Key Takeaway:
Datadog helps companies monitor and manage increasingly complex software environments across clouds, applications, and infrastructure.
AI is creating new demand for monitoring and security, but Datadog’s growth opportunity extends beyond AI. Existing customers are expanding their use, and non-AI demand is accelerating.
FBN Securities initiated coverage with an Outperform rating and a $325 price target, saying growth is broad-based and accelerating.
Datadog shares have gained 107% year to date, reaching $280.04 on Friday.
Valuation is a key risk. At roughly 85 times forward earnings, the stock’s price already reflects substantial growth expectations.
Datadog (DDOG) helps companies keep increasingly complex software systems running smoothly. As businesses spread applications across clouds, containers, databases, and other infrastructure, they face more data to track and more potential points of failure.
AI adds another layer of complexity and new workloads to monitor, secure, and manage. But Datadog’s growth is not ridding on AI alone; demand from customers using traditional workloads is also picking up.
Datadog Stands to Benefit as AI Drives Monitoring Demand
Datadog sees AI driving growth in two ways. AI workloads increase cloud usage and activity across its existing products, while AI applications create new monitoring needs for GPUs, large language models, autonomous agents, and their tools.
More than 750 AI-focused customers used Datadog in the second quarter, and MCP tool calls from AI agents grew more than 22-fold from the end of 2025. Growth is also picking up among customers outside the AI-focused group, reaching the high-20% range in the second quarter, up from 18% a year earlier evidence of stronger spending on cloud and modern software infrastructure beyond AI.
Datadog’s Expanding Platform Makes It Harder for Customers to Leave
Another trend to watch is customers’ growing use of Datadog’s broader platform. The company began with infrastructure monitoring but now offers more than 20 products across observability, security, cloud cost management, and application management. By June, about 85% of customers used at least two products, and 37% used six or more.
This gives Datadog room to grow by expanding within existing accounts, rather than relying only on new customer wins. Management pointed to a large media company that signed a multiyear deal worth over $30 million, adopted 19 Datadog products, and replaced four commercial and in-house tools. As businesses look to simplify their software stacks, this kind of platform consolidation could become an increasingly important growth driver.