Datadog Stock Went from Zero to Hero as AI Demand Drives Results
Spurred by the AI revolution, Datadog's (DDOG) better-than-expected first-quarter results have sparked a huge rally in the beaten-down name. Shares of DDOG stock have surged 35% in the past five days and are now up 45% year-to-date (YTD).
Given the company's tremendous potential and Wall Street's enthusiasm for shares, investors looking to buy software makers on weakness may want to consider purchasing DDOG stock. Let's take a closer look.
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About Datadog Stock
Headquartered in New York, New York, Datadog is a cloud-based observability and security platform that helps organizations monitor their IT operations. Its Software-as-a-Service (SaaS) tools combine infrastructure and application monitoring, log management, user experience tracking, and cloud security.
Datadog currently has a market capitalization of $71.3 billion. Further, DDOG stock has a price-to-sales (P/S) ratio of 20.5 times.
A Look at Datadog's Q1 Results and Q2 Guidance
Datadog reported Q1 earnings on May 7. For the period, revenue jumped 32% year-over-year (YOY) to $1 billion while non-GAAP diluted EPS advanced 30% YOY to $0.60 per share. Analysts on average had predicted that revenue and adjusted EPS would come in at about $950 million and $0.50, respectively. During Q1, the company also generated adjusted operating income of $223 million and free cash flow of $289 million.
Datadog provided Q2 revenue guidance of $1.07 billion to $1.08 billion in the report. This guidance came in well above analyst estimates heading into the print.
Speaking on the Q1 earnings call, CEO Olivier Pomel noted that Datadog has recruited a significant number of new AI-oriented customers, while the firm has also made “new land deals with two of the world’s biggest AI research teams, helping them improve and optimize their training workflows.” Impressively, according to the CEO, revenue growth from both AI-oriented firms and non-AI companies accelerated in Q1.
Will Datadog Continue to Receive Big Boosts From the AI Boom?
Datadog recently launched a product that enables firms to monitor many aspects of their AI chips. According to Pomel, the company's GPU Monitoring offering increases GPU return on investment and raises “operational reliability.”
