Shares in the data monitoring and analytics firm Datadog Inc. crumbled before recovering some ground in after-hours trading today after it said some of its customers are facing “business pressures” from the coronavirus pandemic.

That statement came as Datadog delivered strong second-quarter results that beat Wall Street’s forecasts. It reportea profit before certain costs such as stock compensation of 5 cents per share on revenue of $140 million, up 68% from a year ago. Wall Street had forecast a profit of just a penny a share on revenue of $135.4 million.

Datadog co-founder and Chief Executive Olivier Pomel said the company’s growth demonstrates its importance in enabling its customer’s digital operations.

“While the current macro environment has caused business pressures for our customers, we expect it to accelerate digital transformation and cloud migration over the long term,” Pomel said. “Datadog is very well positioned to be a primary beneficiary of these trends.”

Datadog sells a monitoring and analytics platform for developers and information technology teams. The platform is especially popular with DevOps and information technology operations team, which use its cloud-hosted tools to monitor their software applications and infrastructure for problems. The company only recently went public, launching its initial public offering in September last year.

Three months ago, it looked as if Datadog was benefiting from the coronavirus pandemic as it easily beat expectations following stronger-than-expected first quarter sales. But Pomel’s comments today seemed to cause panic among the company’s investors.

Datadog’s stock fell dramatically in the after-hours trading session, losing more than 15% of their value at one stage. The stock has since recovered somewhat, and is down 6% at the time of writing.

Most likely the stock recovered after investors had more time to properly digest the company’s results, and it appears Pomel may be right when he says Datadog will benefit from the acceleration of digital transformation trends in the long term.

Indeed, Datadog has continued to chalk up new customer wins. It said today it now has 1,015 customers with an average recurring revenue of $100,000 or more, up from just 594 in the same period a year ago.

The company also posted strong guidance for the third quarter, saying it expects revenue of $143 million to $145 million. Wall Street is modeling $140.3 million in revenue for the next quarter.

For the full year, Datadog said it expects revenue of between $566 million and $572 million, versus Wall Street’s $563.7 million estimate.

Image: Datadog