What Happened?
Shares of cloud monitoring software company Datadog (NASDAQ:DDOG)
jumped 7.3% in the afternoon session after data analytics software provider Snowflake (NYSE:SNOW) 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.
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What The Market Is Telling Us
Datadog’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 11.7% on the news that the company reported weak first-quarter results with billings falling below Wall Street's expectations. In addition, its new large contract wins slowed. On the other hand, revenue and EPS came in ahead of expectations during the quarter.
Overall, the results seemed fairly positive, although the billings blemish means it wasn't perfect.
Datadog is up 26.2% since the beginning of the year, and at $145.23 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 $3,626.
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