Datadog (DDOG) Valuation: Gauging Growth Potential After CFO Highlights AI-Driven Expansion and Product Advancements

Datadog (DDOG) is making headlines this week after its CFO spotlighted the company’s fast-growing AI-native clientele during a major tech conference. According to recent remarks, AI initiatives now account for a significant share of Datadog’s recent expansion, with some of the industry’s biggest AI tool providers relying on its solutions. In addition, Datadog is doubling down on international opportunities and investing in product enhancements, spanning cloud security and service management. For investors sizing up their next move, these developments could signal a new phase of growth or suggest the competitive race is heating up.

Datadog’s focus on next-generation technology and global reach seems to be resonating in the market. Over the past year, shares are up 19%, with gains building in the past month after a period of underperformance earlier this year. The company delivered 28% revenue growth year-over-year, reinforcing management’s upbeat commentary and the traction Datadog is finding with both customers and portfolio managers. Even with these strong fundamentals, the stock’s year-to-date return remains in the red, keeping sentiment mixed as investors weigh near-term risks against the longer-term promise of AI-driven momentum.

With that as the backdrop, the key question is whether Datadog’s current price truly reflects its future growth trajectory or if there is still an opportunity for investors to get ahead of the curve.

Most Popular Narrative: 15.8% Undervalued

The prevailing view sees Datadog as undervalued, with a consensus price target meaningfully above current trading levels and an upbeat growth narrative driving optimism about future returns.

Ongoing product innovation (for example, autonomous AI agents, enhanced security modules, expanded log and data observability) is increasing platform breadth and relevance, providing cross-selling opportunities and driving higher average revenue per user and net retention rate. This in turn improves recurring revenue predictability and gross margins.

Want to know the catalyst behind this bullish outlook? There is a game-changing set of expectations for growth, margin expansion, and valuation multiples behind the headline fair value. Wondering what level of future profits and sales would have to materialize in the next few years to justify this stock’s upside? Dig into the narrative to discover which ambitious forecasts are fueling this valuation surge.

Result: Fair Value of $159.93 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent margin pressure from rising costs and heavy reliance on a handful of large AI customers could quickly challenge the bullish thesis.

Find out about the key risks to this Datadog narrative.

Another View: Challenging the Fair Value

While some see Datadog as undervalued, another look at how the stock is priced compared to industry norms raises questions. This approach suggests the shares trade at a higher level than similar businesses. Could future growth justify this, or is caution needed?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Datadog to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Datadog Narrative

If you want a fresh perspective or would rather analyze the numbers yourself, you can craft your own Datadog outlook in just a few minutes with Do it your way.

A great starting point for your Datadog research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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