Why Are Datadog (DDOG) Shares Soaring Today

What Happened?

Shares of cloud monitoring software company Datadog (NASDAQ:DDOG) jumped 5.2% in the afternoon session after stocks extended their rebound, led by strong gains in the technology sector, as renewed optimism surrounding U.S.–China trade negotiations lifted investor sentiment. 

Contributing to the bullish sentiment was a standout earnings report from enterprise software leader ServiceNow, which topped Wall Street's expectations on both revenue and earnings. More importantly, the company's remaining performance obligations (RPO), a key forward-looking metric for future revenue, also exceeded forecasts, giving investors confidence that enterprise customers are not pulling back spending amidst uncertain macro. 

The optimism was further reinforced by solid results from Texas Instruments and Lam Research. Their performance was especially encouraging for semiconductor stocks, which have been under pressure due to their exposure to global trade tensions. These results suggested that, despite macroeconomic uncertainties, demand in key tech verticals remained resilient.

After the initial pop the shares cooled down to $99.10, up 4.8% from previous close.

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What The Market Is Telling Us

Datadog’s shares are quite volatile and have had 16 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 biggest move we wrote about over the last year was 2 months ago when the stock dropped 14.9% on the news that the company reported disappointing fourth quarter 2024 results and provided full-year revenue and EPS guidance below Wall Street's estimates. Despite strong revenue growth of 25% year on year, operating margins shrunk, and the outlook suggested a slowdown in growth. Notably, the guidance implied a 10% y/y decline in net new revenue, and when combined with the weaker margins, could suggest the company was facing stronger competition to find new customers. Overall, this quarter could have been better, and the guidance weighed on shares.

Datadog is down 31% since the beginning of the year, and at $99.10 per share, it is trading 41.2% below its 52-week high of $168.65 from December 2024. Investors who bought $1,000 worth of Datadog’s shares 5 years ago would now be looking at an investment worth $2,370.

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