Shares of cloud monitoring software company Datadog (NASDAQ:DDOG) rose 7.3% in the afternoon session after data analytics software provider Snowflake (NYSE:SNOW) reported impressive third-quarter results that beat analysts’ revenue, earnings and earnings estimates. The strong result boosts sentiment in the software as a service (SaaS) space.
Snowflake is a read through for Datadog in particular because both come to market with software consumption models, meaning their revenues are correlated with customer usage (as opposed to long-term, fixed-spend contracts). The market has sometimes been cautious about these models and how resilient they are or are not during periods of uneven IT spending. Snowflake’s performance shows that usage-based software models appear to be holding up.
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Datadog’s shares are not very volatile and have only had 9 moves above 5% in the past year. In that context, today’s move indicates that the market sees this news as meaningful, even if it may not be something that would fundamentally change the perception of the company.
The biggest move we wrote about in the past year came seven months ago, when the stock fell 11.7% on news that the company reported weak first-quarter results and billings fell below Wall Street expectations. In addition, new major contract purchases slowed down. On the other hand, revenue and earnings per share came in above expectations during the quarter.
Overall, the results seemed quite positive, although the blemish on the bill means it wasn’t perfect.
Datadog is up 25% since the start of the year, hitting a new 52-week high at $143.95 per share. Investors who bought $1,000 worth of Datadog stock five years ago would now be looking at an investment worth $3,596.
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