GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Datadog's premium valuation guards a habit rather than a bottleneck, so strength is worth fading. It earns a 1% operating margin and trades at 553x trailing earnings and 21x sales, pricing its 32% growth as scarce and permanent. Yet observability is exactly the workflow AI agents now absorb and hyperscalers bundle in for free. That is moat pricing on a story, the inverse of a bottleneck. x.com
Datadog's growth is slowing just as its valuation demands acceleration. Q2 beat on every major metric, with revenue up 36% to $1.12 billion and full-year guidance raised to $4.46 billion, yet Q3 guidance implies about 29% growth, new 100K+ ARR customers slowed to 170, and FCF margin fell from 28.7% to 24.9%. The AI story leans on OpenAI as its biggest customer, and the chance OpenAI builds more of its own observability remains an overhang. x.com
Datadog's multiple, not its earnings, is the problem: at a P/E in the 600s, it only works if growth keeps accelerating for the next eight quarters. x.com x.com
Datadog is one of the best-run software companies, spending more on R&D and much less on sales and administration than peers while still growing 36% recently. Rubrik and Snowflake spend massively on SG&A, and Palo Alto Networks and CrowdStrike are no better. x.com x.com
Datadog fell 20% despite beating earnings because at a 550 P/E it trades like a meme stock, and buying at such valuations risks losing everything. x.com
Datadog's valuation looks extremely stretched at 17x next-twelve-month revenue after jumping 30% on its May 7 earnings and grinding up another 30% since from a much larger base. Even with the risk case off the table for now, as a reply notes, the move is still dumb. x.com x.com
The more AI the world builds, the more data flows through Datadog. Revenue growth re-accelerated to 32% from 28%, the rarest signal in software in 2026. As the single pane of glass for cloud infrastructure, it monitors AI workloads that generate 10-100x more telemetry, with OpenAI, Anthropic and AWS using it for GPU clusters, token costs and model latency. AI-native revenue is about 12% of the total and growing triple digits, and expected revenue CAGR is 22%. x.com
Datadog looks expensive against AI software peers on growth-adjusted valuation. Across the group, every 10 points of extra growth commands roughly 5-7x more EV/sales; Snowflake, MongoDB, ServiceNow, Dynatrace, HubSpot and Salesforce track that trendline reasonably well, while Datadog sits above it. x.com
Combining estimated NTM revenue growth with trailing GAAP EBITDA margin makes Palo Alto Networks, Datadog, JFrog, Rubrik and Snowflake look overvalued against forward EV/sales. Zoom, Alphabet, Oracle, AppLovin, Microsoft, Fair Isaac, Adobe, Amazon and Teradata remain undervalued on this Rule of 40 comparison; Palantir, Cloudflare and CrowdStrike remain overvalued. x.com
Datadog's 15% drop on slower Q3 guidance looks like a buying opportunity, with the long-term thesis intact. Revenue rose 36% to $1.1 billion, but its largest AI customer renewed a nine-figure contract while cutting usage, showing the downside of consumption pricing and one frontier AI account's weight on growth. The broader business keeps strengthening: non-AI revenue is accelerating into the high-20% range, enterprise bookings more than doubled and customers are adopting more of the platform. … Show more
Datadog's valuation is indefensible at 25x revenue: nothing with a $100B market cap can sanely be worth 25 times its revenue. The call rests on valuation alone, without deep knowledge of the business. x.com
