Datadog, Inc. (DDOG) shares rallied nearly 12% in Wednesday’s extended session after S&P Global announced that the company would be added to the prestigious S&P 500 Index.
New York-based Datadog is a provider of cloud applications monitoring and security platform.
Datadog stock is down approximately 5.5% year-to-date.
The release from S&P indicated that Datadog will replace Juniper Networks in the index, effective prior to the opening on Wednesday, July 9. Juniper was acquired by Hewlett Packard Enterprise (HPE) in a $14 billion deal, with the transaction closing on Wednesday.
The S&P 500 Index, a market-cap-weighted index, is considered the best single measure of large-cap U.S. equities, comprising 500 leading companies and covering approximately 80% of the total market capitalization. The eligibility criteria for addition to the index include a market cap of $22.7 billion or more.
Index inclusion generates positive sentiment toward the stock, as investors view it as a validation of the company’s credentials as a stable and growing entity. Also, funds tracking a particular index would load up on the stock to align their portfolio weighting with that of the index.
Datadog reported a solid first-quarter earnings beat in early May, with revenue rising 25% year-over-year (YoY) and exceeding the consensus estimate. Artificial intelligence (AI)-native customers accounted for 8.5% of annual recurring revenue, up from 6% in the previous quarter.
The company also notably raised its full-year revenue but suggested that gross margin pressure would result from deployment activity.
