Can Datadog's Accelerating Security ARR Power Its Next Leg of Growth?

Datadog’s DDOG security portfolio is emerging as a meaningful growth catalyst as the company moves beyond its observability foundation into broader security operations. Its multi-layered suite spans Cloud SIEM for threat detection and investigation, Cloud Security Posture Management for misconfiguration and compliance analysis, Application Security Management for runtime protection and Software Security Assurance for vulnerability assessment across the development lifecycle. 

Security Annual Recurring Revenue grew in the mid-50% range year over year during the third quarter of 2025, indicating strong adoption of Datadog’s newer security layers relative to its core portfolio. The company also benefits from an enterprise base of about 4,060 customers generating more than $100,000 in ARR, which provides a steady channel for cross-selling security modules without the friction of onboarding new accounts.The Zacks Consensus Estimate for Datadog’s 2025 revenues is pegged at $3.39 billion, indicating 26% year-over-year growth as multi-product usage deepens. 

However, sustaining this momentum will require Datadog to navigate several structural challenges. The security market remains highly competitive, with established vendors investing heavily in cloud-native threat detection and posture management. Enterprises reassessing their tool stacks may favor consolidated platforms but could also extend evaluation cycles. Although interest in unified observability-security architectures is rising, adoption remains uneven across industries and geographies. How effectively Datadog balances innovation, platform breadth and enterprise budget dynamics will determine the durability of its security-led growth in the years ahead.

DDOG Faces Intensifying Competition

Datadog faces strong competition from SentinelOne S and CloudflareNET as all three target unified cloud-security adoption. SentinelOne competes with Datadog by positioning its threat detection and cloud-workload capabilities as a streamlined alternative for security teams and SentinelOne increasingly pursues the same consolidation budgets Datadog targets. Cloudflare also competes directly by integrating security telemetry across its network and Zero Trust layers, and Cloudflare frequently emphasises faster incident response to challenge Datadog’s platform strengths. Both SentinelOne and Cloudflare are pushing deeper into cloud-security convergence, intensifying competitive pressure on Datadog’s expanding security suite.

DDOG's Price Performance, Valuation & Estimates

Shares of Datadog have appreciated 28.7% in the past six months, outperforming the Zacks Internet-Software industry’s decline of 2.8% and the Zacks Computer and Technology sector’s return of 26.1%.

DDOG’s Price Performance

From a valuation standpoint, Datadog is trading at a forward 12-month price-to-sales ratio of 13.45X, higher than the industry’s 4.98X. DDOG carries a Value Score of F.

DDOG’s Valuation

The Zacks Consensus Estimate for DDOG’s 2025 earnings is pegged at $2 per share, up by 16 cents over the past 30 days. The earnings figure suggests a 9.89% increase year over year.

Datadog, Inc. Price and Consensus

Datadog, Inc. price-consensus-chart | Datadog, Inc. Quote

DDOG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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