Datadog (DDOG) AI Stock Analysis

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Datadog

(NASDAQ:DDOG)

Select Model

Neutral 65 (OpenAI - 5.2)

Rating:65Neutral

Price Target:

$110.00

▲(7.19% Upside)

Action:ReiteratedDate:02/10/26

The score is supported primarily by strong financial quality (high gross margins and robust free cash flow) and a positive earnings call emphasizing demand strength and backlog/bookings momentum. It is weighed down by weak technicals (clear downtrend with negative momentum) and a very expensive valuation (P/E 386), alongside guidance pointing to slower growth and ongoing investment-driven margin pressure.

Positive Factors

Free cash flow strength

Sustained operating cash flow (~$1.05B TTM) and free cash flow (~$1.00B) give Datadog durable internal funding capacity. This supports continued R&D and go-to-market investment, debt reduction or M&A optionality, and reduces reliance on external capital, strengthening long-term strategic flexibility.

High gross margins

Gross margins near 79–81% reflect scalable SaaS economics and cloud efficiencies. High base-level margins permit substantial operating leverage as revenue grows, providing a durable buffer to fund AI/product investment while still enabling the path to stronger operating profits as scale improves.

Platform adoption & enterprise expansion

Rising multi-product adoption and three core pillars each exceeding $1B ARR show a diversified, sticky ARR base. Increasing enterprise customers and strong land‑and‑expand dynamics drive durable revenue expansion and high net retention, reducing churn risk and supporting longer-term organic growth.

Negative Factors

Customer concentration risk

Management explicitly models results excluding the largest customer and flags uncertainty tied to that account. Material revenue concentration raises structural earnings volatility risk and makes forward growth and ARR visibility dependent on one customer's consumption patterns, a persistent strategic vulnerability.

Sustained OpEx investment

Sustained elevated OpEx to fund AI and go‑to‑market expands capability but structurally compresses operating margins. Even with strong revenue growth, prolonged high investment intensity limits near‑term margin expansion and requires outsized revenue scale to restore prior margin targets.

Guided growth deceleration

Management's FY2026 guidance (18–20% growth) implies a material deceleration from recent quarter acceleration. Slower structural top‑line growth reduces operating leverage and raises the bar for product-led and AI-driven initiatives to reaccelerate sustainable revenue expansion over the medium term.

Datadog (DDOG) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$43.05B

Dividend YieldN/A

Average Volume (3M)6.45M

Price to Earnings (P/E)407.2

Beta (1Y)1.32

Revenue Growth26.63%

EPS Growth-46.13%

CountryUS

Employees6,500

SectorTechnology

Sector Strength88

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.59

Shares Outstanding328,274,660

10 Day Avg. Volume7,080,911

30 Day Avg. Volume6,453,610

Financial Highlights & Ratios

PEG Ratio-10.05

Price to Book (P/B)12.65

Price to Sales (P/S)13.78

P/FCF Ratio47.20

Enterprise Value/Market Cap0.88

Enterprise Value/Revenue11.02

Enterprise Value/Gross Profit13.78

Enterprise Value/Ebitda166.31

Forecast

1Y Price Target

$185.75

Price Target Upside81.01% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering36

EPS Forecast (FY)2.15

Revenue Forecast (FY)$4.12B

Datadog Business Overview & Revenue Model

Company DescriptionDatadog, Inc. provides monitoring and analytics platform for developers, information technology operations teams, and business users in the cloud in North America and internationally. The company's SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, and security monitoring to provide real-time observability of its customers technology stack. Its platform also provides user experience monitoring, network performance monitoring, cloud security, developer-focused observability, and incident management, as well as a range of shared features, such as dashboards, analytics, collaboration tools, and alerting capabilities. The company was incorporated in 2010 and is headquartered in New York, New York.

How the Company Makes MoneyDatadog primarily generates revenue through a subscription-based model, offering various pricing tiers based on the features and services utilized by its customers. The company has different product offerings, including APM, log management, and infrastructure monitoring, which are billed on a usage basis. Key revenue streams include charges for additional hosts monitored, data ingested for log management, and premium features for advanced analytics. Datadog also benefits from significant partnerships with cloud providers like AWS, Microsoft Azure, and Google Cloud, which enhance its service offerings and expand its customer base. The company's ability to scale with its customers and provide comprehensive monitoring solutions contributes to its recurring revenue growth.

Datadog Key Performance Indicators (KPIs)

Any

Customers Over $100k

Customers Over $100k
Shows the number of customers generating over $100,000 in annual revenue, reflecting the company's ability to attract and retain high-value clients.

Chart InsightsDatadog's growth in customers spending over $100k continues to accelerate, reaching 4,060 by Q3 2025. This aligns with their strategic expansion in AI and security segments, as highlighted in the latest earnings call. The company is capitalizing on new logo wins and increased product adoption, with 84% of customers using multiple products. However, challenges in GPU monetization and gross margin pressures remain. Overall, the robust customer growth and strategic positioning in cloud and AI markets underscore Datadog's potential for sustained revenue expansion.

Data provided by:

The Fly

Datadog Earnings Call Summary

Earnings Call Date:Feb 10, 2026

(Q4-2025)

% Change Since: |

Next Earnings Date:Apr 30, 2026

Earnings Call Sentiment Positive

The call presented many strong operational and financial highlights: accelerated revenue growth (+29% YoY), record bookings (+37% YoY), rising platform adoption and large multi‑product deals, healthy cash generation (FCF $291M, 31% margin), strong retention (~120% net retention), and notable AI product momentum (multiple product launches and rapid usage growth). Offsetting these positives are conservative FY2026 guidance implying year-over-year deceleration (18%–20%), sustained high OpEx growth as the company invests in AI and go-to-market (affecting near-term margins), slight gross margin compression, and some transparency gaps around AI cohort revenue and dependence on the largest customer. On balance, the highlights materially outweigh the lowlights given robust demand, strong bookings/RPO tailwinds, expanding ARR pillars, and healthy cash flows, while the lowlights are primarily related to measured conservatism and continued investment.

Q4-2025 Updates

Positive Updates

Strong Q4 Revenue Growth

Revenue was $953 million, up 29% year-over-year and up 8% sequentially, beating the high end of guidance.

Record Bookings and Large Deals

Record bookings of $1.63 billion, up 37% year-over-year; 18 deals over $10M TCV, two deals >$100M, and a notable 8-figure land with a leading AI model company.

Robust Cash Generation and Balance Sheet

Free cash flow of $291 million (31% free cash flow margin), operating cash flow $327 million, and $4.47 billion in cash, cash equivalents, and marketable securities at quarter end.

Expanding Enterprise Footprint and ARR Concentration

Total customers ~32,700 (vs ~30,000 a year ago). Customers with ARR >= $100K grew to ~4,310 from ~3,610 and now generate ~90% of ARR. 48% of the Fortune 500 are customers, with median Fortune 500 ARR still under $500K, signaling expansion opportunity.

Platform Penetration and Multi-Product Adoption

Platform adoption increased: 84% of customers use 2+ products (from 83%), 55% use 4+ (from 50%), 33% use 6+ (from 26%), 18% use 8+ (from 12%), and 9% use 10+ (from 6%).

Three Core Pillars Exceeding $1B ARR

Infrastructure monitoring > $1.6B ARR, log management > $1B ARR (FlexLogs nearing $100M ARR), and APM + DEM suite > $1B ARR. Core APM accelerated into the mid-30s % year-over-year—currently the fastest-growing core pillar.

Strong Retention Metrics

Trailing twelve-month net revenue retention ~120% and trailing twelve-month gross revenue retention stable in the mid-to-high 90s, indicating strong customer retention and expansion.

AI Product Momentum and R&D Output

Released over 400 features in 2025. AI highlights include AI SRE agent GA with >2,000 trial/paying users running investigations in the past month, MCP server preview with tool calls up 11x Q4 vs Q3, and Datadog-for-AI adoption over 1,000 customers with spans up 10x in six months.

Strong Backlog and Contract Visibility

Billings $1.21 billion, up 34% year-over-year; Remaining Performance Obligations (RPO) $3.46 billion, up 52% year-over-year, with current RPO growth ~40% year-over-year and longer duration due to more multiyear deals.

Positive Guidance with Conservative Philosophy

Q1 revenue guide $951–$961 million (25%–26% YoY) and FY2026 revenue guide $4.06–$4.10 billion (18%–20% YoY). Guidance explicitly assumes the business excluding the largest customer grows at least 20%.

Negative Updates

Guidance Reflects Slower Full-Year Growth

Full-year FY2026 revenue guidance of $4.06–$4.10 billion implies 18%–20% year-over-year growth, a deceleration from recent quarter growth (Q4 +29%), reflecting a more conservative outlook for the year.

OpEx Growth and Margin Pressure from Investments

Q4 OpEx grew 29% year-over-year. Management indicated continued heavy investment in R&D and go-to-market, and non-GAAP operating margin guidance of ~21% for FY2026 (and Q1) is below prior longer-term mid-20% margin expectations, suggesting margin headwinds as the company scales.

Dependence and Uncertainty Around Largest Customer

Guidance modeling explicitly separates the largest customer (the company assumed core, excluding the largest customer, grows >=20%), implying uncertainty or conservatism tied to that customer's future consumption; no disclosure of AI cohort revenue percentage was provided.

Slight Gross Margin Compression

Q4 gross margin was 81.4%, slightly below the year-ago quarter (81.7%), indicating limited but present pressure at the gross margin line.

Limited Visibility into AI Cohort Revenue Mix

While management disclosed AI-native customer counts (~650 AI-native customers; 19 spending $1M+; 14 of top 20 AI-native companies are customers) they did not quantify what percent of revenue the AI cohort represented in Q4, limiting transparency on concentration and sustainability of that high-growth segment.

Competitive and Structural Risks in the AI Era

Investors raised questions about potential competition from LLM-related tooling and homegrown solutions; while management emphasized defensibility, the company acknowledged evolving product needs (in-stream detection, agent integration) which require continued heavy investment and could attract new competitors.

Company Guidance

Datadog guided Q1 revenue of $951–$961M (up 25–26% YoY), non‑GAAP operating income of $195–$205M (implying ~21% operating margin) and non‑GAAP EPS of $0.49–$0.51 based on ~367M diluted shares; for FY2026 it expects revenue of $4.06–$4.10B (18–20% YoY), non‑GAAP operating income of $840–$880M (≈21% margin) and non‑GAAP EPS of $2.08–$2.16 based on ~372M diluted shares, with modeling that the business excluding the largest customer grows at least 20% during the year. Additional guidance items include net interest and other income of about $140M, cash taxes of ~$30–$40M, a 21% non‑GAAP tax rate going forward, and capital expenditures plus capitalized software of roughly 4–5% of revenue.

Datadog Financial Statement Overview

Summary

Strong fundamentals led by excellent cash generation (TTM operating cash flow ~$1.05B and free cash flow ~$1.00B) and consistently high gross margins (~79–81%). Offsetting this strength, profitability softened in TTM versus 2024 (slight operating loss and weaker net margin), and the cash flow coverage metric below 1.0 is a watch item.

Income Statement

Positive

Datadog shows strong top-line expansion over the period, with revenue scaling from ~$0.6B (2020) to $3.43B in TTM (Trailing-Twelve-Months). Profitability has improved from losses in 2020–2022 to positive net income in 2023–TTM, supported by consistently high gross margins (~79–81%). Offsetting this, margins weakened in TTM versus 2024 (lower net income margin and a drop from positive operating profit to a slight operating loss), suggesting higher spending or operating volatility as growth moderates versus prior years.

Balance Sheet

Positive

The balance sheet is generally solid with rising equity over time ($0.96B in 2020 to $3.73B in TTM (Trailing-Twelve-Months)) and moderate leverage in TTM (debt-to-equity ~0.37, improved from ~0.68 in 2024). Returns on equity have turned positive but remain modest in TTM (~3.5%), indicating profitability is still relatively light compared with the capital base. Total debt remains meaningful (~$1.28B in TTM), so sustained earnings power is important to keep leverage trending favorably.

Cash Flow

Very Positive

Cash generation is a clear strength: operating cash flow increased from $109M (2020) to $1.05B in TTM (Trailing-Twelve-Months), with free cash flow reaching ~$1.00B. Free cash flow also closely tracks reported earnings (free cash flow to net income ~0.95–0.96 in 2023–TTM), indicating good earnings quality. A watch item is that cash flow growth in TTM is far slower than earlier years, and the provided cash flow coverage metric is below 1.0 in TTM, implying cash flow does not fully cover the referenced obligation in that measure.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	3.43B	2.68B	2.13B	1.68B	1.03B
Gross Profit	2.74B	2.17B	1.72B	1.33B	793.94M
EBITDA	260.61M	317.99M	150.21M	41.10M	25.57M
Net Income	107.74M	183.75M	48.57M	-50.16M	-20.75M
Balance Sheet
Total Assets	6.64B	5.79B	3.94B	3.00B	2.38B
Cash, Cash Equivalents and Short-Term Investments	4.47B	4.19B	2.58B	1.88B	1.55B
Total Debt	1.54B	1.84B	902.34M	837.52M	807.75M
Total Liabilities	2.91B	3.07B	1.91B	1.59B	1.34B
Stockholders Equity	3.73B	2.71B	2.03B	1.41B	1.04B
Cash Flow
Free Cash Flow	1.00B	835.88M	632.37M	353.52M	250.52M
Operating Cash Flow	1.05B	870.60M	659.95M	418.41M	286.55M
Investing Cash Flow	-1.33B	-736.84M	-731.37M	-384.67M	-273.74M
Financing Cash Flow	-572.48M	787.08M	58.28M	36.02M	34.94M

Datadog Technical Analysis

Technical Analysis Sentiment

Negative

Last Price102.62

Price Trends

50DMA

129.90

Negative

100DMA

146.36

Negative

200DMA

138.77

Negative

Market Momentum

MACD

-4.56

Positive

RSI

31.76

Neutral

STOCH

25.51

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DDOG, the sentiment is Negative. The current price of 102.62 is below the 20-day moving average (MA) of 123.07, below the 50-day MA of 129.90, and below the 200-day MA of 138.77, indicating a bearish trend. The MACD of -4.56 indicates Positive momentum. The RSI at 31.76 is Neutral, neither overbought nor oversold. The STOCH value of 25.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DDOG.

Datadog Risk Analysis

Datadog disclosed 59 risk factors in its most recent earnings report. Datadog reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Datadog Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DT	72 Outperform	$10.86B	59.77	6.96%	―	18.50%	207.45%
DDOG	65 Neutral	$43.05B	407.16	3.34%	―	26.63%	-46.13%
PD	62 Neutral	$637.85M	4.18	70.46%	―	7.01%	―
CRWD	62 Neutral	$104.81B	―	-8.88%	―	22.05%	-341.24%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
SNOW	52 Neutral	$60.25B	-44.41	-53.32%	―	28.48%	-19.12%

* Technology Sector Average

Performance Comparison

DDOG

Datadog

102.62

-12.37

-10.75%

PagerDuty

6.25

-11.71

-65.20%

CRWD

CrowdStrike Holdings

350.33

-29.42

-7.75%

Dynatrace

33.64

-24.78

-42.42%

SNOW

Snowflake

157.60

-6.60

-4.02%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Feb 10, 2026