3Wk·

📊 Deep Dive: Datadog ($DDOG)

👉 Datadog is one of the leading providers in the field of monitoring, observability & security for cloud infrastructures. Founded in 2010, the US company has become an indispensable "operating system" for modern IT stacks - from servers and networks to applications and AI applications.

With a market share of ~20 % in the observability segment and a strong focus on upselling (security & AI modules), Datadog has established itself as a standard solution for hyperscalers, startups and Fortune 500 companies.

🚀 Growth driver

➡️ Cloud adoption & AI boom: Every company that uses the cloud needs monitoring - Datadog is one of the first port of call.

➡️ GLUE effect: Strong customer loyalty - once integrated, switching is extremely difficult (vendor lock-in).

➡️ UpsellingSecurity & AI modules drive margins up significantly.

➡️ Market potential: According to Gartner, the global observability market is growing at a double-digit rate and is expected to reach > USD 70 billion by 2030.

💰 Finances (Q2/2025)

📊 Sales: $720m (+23% YoY)

📊 ARR: ~$2.9bn

📊 Customers >100k ARR: ~3,200 (+18% YoY)

📊 Free cash flow margin: ~25 %

📊 Rule of 40: ~50 (top level for SaaS)

📊 NRR: >115 % → strong upselling

📊 Magic Number: ~0.8-0.9 (below ideal value >1, due to high AI investments)

⚖️ Valuation

➡️ EV/Sales 2025e: ~12x → high, but not unusual for market leaders in the SaaS sector

➡️ Comparison: Dynatrace ~8x, Splunk (before Cisco acquisition) ~5x → Datadog is clearly premium valued.

➡️ P/E ratio (2026e): ~45 → Profitability present, but growth story dominates.

🟢 Opportunities

🟢 Cloud & AI megatrend: Monitoring is mandatory infrastructure - whether for start-ups or Fortune 500.

🟢 Cross-selling: One customer → many modules (observability, security, APM, log management).

🟢 Scalability: SaaS model with high margins and enormous cash flow leverage.

🟢 First-mover advantage: Strong brand, community & developer ecosystem.

🔴 risks

🔴 Hyperscaler competition: AWS, Azure, GCP develop their own observability solutions.

🔴 High valuation: Execution risk - small disappointment = big price losses.

🔴 Dependence on IT budgets: Monitoring budgets are put on hold during recessions.

🔴 Competitive pressure: Dynatrace, Splunk, Elastic, New Relic - strong competition.

🧠 Conclusion

Datadog combines strong growth with profitability - a rarity in the SaaS sector. With a Rule of 40 of ~50 and >25 % FCF margin, the foundation is solid.

The high valuation remains the biggest risk - $DDOG (-0.63%) must continue to grow at double-digit rates to justify it.

👉 Will Datadog succeed in establishing itself in the AI age as the standard platform platform for monitoring + security in the AI age, it remains a potential compounder.

❓Question for the community:

Do you trust Datadog to maintain its premium multiple and overtake Splunk & Dynatrace in the long run - or is the stock currently too highly valued?

10 Comments

Chris@Multibagger

3Wk

The community moves markets. Hardly introduced 😉 the share goes up to the moon today 😎.

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Der Spekulant@Derspekulant1

3Wk

@Multibagger I was thinking the same thing earlier 😂

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Chris@Multibagger

3Wk

Thanks for the presentation and the analysis. I entered small with a derivative. Also made a positive appearance in the 13 F reports.

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Der Spekulant@Derspekulant1

3Wk

@Multibagger with pleasure! They're still growing into the rating but so far they've hardly disappointed, I've been with them for about a year 👍🏽

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Chris@Multibagger

3Wk

@Derspekulant1 Didn't you write in your disclaimer that you are not invested?

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Chris@Multibagger

3Wk

Fits in with the theme.

Investing.com - Wells Fargo has started tracking 18 small and mid-cap software companies, highlighting artificial intelligence (AI) as a key driver of the industry. AI has reached a tipping point, the analysts explained. "Agents are now doing the work for the user."

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There is a particular focus on agentic coding. AI systems plan and complete complex tasks across an entire code ecosystem. According to Wells Fargo, this is the "first real breakthrough" in the field of software-as-a-service. The technology, which has been available since February 2025, automates processes and significantly increases the productivity of developers.

The stocks rated "Overweight" include MongoDB, Snowflake, Datadog and Dynatrace. HubSpot, Monday.com, Atlassian, Braze, Confluent, Twilio and Klaviyo were also rated positively. The analysts gave Elastic, GitLab, Freshworks, RingCentral, Zoom and Five9 a neutral rating. ZoomInfo, on the other hand, was rated "Underweight".

Concrete data shows how strong the interest in AI solutions is growing: The open source library LangChain now has 78 million downloads per month - an increase of 140 percent since the beginning of the year. The number of MongoDB installations has even quadrupled. The AI tool Claude Code was downloaded over 21 million times in August, compared to 650,000 in March. Companies such as Rakuten have been able to shorten their development cycles by almost 80 percent.

Wells Fargo expects infrastructure providers such as MongoDB, Datadog and Dynatrace in particular to benefit from the increasing spread. "Interaction with AI agents will become an integral part of everyday working life," say the experts. Accordingly, monetization is likely to accelerate at both the infrastructure and application level.

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Der Spekulant@Derspekulant1

3Wk

@Multibagger was also my intention not to invest in the companies at the forefront of the AI sector, but in those that are essential but less well known. That's why I'm staying invested in $SNOW and $DDOG for longer.

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investment_wizard_2286@investment_wizard_2286

3Wk

Are on the watch list. So far, I haven't dared to do so or other companies were more interesting.
I still see ZScaler as a competitor and think it has a better chance of asserting itself as the top dog in the field and holding its own

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Der Spekulant@Derspekulant1

3Wk

@investment_wizard_2286 $ZS and $DDOG hardly overlap and are not in direct competition, datadog's focus is on obersvability with 20% market share and Zscaler has no product in this area.

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investment_wizard_2286@investment_wizard_2286

3Wk

You're right, ZScaler's current focus is more on cloud security and zero-trust solutions and not on upper servability. Currently...

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