Key Takeaways:
- AI Acceleration: AI-native customer revenue grew to 12% of total revenue, with sequential growth accelerating in Q3 2025.
- Price Projection: Based on current execution, DDOG stock could reach $165 by December 2027.
- Potential Gains: This target implies a total return of 47% from the current price of $112.
- Annual Return: Investors could see roughly 23% growth over the next 1.9 years.
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Datadog (DDOG) delivered a standout third quarter in 2025 with 28% revenue growth and raised full-year guidance across all metrics. The company now expects revenue growth of approximately 26% for the full year, a significant jump from the 19% growth anticipated at the start of 2025.
CEO Olivier Pomel highlighted broad-based strength in demand. Mobile data consumption continues surging, and AI adoption is accelerating faster than expected. The platform strategy is resonating with customers as they consolidate fragmented tooling.
- Sequential usage growth from existing non-AI customers hit the highest level in 12 quarters. This signals real momentum beyond just the AI narrative.
- New logo bookings more than doubled year-over-year, with larger land sizes particularly in enterprise accounts.
- The company ended Q3 with about 32,000 customers and roughly 4,060 customers spending $100,000 or more annually.
- Platform adoption continues to expand, with 84% of customers using two or more products and 31% using six or more.
- Datadog’s Security suite is gaining significant traction, with ARR growth accelerating to the mid-50% range year over year. The company landed several seven-figure deals, including a Cloud SIEM to replace legacy security tools.
- Digital Experience products now exceed $300 million in ARR, with Product Analytics reaching over 1,000 customers despite being relatively new.
- The AI-native customer base now includes over 500 companies. More than 100 spend over $100,000 annually, and 15 exceed $1 million. This cohort represents 12% of total revenue, up from 6% a year ago. Growth is accelerating even when excluding the largest customer.
Datadog’s Bits AI Agents are generating strong buzz. The Bits AI SRE agent automatically handles incident investigation, often identifying root causes in three minutes rather than two hours with 20 engineers.
One customer said, “With Bits AI SRE being on call 24/7 for us, mean time to resolution for our services has improved significantly.”
The company extended a nine-figure contract with its largest AI-native customer, securing better economics through a higher level of commitment. Management emphasized that this follows the typical pattern of usage growth, followed by renewals with better pricing, then continued expansion.
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What the Model Says for Datadog Stock
We analyzed Datadog as it transitions into a leading unified observability platform, capturing emerging AI monitoring opportunities. The company benefits from secular growth in cloud migration and the increasing complexity of modern applications.
Datadog’s land-and-expand model drives predictable growth. Customers start small, see value quickly, then expand across more products and teams. Gross revenue retention remains in the mid-to-high 90% range while net revenue retention sits at 120%.
Customers using 50+ integrations on average benefit from correlating data across their entire stack. Large customers use over 150 integrations, making Datadog deeply embedded in operations.
Using a forecast of 22.7% annual revenue growth and 23.6% operating margins, our model projects the stock will rise to $165 within 1.9 years. This assumes a 47.1x price-to-earnings multiple.
That represents compression from Datadog’s historical P/E averages of 69.9x (one year) and 176.5x (three years). The lower multiple reflects normalization as the company scales and profitability improves, though it still implies premium positioning.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for DDOG stock:
1. Revenue Growth: 22.7%
Datadog’s growth centers on platform consolidation and AI adoption. The company delivered 28% revenue growth in Q3, with strength across customer segments and geographies.
Management sees continued momentum from cloud migration and digital transformation. New products like Security, Digital Experience, and LLM Observability are gaining traction. The sales organization is scaling effectively, with productivity metrics improving.
2. Operating margins: 23.6%
Datadog expanded operating margins through cloud efficiency initiatives and disciplined expense management. The company delivered 23% operating margin in Q3 while continuing to invest in growth.
Management expects further margin expansion as the platform scales and engineering efforts drive cloud cost savings. The usage-based model provides natural operating leverage.
3. Exit P/E Multiple: 47.1x
The market values Datadog at 50x earnings currently. We assume slight compression to 47.1x over our forecast period as the company matures.
This still reflects a premium multiple deserved by a market leader with 20%+ growth, strong retention, and expanding profitability. The platform’s mission-critical nature and AI positioning support premium valuation.
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What Happens If Things Go Better or Worse?
Observability companies face technology transitions and varying enterprise spending. Here’s how Datadog stock might perform under different scenarios through December 2029:
- Low Case: If revenue growth slows to 18.7% and net income margins compress to 20.6%, investors still see a 64.7% total return (13.7% annually).
- Mid Case: With 20.8% growth and 22.2% margins, we expect a total return of 122.6% (22.8% annually).
- High Case: If AI acceleration drives 22.9% revenue growth while Datadog maintains 23.6% margins, returns could hit 192.7% total (31.7% annually).
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The range reflects execution on AI observability, Security expansion, and platform adoption.
In the low case, competition intensifies or cloud migration stalls.
In the high case, AI workloads accelerate faster than expected, and Security products gain major traction.
How Much Upside Does Datadog Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
