Reassessing Datadog (DDOG) Valuation After Recent Share Price Weakness

Datadog (DDOG) has been under pressure lately, with the stock sliding about 24% over the past month even as revenue grew roughly 17% and net income climbed more than 34% year over year.

See our latest analysis for Datadog.

That steep 30 day share price return of minus 24.3 percent has taken the stock back near where it started the year, despite a slightly positive 90 day share price return and a still impressive three year total shareholder return of 84.3 percent. This suggests momentum has cooled even as the long term story remains intact.

If Datadog has you rethinking where the next wave of growth might come from, this could be a good moment to explore other high growth tech and AI stocks that are reshaping software and infrastructure.

With shares sliding even as profits and revenue rise, investors now face a pivotal question: Is Datadog trading at a meaningful discount to its growth prospects, or has the market already priced in the next leg of expansion?

Most Popular Narrative Narrative: 33.9% Undervalued

Datadog’s most followed narrative pegs fair value around 34 percent above the last close of $140.05, framing the recent share pullback as potential mispricing.

Ongoing product innovation (e.g., 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, which in turn improves recurring revenue predictability and gross margins.

Read the complete narrative.

Want to see what kind of revenue runway and margin expansion this valuation is banking on, and how far future earnings multiples are stretched to get there? Dive into the full narrative to unpack the exact growth path behind that higher fair value.

Result: Fair Value of $211.97 (UNDERVALUED)

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

However, concentrated AI customer exposure and intensifying competition from hyperscalers and open source tools could quickly undermine these optimistic growth and valuation assumptions.

Find out about the key risks to this Datadog narrative.

Another View on Valuation

While the narrative driven fair value suggests Datadog is 33.9 percent undervalued, its 15.3 times price to sales ratio looks demanding against US software peers at 4.9 times and an estimated fair ratio of 13.1 times. That premium hints at valuation risk if growth stumbles, or it may simply reflect a category leader premium.

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

Build Your Own Datadog Narrative

If you see Datadog’s story differently or want to stress test these assumptions with your own inputs, you can build a fresh view in minutes: Do it your way.

A great starting point for your Datadog research is our analysis highlighting 3 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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