Datadog’s software goes down — and so does its stock

Datadog Inc.’s software suffered an outage Wednesday, and its shares declined as analysts voiced concern about a potential hit to revenue.


first notified customers that engineers were investigating issues with its web application at 1:31 a.m. Eastern, and continued to provide updates on its status blog. At 3:39 p.m., just before the close of markets, The company said that engineers had “identified and mitigated the initial issue.”

“A system update on a number of hosts controlling our compute clusters caused a subset of these hosts to lose network connectivity,” the company said. “As a result a number of the corresponding clusters entered unhealthy states and caused failures in a number of the internal services, datastores and applications hosted on these clusters.”

“We expect live data recovery in a matter of hours (not minutes, and not days),” the status blog said.

The company managed to get two services back up and running by just after 5 p.m. Eastern — Database Monitoring and Processes Monitor — though data processing and notifications were still delayed.

Datadog charges for its data-crunching software based on usage. This consumption-based business model has been spreading throughout the software sector as companies like Snowflake Inc.

succeed with it, but it could prove to be a hindrance in the event of an outage.

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“Depending on how long the outage lasts, we remain concerned with the impact to revenue, given this is a consumption-based model,” Wells Fargo analysts wrote in a note sent just past noon Eastern time. They have an overweight rating and $105 price target on the stock.

Datadog reported fourth-quarter revenue of $469.4 million in February, which is more than $5 million a day.

Datadog shares fell 3.8% Wednesday. The stock has declined 43.3% in the past 12 months, while the S&P 500

has dropped 4.4%, but it is still trading for well more than double the $27 price it commanded in its 2019 initial public offering. Datadog shares have never traded below that price in a regular session and have stayed higher than $60 since mid-2020.