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:
- Cloud monitoring company Dynatrace (NYSE: DT) fell 3.4%. Is now the time to buy Dynatrace? Access our full analysis report here, it’s free.
- Communications platform company Twilio (NYSE: TWLO) fell 3.2%. Is now the time to buy Twilio? Access our full analysis report here, it’s free.
- Developer operations company JFrog (NASDAQ: FROG) fell 3.2%. Is now the time to buy JFrog? Access our full analysis report here, it’s free.
Zooming in on Dynatrace (DT)
Dynatrace’s shares are quite volatile and have had 17 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 about 23 hours ago when the stock dropped 10.6% on the news that the company lowered its full-year fiscal 2027 forecast for non-GAAP diluted net income per share and adjusted free cash flow in its second-quarter financial results.
According to a company press release, Dynatrace lowered its full-year fiscal 2027 forecast for non-GAAP diluted net income per share to between $1.88 and $1.90. It also lowered its full-year forecast for adjusted free cash flow to between $600 million and $605 million. For the fiscal third quarter, the company projected non-GAAP diluted earnings per share to be between 44 cents and 45 cents, which was below analyst estimates.
Dynatrace is up 7.9% since the beginning of the year, but at $45.68 per share, it is still trading 30% below its 52-week high of $65.25 from October 2026. Despite the year-to-date gain, investors who bought $1,000 worth of Dynatrace’s shares 5 years ago would now be looking at only $588.82.
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