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: Datadog’s software is down — and so is its stock

Datadog's software suffered an outage after midnight Wednesday. The company was still attempting to correct the issues 12 hours later as its stock declined. Read More...

Datadog Inc.’s software suffered an outage just past midnight on Wednesday, and the company was still attempting to correct the issues 12 hours later as its shares declined.

Datadog DDOG, -3.84% first notified customers that engineers were investigating issues with its web application at 1:31 a.m. Eastern time, and the company has continued to provide updates on its status blog. Four successive updates between 9:49 a.m. and 12:29 p.m. Eastern time used the same language: “We continue progress towards recovering all services. Data ingestion and monitor notifications remain delayed across all data types.”

In a note sent just past noon Eastern time, Wells Fargo analysts suggested that the company had not made headway in resolving the issues, writing that “it appears that more modules progressed to a ‘major outage.’” Datadog representatives did not immediately respond to an email seeking comment and more information.

“Error Tracking and Security Monitoring went from Partial Outage to Major Outage, while Events and Web Application went from Degraded Performance to Partial Outage,” the analysts wrote. “It does not appear Datadog is making progress bringing the service back up yet.”

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. SNOW, -0.31% succeed with it, but it could prove to be a hindrance in the event of an outage.

In-depth: Should more services charge like a power bill than a Netflix subscription? That’s where software is headed.

“Depending on how long the outage lasts, we remain concerned with the impact to revenue, given this is a consumption-based model,” wrote the Wells Fargo analysts, who 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 were down more than 3% in Wednesday afternoon trading. The stock has declined 43.3% in the past 12 months, while the S&P 500 SPX, -0.16% has dropped 4.4%, but the company’s stock is still trading for well over 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.

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