What happened

Shares of Datadog (NASDAQ:DDOG), which provides a monitoring and analytics platform for cloud-based systems, soared by as much as 24% Tuesday morning, and was up 22.4% as of 1:15 p.m. EDT.

The stock's sharp rise came on the heels of an impressive first-quarter report that featured skyrocketing revenue and an expanding gross profit margin.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

Datadog's revenue jumped 87% year over year to $131 million, fueled by rapid growth in the number of customers providing it with annual recurring revenue greater than $100,000. The tech company ended the quarter with 960 of these customers, up from 508 in the year-ago period.

This torrid revenue growth generated leverage in the company's business model, and Datadog's gross profit margin expanded from 73% in the year-ago quarter to 80%. This translated to a huge improvement in the company's bottom line. The bottom line improved from a loss of $0.12 per share in the year-ago period to a profit of $0.02. Non-GAAP (adjusted) earnings per share swung from a loss of $0.09 to a profit of $0.06.

Analysts, on average, were expecting revenues of $118 million and an adjusted loss per share of $0.01. 

Now what

With so much business momentum, it wasn't surprising to see management provide an optimistic outlook. Management now expects full-year revenue to be between $555 million and $565 million, up from the previous forecast range of $535 million to $545 million. 

"[The coronavirus pandemic] has demonstrated the need to be digital-first and agile, has underscored the importance of observability into cloud environments, and reaffirmed the long-term opportunity for Datadog," said CEO Olivier Pomel in the earnings release.

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