What Happened?
Shares of cloud monitoring platform Datadog (NASDAQ: DDOG) fell 5.1% in the morning session after a broader market rotation out of the technology sector led to profit-taking following a recent rally.
The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech.
Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Datadog? Access our full analysis report here.
What Is The Market Telling Us
Datadog’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 biggest move we wrote about over the last year was 2 months ago when the stock gained 21.1% on the news that the company reported third-quarter financial results that surpassed Wall Street's expectations and provided an optimistic outlook for the future. The monitoring and security platform posted revenue of $885.7 million, a 28.4% increase from the same period last year, and delivered an adjusted earnings per share of $0.55, both of which beat analyst estimates. The company also reported adding 210 new large customers, those spending over $100,000 annually, bringing the total to 4,060. Looking ahead, Datadog issued fourth-quarter revenue guidance that was above market expectations and also raised its financial forecast for full-year earnings. This combination of a strong quarterly performance and a confident outlook fueled positive investor sentiment.
Datadog is flat since the beginning of the year, and at $132.81 per share, it is trading 33.5% below its 52-week high of $199.72 from November 2025. Investors who bought $1,000 worth of Datadog’s shares 5 years ago would now be looking at an investment worth $1,329.
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