What happened

Shares of Datadog (DDOG 0.50%), which operates a monitoring and security platform for cloud applications, surged 22.3% in September, according to data from S&P Global Market Intelligence. For context, the S&P 500 (including dividends) fell 3.8% last month.

(Datadog shares have gained 2.2% so far this month through Wednesday, Oct. 7. The broader market has returned 1.7% over this period.)  

Datadog is a top dog among tech stocks in 2020. Shares are up 176% this year through Oct. 7. The S&P 500 has returned 7.4% over this period. 

Company image -- image of a white dog on a digital-like background.

Image source: Datadog.

So what 

We can attribute Datadog stock's strong September performance in part to a continuation of the upward momentum it's enjoyed for some time. Investors view the company as a long-term beneficiary of the COVID-19 pandemic, which "has illuminated the need to be digital-first," as Datadog CEO Olivier Pomel put it in his remarks in the company's second-quarter 2020 earnings release.

That said, there was also one specific catalyst last month that notably lifted the stock: a strategic partnership with a technology giant.

On Sept. 30, shares of Datadog popped 12.4% after the company announced a deal with Microsoft. As my colleague Dan Caplinger reported at the time, under the terms of the agreement, "Datadog will make its cloud monitoring and security platform available to users of the Microsoft Azure cloud computing console. ... Azure users will be able to implement the monitoring service into their own cloud infrastructure." This specific type of arrangement is a first, undoubtedly leaving Datadog investors particularly excited about the deal's potential to bring new customers into the company's fold. 

Here's Datadog stock's year-to-date performance picture: 

DDOG Chart

Data source: YCharts.

Now what

For full-year 2020, Datadog management guided for revenue between $566 million and $572 million, representing growth of 57% year over year at the midpoint of the outlook range. While this expected growth is still powerful, it would represent a slowdown of 2019's growth of 83% year over year.

Management also expects 2020 adjusted earnings per share between $0.11 and $0.13. That would be a big improvement from 2019, when the company posted an adjusted loss of $0.01.