Datadog was a victim of its own success on Thursday as better-than-expected second-quarter earnings and increased full-year guidance wasn't enough for Wall Street.

Datadog stock sank 22% to $222 in premarket trading on Thursday after ending Wednesday down 1.7%. Wall Street had high expectations for Datadog heading into the report with many firms hiking price targets.

The monitoring and analytics platform on Thursday posted adjusted earnings of 65 cents a share in the second quarter, up from 46 cents a year ago and above Wall Street expectations for 58 cents. Revenue grew 36% to $1.12 billion, beating the analyst consensus call for $1.08 billion, according to FactSet.

Looking ahead, Datadog sees third-quarter earnings between 63 cents and 65 cents a share with revenue ranging from $1.135 billion to $1.145 billion. The analyst consensus calls for third-quarter earnings of 61 cents and revenue coming in at $1.11 billion.

For the full year, the software company also now expects adjusted earnings of $2.50 to $2.54 a share with revenue between $4.45 billion to $4.47 billion. That's up from its previous guidance and well above Wall Street's full-year forecasts of $2.42 a share on revenue totaling $4.35 billion, according to FactSet.

The stock has advanced 108% this year, making it a rare bright spot in the software industry in 2026. Datadog has exposure to the artificial-intelligence trade, offering monitoring solutions for AI chips and coding agents. The company also counts AI labs and cloud providers like OpenAI and Amazon Web Services among its customers.