Software equities climbed Thursday after Datadog’s quarterly report and upward revision to full-year targets improved sentiment across the sector.
Market winners included Snowflake, which rose 10%, and MongoDB, which advanced 8%. Other notable moves: Cloudflare gained 4.2%, HubSpot added 2.5%, Salesforce increased 1.3%, and Microsoft rose 1%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 3%.
Datadog results and guidance
Datadog (DDOG) led the group after its shares jumped about 30% in premarket trading following a first-quarter report that exceeded analyst expectations and a material lift to its full-year outlook.
The company raised its full-year adjusted earnings-per-share guidance to a range of $2.36 to $2.44, up from its prior forecast of $2.08 to $2.16. The Bloomberg consensus estimate stood at $2.23.
Datadog also increased its revenue outlook to $4.30 billion to $4.34 billion for the full year, compared with previous guidance of $4.06 billion to $4.10 billion. Analysts had been modeling $4.09 billion.
Quarterly and operating-profit projections
Looking to the second quarter, Datadog forecast adjusted EPS of $0.57 to $0.59, above the $0.52 consensus estimate. Revenue for Q2 was guided to $1.07 billion to $1.08 billion, versus a $994.7 million consensus.
The company also projected second-quarter adjusted operating income of $225 million to $235 million, ahead of the $202 million estimate. For the full year, Datadog expects adjusted operating income of $940 million to $980 million, above a consensus figure of $883.4 million.
Market context
Datadog’s stronger-than-expected results and uplifted guidance served as the proximate catalyst for the intra-day strength across cloud and software names. The upward revisions to both top-line and profit metrics were sizable relative to prior company guidance and consensus estimates, and the market reaction was concentrated in firms with cloud and software exposure.
Investors will be watching whether the company’s raised targets and the sector’s rally are sustained in subsequent reporting periods.