Data monitoring and analytics provider Datadog Inc.’s stock fell almost 7% in late trading today even after it posted strong third-quarter results that comfortably beat analysts’ expectations.

The company reported a profit before certain costs such as stock compensation of 5 cents per share on revenue of $154.7 million, up 61% from a year ago. Wall Street had forecast earnings of just a penny a share on revenue of $155.2 million

The solid results came despite Datadog warning three months ago that some of its customers were facing business pressures from the COVID-19 pandemic.

However, the company’s billings, an indication of future business, apparently came in a bit light, which may have been what spooked investors. Billings were about $156 million, just under a $159.1 million Wall Street consensus.

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.

Chief Executive Olivier Pomel said the strong results demonstrated the company’s “high growth at scale.”

“The pandemic has driven organizations globally and across industries to prioritize their digital operations like never before, further strengthening the cloud’s position as the IT architecture of choice,” Pomel said.

Datadog made inroads with two of the big three public cloud infrastructure providers during the quarter. First, and perhaps most important, it negotiated a deal with Microsoft Corp. to make Datadog available directly from the Azure console. That makes it possible for Microsoft’s cloud customers to buy Datadog plans using their Azure budget, implement its tools with a few simple clicks and then manage Datadog from within Azure.

It also announced it’s extending its existing partnership with Google LLC’s cloud platform from Europe, the Middle East and Africa to North America.

There was more good news on the customer acquisition front. Datadog said it now has 1,107 customers with an annual recurring revenue of $100,000 or more, up 52% from a year ago.

The company’s immediate prospects look good too. Datadog said it expects fourth-quarter earnings of a penny to 2 cents per share on revenue of $162 million to $164 million. That beat Wall Street’s estimate of a penny a share profit on $155.2 million in revenue. Datadog also updated its full-year fiscal 2020 outlook, saying it expects total revenue of between $588 million and $590 million for the year, ahead of the consensus of $571.2 million.

Constellation Research Inc. analyst Holger Mueller said Datadog has shown that’s well placed to take advantage of the greater enterprise demand for DevOps tools that’s driven by the shift to the cloud.

“It’s good to see Datadog investing more in R&D while slowing down on sales and marketing and G&A costs,” Mueller said. “This has allowed Datadog to come closer to break even for the financial year. All eyes will now be on how it can execute in Q4 in what are still very challenging overall conditions.”

Image: Datadog