Shares of cloud monitoring software firm Datadog surged nearly 30% in Tuesday trading after the company reported stronger-than-expected third-quarter earnings and full-year guidance.
The company reported quarterly revenue of $547.5 million, up 25% year over year, topping estimates. That growth rate was consistent with results in the second quarter. Analysts surveyed by LSEG, formerly known as Refinitiv, had expected revenue of $524.1 million. Datadog reported adjusted earnings per share of 45 cents, better than the 34 cents analysts expected.
Datadog also bumped up its revenue and profit view for the full year. The company now expects fourth-quarter revenue between $564 million and $568 million, alongside full-year revenue of around $2.1 billion. That was above consensus estimates of $543.3 million and $2.06 billion, respectively, according to a survey of analysts by LSEG.
Co-founder and CEO Olivier Pomel told analysts on a conference call that “AI-native customers” contributed 2.5% of Datadog’s annualized revenue during the quarter. Pomel declined to confirm if his company was working with OpenAI, Anthropic or Cohere. All three sell access to large language models that can compose text based on a few words of human input.
Datadog’s surge buoyed other cloud-computing names, including MongoDB and Snowflake.
The latest guidance is the cheeriest it has been all year. Datadog stock fell significantly in August after it revised its guidance down, citing continued reduction in cloud spending by companies.
Datadog builds cloud monitoring and security products that work with Amazon Web Services, Google Cloud and Microsoft Azure. The company was founded in 2010 and debuted on the Nasdaq in 2019.
The cloud infrastructure providers indicated last week that some organizations’ cost-reduction efforts have begun to wane. Similar to many cloud names, Datadog was not immune to corporate belt-tightening. Pomel validated that observation, saying optimization activity among Datadog clients could be easing up. “Overall, we continue to see impact from optimization in our business, but we believe that the intensity and breadth of optimization we’ve experienced in recent quarters is moderating,” he said Tuesday.
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