Why Datadog Stock Surged Today

Key Points

• Snowflake's blockbuster Q2 report helped lift Datadog's valuation today.

• Datadog is partner of Snowflake's and has integrations with the company's platform.

• Snowflake's report is being interpreted as a strong positive indicator for data technologies, analytics, and monitoring services.

• 10 stocks we like better than Datadog ›

Datadog (NASDAQ: DDOG) stock closed out Thursday's trading with big gains. The company's share price gained 7% in the session amid the backdrop of a 0.3% gain for the S&P 500 and a 0.5% gain for the Nasdaq Composite.

Datadog roared higher today thanks to a blockbuster earnings report from Snowflake -- one of the company's partners and a fellow player in the data management and analytics space. Despite strong gains for the broader market this year, Datadog stock is still down 1% year to date.

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Datadog soars on strong results from Snowflake

Datadog's applications monitoring service is integrated into Snowflake's data-warehousing and analytics platform, and investors are seeing the latter company's explosive earnings as positive performance indicator for the former's stock. Snowflake posted non-GAAP (adjusted) earnings per share of $0.35 on revenue of $1.14 billion, beating the average analyst estimate's target for per-share earnings of $0.27 on revenue of $1.09 billion. Snowflake's revenue was up 31% year over year, and margins came in significantly better than anticipated.

What's next for Datadog?

Snowflake's strong quarterly report came directly on the heels of a blockbuster report from data-technologies player MongoDB -- and the combined reports from the two companies seem to suggest strong momentum in the broader industry connected to artificial intelligence (AI) trends. With the quarterly results it published earlier this month, Datadog announced revenue had jumped 28% compared to the prior-year period to reach approximately $827 million. The performance actually marked an improvement on the 27% annual growth it recorded in the prior-year quarter, and AI-related spending from clients could help the company sustain strong rates of sales expansion.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog, MongoDB, and Snowflake. The Motley Fool has a disclosure policy.