What happened

Shares of Datadog (DDOG -3.94%) charged sharply higher Thursday morning, surging as much as 6.1%. As of 1:31 p.m. ET, the stock was up 2.1%, even as the broader market indexes slumped.

The catalyst that drove the cloud monitoring and security company higher was third-quarter financial results that far exceeded expectations.

So what

Datadog generated revenue of $437 million, up 61% year over year, on top of 75% growth in the prior-year quarter. At the same time, the company delivered adjusted earnings per share (EPS) of $0.23, which surged 77%.

To give those numbers context, analysts' consensus estimates were calling for revenue of $414.8 million and adjusted EPS of $0.16. 

The fuel that drove the impressive results were equally strong client metrics. Total customers of 22,200 increased 27% year over year. Perhaps as importantly, however, Datadog ended the quarter with 2,600 customers that generate annual recurring revenue (ARR) of $100,000 or more, up 44%. These are Datadog's most important customers, as they contribute 85% of the company's ARR. 

Now what

Datadog provided investors other reasons to cheer. The company now expects full-year revenue in a range of $1.65 billion to $1.654 billion, up from its previous guidance of $1.61 billion to $1.63 billion. Datadog also boosted its bottom-line outlook, forecasting adjusted EPS in a range of $0.90 to $0.92, up from its prior range of $0.74 to $0.81. This shows that the company is leveraging its growing scale to drop more profits to the bottom line. 

The company's ability to "beat and raise," beating analysts' expectations, while simultaneously raising guidance, was enough to send Datadog higher.

To be clear, investors have baked plenty of growth into Datadog stock, which isn't cheap in terms of traditional metrics. It's currently trading for 11 times next year's sales, when a reasonable price-to-sales ratio is between 1 and 2. That said, management is forecasting year-over-year revenue growth of 60% this year, which is strong by any measure. 

Still, investors with the stomach for a little risk and volatility and a three-to-five-year outlook should consider taking this dog for a walk.