Earnings season is well underway, and several stocks should surprise investors with positive data measuring at least one aspect of their financial health, according to Morgan Stanley. Ten percent of S & P 500 companies had reported their first-quarter financials by April 17, largely surprising investors with their growth , according to data collected by FactSet. Of those, 88% posted a positive earnings-per-share surprise, when tracked against Wall Street expectations, while 84% clocked better-than-expected revenue. With hundreds of firms preparing to report their performance data over the next few weeks, several more positive surprises should be in store, according to a recent note from Morgan Stanley. But disproportionate benefits may accrue to those companies that beat the Street on at least one key performance indicator this earnings season, the investment bank said. "Despite geopolitical risks, the earnings recovery remains intact driven by the return of positive operating leverage," Morgan Stanley chief U.S. equity strategist Michael Wilson wrote Monday in a note to clients. "Our view that we're in an early cycle backdrop remains out of consensus as does our call for a broadening in price/earnings leadership this year." Sources of upside Unexpected sources of upside in individual stocks should be evident in key performance indicators beyond simple earnings per share, Wilson noted. Among the companies that are likely to report such surprises are gambling platform DraftKings and software provider Datadog , according to Wilson and Morgan Stanley sector analysts. The analysts screened for stocks with both overweight ratings at Morgan Stanley, and that are expected to beat on one key performance indicator (KPI) this earnings season. They selected a KPI for each stock on their list, using their knowledge to pick the most relevant indicator for each firm. Here are a couple of stocks that are likely to see upside from one of their KPIs: Datadog The software stock is likely to gain ground on better-than-expected revenue for the first quarter of 2026, per Morgan Stanley. Earnings are estimated to be released on May 6. Datadog offers cloud-based tools that provide insights into applications' security issues, costs and other performance yardsticks, helping developers troubleshoot and improve their software. Shares are down 15% over the past six months, hurt by artificial intelligence-related disruption threats. But Datadog is poised to rake in more revenue by embracing the emerging technology — setting it apart from its peers, according to Guggenheim. "Based on our industry research and checks, we believe that Datadog is a primary beneficiary of AI-driven growth in data volumes and IT complexity," Guggenheim analyst Howard Ma wrote in a report earlier this month. That could lead Datadog to top expectations for its revenue in the March quarter, positively surprising investors, according to Morgan Stanley. DraftKings The sportsbook is likely to top expectations in its adjusted EBITDA, which should send shares higher, according to Morgan Stanley. DraftKings is estimated to report first-quarter results on April 30. DraftKings has faced increased competition over the past year from newer entrants in sports gambling, including prediction market provider Kalshi. That's put pressure on the stock, with shares falling 29% over the past 12 months. But the company is attempting a turnaround by diversifying its business, launching a prediction markets platform of its own late last year. The company has forecast adjusted EBITDA would total between $700 and $900 million for the full year, below the $980.7 million expected by analysts polled by FactSet. But Morgan Stanley thinks DraftKings will top expectations for adjusted EBITDA in the first quarter of 2026.
