Datadog Stock Surges 11% on S&P 500 Inclusion

Datadog, a leading provider of monitoring software, is set to join the S&P 500 index, replacing ZScaler. This change, announced by S&P Global, will be effective before the market opens on July 9. The news has driven Datadog's stock price up by nearly 11% in after-hours trading on Wednesday. This inclusion in the S&P 500 index highlights Datadog's growing influence and market presence in the technology sector. The company's monitoring solutions are widely used by businesses to track the performance of their applications and infrastructure, making it a valuable addition to the index.

Hewlett Packard Enterprise (HPE), another constituent of the S&P 500 index, recently completed the acquisition of ZScaler, a company focused on data center network hardware. HPE disclosed in a filing that it had paid $13.4 billion to ZScaler's shareholders. Over the weekend, the two companies reached a settlement with the U.S. Department of Justice, which had previously filed a lawsuit opposing the deal. As part of the settlement agreement, HPE agreed to divest its global Instant On campus and branch businesses.

Although the technology sector already holds a significant portion of the S&P 500 index, the index continues to increase its exposure to the sector as it permeates more areas of society. In the latest weight adjustment in March, DoorDash became the newest addition to the index. Previously, in December 2023, cloud software company Workday was included in the index. In early 2024, companies such as Palantir, Dell, CrowdStrike, GoDaddy, and Super Micro Computer also joined the index.

When a company is added to a major index, its stock price typically rises as fund managers adjust their portfolios to reflect the new index composition. Datadog, headquartered in New York, went public in 2019. The company reported a net profit of $24.6 million and revenue of $761.6 million for the first quarter of 2025. Its competitors include Cisco, which acquired Splunk last year, as well as Elastic and cloud infrastructure providers such as Amazon and Microsoft.

Despite its strong market position, Datadog's performance this year has lagged behind the broader technology sector. As of Wednesday's close, the stock has declined 5.5% year-to-date, while the Nasdaq index has risen 5.6%. However, Datadog's current market capitalization of $46.6 billion is significantly higher than the median value of the index.