Why Datadog Stock Is Soaring Today

Shares of the enterprise software company Datadog (NASDAQ: DDOG) popped today after the company reported third-quarter sales and earnings that outpaced Wall Street's consensus estimates. Investors were also optimistic about the company's revenue estimates for the fourth quarter.

As a result, Datadog's share price spiked by 23.6% as of 10:30 a.m. ET.

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A better-than-expected third quarter

Datadog reported revenue of $886 million in the quarter -- up 28% from the year-ago quarter -- that beat analysts' consensus estimate of $854 million. The company's non-GAAP (adjusted) earnings per share of $0.55 were up 19% from the year-ago quarter and easily beat Wall Street's expectation of $0.45 per share.

Part of the sales increase was likely tied to the company's expanding customer base. Datadog grew its customers contributing annual recurring revenue (ARR) of $100,000 or more by 16% from the year-ago quarter to 4,060.

Adding to the good news was that Datadog's management issued guidance for the fourth quarter that was ahead of analysts' consensus estimates. The company expects revenue of $914 million, at the midpoint, compared to Wall Street's consensus estimate of $889 million.

A volatile time for Datadog shareholders

Datadog's share price has been all over the map this year, as investors have tried to gauge how well the company is benefiting from the artificial intelligence boom. But with today's gains, the tech stock is now up about 50% over the past year.

And with Datadog's strong third quarter and better-than-expected fourth-quarter revenue guidance, shareholders certainly have much to celebrate today.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog. The Motley Fool has a disclosure policy.