What happened

Shares of Datadog (NASDAQ:DDOG) gained 160.1% in the calendar year 2020, according to data from S&P Global Market Intelligence. The provider of monitoring tools for cloud computing systems and services delivered nothing but stellar earnings reports all year long, and the company signed a potentially game-changing partnership with computing giant Microsoft (NASDAQ:MSFT) along the way.

So what

Datadog's monitoring service became a first-class citizen of Microsoft's Azure cloud computing platform on Sept. 30. Investors sat up and took notice, and the stock closed 12.4% higher that day. Beyond simply allowing Azure customers to install and run Datadog's tools with full technical support, the two companies also committed to cross-selling and promoting each others' products. That's a big win for Datadog, which is this partnership's smaller company by far.

Digital rendering of a magnifying glass over a cloud made up of ones and zeros

Image source: Getty Images.

Among the year's earnings reports, the first-quarter update stands out as the most impressive showing. Sales rose 87% year over year to $131 million thanks to a healthy inflow of long-term subscription contracts. The adjusted bottom line swung from a $0.09 loss per share to a net profit of $0.06 per share. Your average analyst would have settled for a loss of $0.01 per share on revenue near $118 million. Datadog's stock closed 23% higher the next day.

Now what

As cloud-based services continue to take over the software industry, Datadog's tools become more and more crucial to operating a modern IT department. It's not the only game in town but a well-respected competitor for pretty much every contract in the cloud monitoring market. This is not a cheap stock by any stretch of the imagination, but growth investors with a high tolerance for valuation risk may want to take a closer look at Datadog.