Datadog (DDOG) AI Stock Analysis

• Market Cap: $42.38B
• Dividend Yield: N/A
• Average Volume (3M): 3.56M
• Price to Earnings (P/E): 403.2
• Beta (1Y): 1.40
• Revenue Growth: 26.63%
• EPS Growth: -46.13%
• Country: US
• Employees: 6,500
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.55
• Shares Outstanding: 325,443,360
• 10 Day Avg. Volume: 4,201,796
• 30 Day Avg. Volume: 3,557,242
• PEG Ratio: 0.98
• Price to Book (P/B): 17.70
• Price to Sales (P/S): 17.90
• P/FCF Ratio: 57.47
• Enterprise Value/Market Cap: 1.15
• Enterprise Value/Revenue: 15.16
• Enterprise Value/Gross Profit: 18.97
• Enterprise Value/Ebitda: 181.15
• 1Y Price Target: $202.40
• Price Target Upside: 70.06% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 33
• EPS Forecast (FY): 2.31
• Revenue Forecast (FY): $4.10B

• Rating: 69 Neutral
• Price Target: $130.00 ▲(9.23% Upside)

Datadog's strong financial performance and positive earnings call sentiment are the most significant factors driving the score. The company's robust revenue growth and strategic positioning in AI and security segments are key strengths. However, high valuation metrics and mixed technical indicators present challenges. Continued focus on operational efficiency and margin improvement will be crucial for future performance.

Positive Factors

Subscription, usage-based model & cloud partnerships

Datadog’s recurring, usage-based subscription model and deep cloud provider partnerships create durable ARR and high customer switching costs. Usage billing scales with customer growth, aligning incentives and supporting predictable revenue and long-term cross-sell as customers expand cloud footprints.

Sustained revenue and customer growth; AI & security traction

Consistent high-teens to high-20s revenue growth and rising customer count demonstrate product-market fit and enterprise adoption. Accelerating security ARR and AI-native revenue signal structural expansion into higher-value adjacencies, supporting durable ARR growth and larger deal sizes over the medium term.

High gross margins and improving leverage

An ~80% gross margin base and reduced leverage enhance operating flexibility and resilience. Strong operating cash flows coupled with a cleaner balance sheet provide capacity for strategic investment, M&A or buffering cyclical pressures, underpinning long-term durability despite near-term margin swings.

Negative Factors

Low net margin and negative EBIT

Weak net income conversion and a negative EBIT margin reveal persistent operating leverage and cost structure challenges. Until Datadog sustainably improves operating efficiency, thin profitability limits retained earnings for reinvestment and makes the business more sensitive to margin compression or higher SG&A and R&D spend.

Free cash flow growth has turned negative

Although operating cash flow is solid, declining free cash flow growth indicates rising investments or working capital needs that may reduce discretionary cash. Persistent negative FCF growth can constrain capital allocation flexibility and increase reliance on external funding for strategic initiatives.

Unrealized GPU monetization and margin pressure

Key AI-related monetization (GPU monitoring) is not yet contributing materially, while gross margin consistency is under pressure. Failure to monetize GPU workloads or control margin erosion from costly AI infrastructure could hamper long-term profitability and the economics of scaling AI-centric offerings.

Datadog Business Overview & Revenue Model

Company Description

Datadog, 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 Money

Datadog 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 Financial Statement Overview

Summary

Datadog shows strong revenue growth and efficient cost management with a high gross profit margin. However, the net profit margin and EBIT margin indicate room for improvement in operational efficiency. The balance sheet reflects reduced leverage, enhancing financial stability, while cash flow generation remains robust despite recent declines in free cash flow growth.

Income Statement

Datadog has demonstrated strong revenue growth with a TTM increase of 6.49%, although this is a slowdown compared to previous years. The gross profit margin remains robust at approximately 80%, indicating efficient cost management. However, the net profit margin has decreased to 3.32% in the TTM, reflecting challenges in converting revenue growth into net income. The negative EBIT margin suggests operational inefficiencies, but the positive EBITDA margin of 7.99% shows potential for improvement.

Balance Sheet

The company's debt-to-equity ratio has improved to 0.37 in the TTM, indicating a stronger equity position relative to debt. Return on equity is modest at 3.48%, suggesting limited profitability from shareholder investments. The equity ratio is stable, reflecting a balanced asset structure. Overall, the balance sheet shows a trend towards reduced leverage, enhancing financial stability.

Cash Flow

Operating cash flow remains strong, with a TTM coverage ratio of 0.75, indicating good cash generation relative to net income. However, free cash flow growth has turned negative, highlighting potential cash flow management issues. The free cash flow to net income ratio is high at 95.10%, suggesting efficient conversion of earnings into cash. Despite some challenges, cash flow metrics indicate a generally healthy cash position.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.21B	2.68B	2.13B	1.68B	1.03B	603.47M
Gross Profit	2.57B	2.17B	1.72B	1.33B	793.94M	473.27M
EBITDA	268.77M	317.99M	150.21M	41.10M	25.57M	34.11M
Net Income	106.77M	183.75M	48.57M	-50.16M	-20.75M	-24.55M
Balance Sheet
Total Assets	6.05B	5.79B	3.94B	3.00B	2.38B	1.89B
Cash, Cash Equivalents and Short-Term Investments	4.14B	4.19B	2.58B	1.88B	1.55B	1.52B
Total Debt	1.28B	1.84B	902.34M	837.52M	807.75M	643.62M
Total Liabilities	2.61B	3.07B	1.91B	1.59B	1.34B	932.85M
Stockholders Equity	3.44B	2.71B	2.03B	1.41B	1.04B	957.43M
Cash Flow
Free Cash Flow	939.85M	835.88M	632.37M	353.52M	250.52M	83.21M
Operating Cash Flow	988.29M	870.60M	659.95M	418.41M	286.55M	109.09M
Investing Cash Flow	-945.99M	-736.84M	-731.37M	-384.67M	-273.74M	-1.15B
Financing Cash Flow	156.89M	787.08M	58.28M	36.02M	34.94M	670.28M

Datadog Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 119.02
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

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 119.02 is below the 20-day moving average (MA) of 133.30, below the 50-day MA of 151.92, and below the 200-day MA of 135.53, indicating a bearish trend. The MACD of -7.59 indicates Positive momentum. The RSI at 24.98 is Positive, neither overbought nor oversold. The STOCH value of 4.35 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DDOG.

Datadog Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DT	77 Outperform	$11.87B	23.92	20.57%	―	18.50%	207.45%
DDOG	69 Neutral	$42.38B	403.18	3.52%	―	26.63%	-46.13%
CRWD	66 Neutral	$114.70B	-359.25	-8.88%	―	22.05%	-341.24%
PD	63 Neutral	$1.08B	7.01	70.46%	―	7.01%	―
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
SNOW	54 Neutral	$71.09B	-52.13	-53.32%	―	28.48%	-19.12%