Editorial note: This article is based on a May 2020 opinion piece originally published on fool.com. The financial figures cited reflect company results reported at that time. This is not financial advice. Investors should conduct their own due diligence before making any investment decisions.
Why Cloud Computing Stocks Attracted Attention in 2020
The first half of 2020 saw cloud computing companies recover sharply from the mid-March market selloff. While many sectors struggled with COVID-19-related disruption, cloud-native businesses benefited from accelerating enterprise migration to remote and distributed infrastructure. Three companies in particular — CrowdStrike (NASDAQ: CRWD), Datadog (NASDAQ: DDOG), and MongoDB (NASDAQ: MDB) — were highlighted as notable performers due to strong revenue growth, improving unit economics, and expanding customer bases.
Below is a breakdown of what each company does and why analysts and investors found them compelling at that point in time.
CrowdStrike: Cloud-Native Endpoint Security
CrowdStrike is a cybersecurity company that delivers cloud-native endpoint protection through its Falcon platform. Rather than relying on traditional signature-based detection, Falcon uses behavioral analytics, artificial intelligence, and big-data telemetry to identify and respond to threats across the full attack lifecycle — from initial intrusion attempt through lateral movement and data exfiltration.
Business Model and Revenue Structure
CrowdStrike operates on a subscription model. At the time of reporting (fiscal year ending January 2020), subscription revenue accounted for more than 90% of total revenue. Customers purchase access to individual Falcon modules — covering areas such as threat intelligence, vulnerability management, identity protection, and device control — and can expand their footprint over time.
Key metrics reported for fiscal year 2020 and the most recent quarter at that time:
- Annual revenue growth: 93% year-over-year
- Most recent quarterly revenue growth: 89%
- Subscription revenue growth in latest quarter: 90%
- Annual recurring revenue (ARR) growth: 92% year-over-year
- Total subscription customers: 5,431 (more than doubling year-over-year)
- Net new subscription customers in latest quarter: 870
- Subscribers using five or more Falcon modules: up 33% year-over-year
Gross margins were improving and net losses were narrowing. The company had also turned free cash flow positive by fiscal year 2020.
COVID-19 Tailwind
The rapid shift to remote work in early 2020 was broadly expected to expand CrowdStrike’s addressable market. Endpoint security becomes more complex — and more critical — when corporate devices are operating outside a traditional network perimeter. Cloud-delivered security platforms like Falcon are architecturally better suited to this distributed model than legacy on-premises solutions.
Management’s guidance issued in mid-March 2020 called for 50%–52% revenue growth for the new fiscal year, which the original article characterised as historically conservative relative to actual outcomes.
Datadog: Observability and Cloud Monitoring
Datadog provides a unified observability platform for cloud-scale infrastructure. Its core offering covers infrastructure monitoring, application performance monitoring (APM), log management, and synthetic monitoring — all surfaced through a single data plane. The value proposition is consolidating visibility across distributed, polyglot environments that would otherwise require separate monitoring tools for each layer of the stack.
Growth and Financial Profile
Datadog reported the following metrics at the time of the original article:
- Most recent quarterly revenue growth: 87% year-over-year
- Customers with annual recurring revenue greater than $100,000: 960 (up from 508 a year earlier)
- Third consecutive quarter of posting a small profit against analyst expectations of a loss
- Raised full-year revenue guidance to $555 million–$565 million, up $20 million at both ends of the range
Datadog’s ability to raise guidance during a period when many companies were withdrawing or cutting forecasts was treated as a meaningful signal of pipeline visibility and contract durability.
Why Observability Matters for DevOps Teams
From an engineering standpoint, Datadog addresses a genuine operational problem: as microservices architectures and multi-cloud deployments become standard, correlating signals across infrastructure, application, and log data in real time becomes difficult without a purpose-built platform. Datadog’s architecture — built around a lightweight agent and a SaaS backend — meant it could be adopted incrementally, which helps explain the strong net revenue retention and upsell patterns the company reported.
MongoDB: Document Database Built for the Cloud
MongoDB is the company behind the widely adopted open-source document database of the same name. Unlike relational databases built around rigid schemas and SQL, MongoDB stores data as flexible JSON-like documents (BSON), making it well suited for applications with evolving data models or highly nested, hierarchical data structures.
Atlas: The Cloud-First Growth Driver
MongoDB Atlas, the company’s fully managed cloud database service, was the primary growth engine at the time of this article. Key metrics reported:
- Fiscal year (ending January 2020) revenue growth: 58% year-over-year
- Most recent quarterly revenue growth: 44%
- Atlas revenue growth in latest quarter: 80%
- Atlas share of total revenue: grown from 32% to 41% over the prior year
- Total database downloads: more than 90 million (described as triple the figure from two years prior)
- MongoDB University registrations: more than one million
The growth of MongoDB University — a free online learning platform for developers — is worth noting from a developer adoption standpoint. A large trained developer community lowers the integration friction for enterprises evaluating the platform.
COVID-19 Exposure
Of the three companies discussed, MongoDB was characterised as the most exposed to pandemic disruption. Its mid-March 2020 guidance of $510 million–$530 million in fiscal 2021 revenue already included a $15 million–$25 million reduction attributed to expected COVID-19 impact. The company’s consumption-based pricing model for Atlas meant that reduced application activity by customers would flow through to lower revenue, unlike purely seat-based subscription models.
What These Three Companies Have in Common
Despite operating in different segments — security, observability, and database infrastructure — CrowdStrike, Datadog, and MongoDB shared several structural characteristics that made them stand out during this period:
- Cloud-native architecture: All three were built for multi-cloud and distributed environments from the ground up, not retrofitted from on-premises products.
- Subscription or consumption revenue: Recurring revenue models provide better forward visibility than one-time licence sales.
- Strong net revenue retention: Customers expanded usage over time, reflecting product stickiness and platform breadth.
- Developer or practitioner affinity: All three built significant adoption from the bottom up — through practitioners evaluating tools independently — rather than relying solely on top-down enterprise procurement.
- High growth with a path toward profitability: Each company was still operating at a net loss but showing improving margins and, in some cases, positive free cash flow.
Important Caveats
This article reflects a snapshot from May 2020. All revenue figures, customer counts, and guidance ranges are historical and do not represent current company performance. The cloud computing sector has evolved significantly since then, with valuations, competitive dynamics, and growth rates all having changed materially.
This article does not constitute investment advice. Anyone evaluating these or any other stocks should consult up-to-date financial filings, independent research, and a qualified financial adviser before making investment decisions.