Datadog, Inc. (DDOG): A Bull Case Theory

We came across a bullish thesis on Datadog, Inc. on Business Invest’s Substack by Francesco Ferrari. In this article, we will summarize the bulls’ thesis on DDOG. Datadog, Inc.'s share was trading at $139.36 as of July 16^th. DDOG’s trailing and forward P/E were 296.51 and 81.30 respectively according to Yahoo Finance.

Datadog (DDOG), a $48.5B cloud monitoring and security platform, presents a nuanced investment case shaped by strong historical growth and a seemingly excessive valuation. While its current P/E of 293 appears alarming, a deeper dive into the company's long-term earnings power reveals a far more favorable picture.

Over the past three years, DDOG has grown sales at a 33.4% CAGR, with a 5-year stock CAGR of 10.5%, underlining consistent top-line momentum. However, the company currently operates with a thin 1.1% operating margin and a net profit margin of just 5.8%. When adjusting for capital efficiency and excluding taxes, the firm’s “owners’ earnings” suggest an earnings power closer to 32.1%, indicating a significant gap between reported profits and intrinsic earnings capacity.

Under a conservative projection of 15% revenue growth through 2030, revenues could reach $5.7B, with implied earnings of $1.8B. Applying a normalized terminal multiple of 25x, the resulting market cap would be approximately $45.8B—essentially flat relative to today’s valuation. This implies the current stock price already reflects meaningful margin expansion and sustained mid-teens growth over the next five years.

Therefore, any performance exceeding these built-in assumptions—whether through upside in revenue growth, faster margin expansion, or strategic upside—could drive material revaluation. While the margin of safety appears thin on a traditional basis, DDOG’s long-term monetization potential and operational leverage provide a compelling asymmetry for investors focused on durable growth and improving fundamentals. The stock may offer limited downside with meaningful optionality if execution exceeds the already embedded expectations.

Previously, we covered a bullish thesis on Datadog, Inc. (DDOG) by @bigbullcap on X in May 2025, which highlighted the company’s multi-product engine, diversified ARR base, and upside from deeper product adoption. The company’s stock price has experienced a turnaround and appreciated approximately 21.75% since the thesis began to play out. Francesco Ferrari shares a similar view but emphasizes DDOG’s long-term earnings power and valuation asymmetry.

Datadog, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held DDOG at the end of the first quarter which was 83 in the previous quarter. While we acknowledge the potential of DDOG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.