Nov 7 (Reuters) - Cloud monitoring firm Datadog ( DDOG )

raised its annual revenue and profit forecasts on Thursday,

betting on accelerating demand for its AI-backed cybersecurity

products.

Shares of the New York City-based company rose 4.1% before

paring gains later in volatile trading.

"Datadog ( DDOG ) reported very strong results and guided for further

impressive growth, some of it driven by AI applications. Shares

are up significantly over the last few weeks as investors had

very high expectations, which may be leading to some volatility

in trading today," said Gil Luria, analyst, D.A. Davidson & Co.

Datadog ( DDOG ) raised its full-year revenue to be about $2.66

billion, compared to its earlier expectation of between $2.62

billion and $2.63 billion. Analysts were expecting revenue of

$2.63 billion, data compiled by LSEG shows.

An increasing number of Datadog ( DDOG ) customers are deploying

their artificial intelligence apps in live production, which is

expected to boost usage of the company's products.

AI apps run in the cloud, and a large-scale migration to

the cloud is anticipated, boding well for companies such as

Datadog ( DDOG ), which provide monitoring software for cloud

infrastructure.

Datadog ( DDOG ) now sees adjusted profit between $1.75 and $1.77 per

share for the full year, compared to $1.62 to $1.66 per share

previously. Analysts were estimating an adjusted profit of

$1.65.

Revenue for the quarter ended Sept. 30 was $690 million,

compared with an expectation of $664.3 million. It reported

adjusted profit of 46 cents per share, above analyst

expectations of 40 cents.