Key Stats for Datadog Stock
- One-Day Performance: -19%
- 52-Week Range: $98 to $293
- Valuation Model Target Price: Around $275
- Implied Upside From $229: Around 20%
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What Happened?
Datadog stock fell about 19% today to close near $229 per share after its second-quarter report interrupted a powerful rally that had pushed the stock to a new 52-week high near $293 before earnings.
Datadog stock dropped specifically because management disclosed lower usage from its largest customer and forecast slower revenue growth in the third quarter. The company expects Q3 revenue of about $1.14 billion, representing growth of 28% to 29%, compared with Q2 growth of 36%, while the midpoint implies only modest sequential growth from $1.12 billion. The outlook remained healthy in absolute terms, but the smaller revenue beat and expected slowdown failed to clear the unusually high expectations created by the stock’s earlier rally.
This week, Datadog reported Q2 revenue of $1.12 billion, up 36% year over year, while sequential revenue growth reached 11%, its highest since Q2 2022, and remaining performance obligations increased 43% to $3.47 billion. CEO Olivier Pomel said “the business is booming,” as revenue growth from non-AI customers accelerated to the high-20% range, more than 750 AI customers used Datadog, and the company signed a multiyear contract worth over $30 million alongside a 9-figure renewal with its largest customer. Management incorporated that customer’s expected usage reduction beginning in Q3 into its guidance.
Bullish analyst expectations also raised the bar, with Morgan Stanley increasing its price target to $300 from $225 shortly before earnings while maintaining an Overweight rating. Datadog still beat consensus with adjusted EPS of $0.65 versus $0.58 and revenue of $1.12 billion versus about $1.08 billion, while raising its full-year outlook to $4.45 billion to $4.47 billion in revenue and adjusted EPS of $2.50 to $2.54. Datadog competes with Dynatrace and Elastic in observability software, which helps companies monitor applications, cloud infrastructure, logs, and security threats, and its 36% Q2 revenue growth substantially exceeded Dynatrace’s 19% fiscal 2026 growth, although Dynatrace’s 29% adjusted operating margin sets a higher profitability benchmark.
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Does Datadog Look Fairly Valued After the Selloff?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): Around 25%
- Operating Margins: Around 23%
- Exit P/E Multiple: 42x
Datadog’s modeled growth depends on customers expanding beyond infrastructure monitoring into logs, application-performance monitoring, security, and user-experience products, with 58% already using at least four products and 37% using six or more.
AI offers another growth lever because model training, inference, GPU fleets, data pipelines, and software agents create more systems that companies need to monitor and secure, while Bits AI helps engineers identify problems, find their causes, and repair failures faster.
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Datadog’s faster growth supports a premium valuation, but Dynatrace’s 29% non-GAAP operating margin shows why Datadog must convert more of its revenue expansion into profit to justify a 42x exit P/E.
The model’s target of around $275 implies around 20% total upside from the post-earnings price near $229 over roughly 2.4 years, equal to an annualized return of around 8%.
At current levels, Datadog appears fairly valued rather than clearly undervalued, with stronger returns requiring broad enterprise consumption, deeper product adoption, and AI-related demand to outweigh reduced usage from its largest account.
How Much Upside Does DDOG Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
