Spotting Winners: Datadog (NASDAQ:DDOG) And Software Development Stocks In Q2

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how software development stocks fared in Q2, starting with Datadog (NASDAQ:DDOG).

As legendary VC investor Marc Andreessen says, "Software is eating the world", and it touches virtually every industry. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming.

The 11 software development stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was in line.

Thankfully, share prices of the companies have been resilient as they are up 6.5% on average since the latest earnings results.

Datadog (NASDAQ:DDOG)

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) provides a software platform that helps organizations monitor and secure their cloud applications, infrastructure, and services.

Datadog reported revenues of $826.8 million, up 28.1% year on year. This print exceeded analysts’ expectations by 4.5%. Overall, it was a strong quarter for the company with full-year EPS guidance exceeding analysts’ expectations.

Datadog achieved the biggest analyst estimates beat of the whole group. The company added 80 enterprise customers paying more than $100,000 annually to reach a total of 3,850. The results were likely priced in, however, and the stock is flat since reporting. It currently trades at $137.45.

Read why we think that Datadog is one of the best software development stocks, our full report is free.

Best Q2: Cloudflare (NYSE:NET)

With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE:NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.

Cloudflare reported revenues of $512.3 million, up 27.8% year on year, outperforming analysts’ expectations by 2.3%. The business had a very strong quarter with a solid beat of analysts’ billings estimates and EPS guidance for next quarter exceeding analysts’ expectations.

The market seems happy with the results as the stock is up 7.4% since reporting. It currently trades at $223.

Is now the time to buy Cloudflare? Access our full analysis of the earnings results here, it’s free.

Slowest Q2: PagerDuty (NYSE:PD)

Born from the frustration of developers being woken up by unprioritized alerts, PagerDuty (NYSE:PD) is a digital operations management platform that helps organizations detect and respond to IT incidents, outages, and other critical issues in real-time.

PagerDuty reported revenues of $123.4 million, up 6.4% year on year, in line with analysts’ expectations. It was a slower quarter as it posted EPS guidance for next quarter missing analysts’ expectations and a significant miss of analysts’ billings estimates.

PagerDuty delivered the weakest performance against analyst estimates in the group. The company added 75 customers to reach a total of 15,322. Interestingly, the stock is up 3.4% since the results and currently trades at $16.15.

Read our full analysis of PagerDuty’s results here.

Dynatrace (NYSE:DT)

With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE:DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.

Dynatrace reported revenues of $477.3 million, up 19.6% year on year. This number beat analysts’ expectations by 2.1%. Overall, it was a strong quarter as it also put up a solid beat of analysts’ billings estimates and an impressive beat of analysts’ EBITDA estimates.

The stock is down 5.5% since reporting and currently trades at $47.77.

Read our full, actionable report on Dynatrace here, it’s free.

Bandwidth (NASDAQ:BAND)

Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ:BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.

Bandwidth reported revenues of $180 million, up 3.7% year on year. This result topped analysts’ expectations by 0.6%. Zooming out, it was a mixed quarter as it also produced an impressive beat of analysts’ EBITDA estimates.

Bandwidth had the slowest revenue growth among its peers. The stock is up 7.9% since reporting and currently trades at $17.52.

Read our full, actionable report on Bandwidth here, it’s free.

Market Update

Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.

Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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