What Happened?
Shares of cloud monitoring software company Datadog (NASDAQ:DDOG)
jumped 7.8% in the afternoon session as the positive momentum continued, likely strengthened by the strong earnings results reported by Elastic, a key player in the DevOps space. Elastic's third-quarter results exceeded analysts' expectations for both sales and earnings. Additionally, the company observed improved demand in key mid-to-large enterprise markets, a promising indicator for other players in the broader observability and SaaS sectors. Adding to the improved growth trend, Elastic also raised full-year guidance for sales and earnings.
Overall, these results are highly encouraging and contribute to the growing list of enterprise SaaS companies that delivered impressive performance during the earnings season.
Shares closed at $155.39.
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What The Market Is Telling Us
Datadog’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was aa day ago when the stock gained 7.3% on the news that data analytics software provider Snowflake reported impressive third-quarter results, which surpassed analysts' revenue, profit, and earnings expectations. The strong result is boosting sentiment in the software as a service (SaaS) space.
Snowflake is particularly a "read-through" for Datadog because both go to market with software consumption models, which means their revenue is correlated with customer usage (as opposed to long-term contracts with set spend).
The market has sometimes been cautious of these models and how resilient they may or may not be in periods of uneven IT spending. Snowflake's performance highlights that usage-based software models seem to be holding up.
Datadog is up 34.8% since the beginning of the year, and at $155.39 per share, has set a new 52-week high. Investors who bought $1,000 worth of Datadog’s shares 5 years ago would now be looking at an investment worth $3,786.
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