What happened?
A number of stocks fell in the morning session after Datadog projected fourth-quarter revenue that implied flat sequential growth, triggering read-through concerns across infrastructure peers.
In a company press release, Datadog reported third-quarter revenue rose 35% year over year to $1.20 billion, topping consensus estimates of $1.15 billion, while adjusted earnings per share reached $0.81. However, the company guided fourth-quarter revenue to between $1.19 billion and $1.20 billion, representing 25% to 26% annual growth but signaling a pause in sequential expansion.
Datadog's consumption model functions as a barometer for enterprise cloud activity. When a high-multiple cloud bellwether guides to flat sequential revenue, this could raise concerns regarding a moderation in enterprise AI and cloud adoption.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Content delivery company Cloudflare (NYSE: NET) fell 2.9%. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
- Data storage company DigitalOcean (NYSE: DOCN) fell 3.7%. Is now the time to buy DigitalOcean? Access our full analysis report here, it’s free.
Zooming in on DigitalOcean (DOCN)
DigitalOcean’s shares are extremely volatile and have had 73 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 10.8% on the news that underwhelming earnings reports from tech giants Amazon and Intel (after mediocre earnings reports from Alphabet and ServiceNow the previous day) sparked widespread investor anxiety regarding aggressive artificial intelligence spending and sustained cash burn.
As reported by CNBC, disappointing quarterly reports from both companies triggered a broad slide across technology equities and hardware suppliers, overshadowing positive momentum in other areas of the market. Investors grew increasingly wary of the sector's rising capital expenditures—the funds poured into long-term assets such as data centers and computing hardware.
DigitalOcean is up 71.5% since the beginning of the year, but at $83.98 per share, it is still trading 53.7% below its 52-week high of $181.29 from June 2026. Despite the year-to-date gain, investors who bought $1,000 worth of DigitalOcean’s shares 5 years ago would now be looking at only $797.48.
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