Shares of observability provider Datadog Inc. climbed more than 14% in trading today after the company reported higher-than-expected first quarter sales.
Datadog generated $481.7 million in revenue during the three months ended March 31, which amounts to a 33% year-over-year increase. The company surpassed the Zacks consensus estimate by 2.8%. Since going public in 2019, Datadog has regularly topped analysts’ sales projections, including last quarter.
Datadog provides an observability platform that companies use to detect and fix technical issues in their infrastructure. Since its initial public offering, Datadog has also established a presence in several adjacent markets. It provides tools that help companies find cybersecurity vulnerabilities in their cloud environments, as well as test newly released software for reliability issues.
Datadog’s platform is widely used in the enterprise. According to the company, the number of organizations that spend more than $100,000 on its platform annually grew 29% in the first quarter, to 2,910. Datadog had 2,250 such customers in the first quarter of 2022.
To support the continued growth of its customer base, Datadog regularly upgrades its platform with new modules. The feature additions help extend the company’s addressable market and thereby unlock new sales opportunities. As part of the effort, Datadog launched four products into general availability last year.
The company rolled out two more offerings in the first quarter. It released Data Streams Monitoring, a tool for finding errors in the software workflows that companies use to move data between their applications. Datadog also rolled out a module that can scan applications for vulnerable open-source components.
“We continue to deliver innovation to our customers, including the recent launch of our Data Streams Monitoring and Application Vulnerability Management products,” said Datadog co-founder and Chief Executive Officer Olivier Pomel. “With our broadening observability and security platform, our customers can monitor, manage, secure, and drive value from their complex and ephemeral cloud environments.“
The company’s revenue momentum in the first quarter benefited its bottom line. Datadog generated $86.4 million in adjusted operating income during the quarter, which amounts to adjusted earnings of 28 cents per share. Analysts surveyed by Zacks had expected 24 cents per share.
In the current quarter, Datadog expects to generate an adjusted operating income of $82 million to $86 million. Its revenue, in turn, is projected to range between $498 million and $502 million. For the full 2023 fiscal year, the company is forecasting sales of $2.08 billion to $2.1 billion, which would represent a significant increase over the $1.68 billion that it reported at the end of 2022.
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