What Datadog Holders Got Right Before A 99% Run

Datadog’s quarter was defined by real contracts, not just hype, including a $30 million agreement with an online media group and fresh deals with hyperscale AI research customers, in addition to over $1 billion in Q1 revenue. Investors who held Datadog from the start of the year are up 99.0%, including dividends. If you were deciding on 1 January, what did you need to believe about AI demand and customer concentration risk to back that outcome?

A Narrative on Simply Wall St is one investor's written case for a company, with its growth, margin and multiple assumptions spelled out. Those assumptions imply an estimated Fair Value.

Datadog has already moved. Pinpoint other ways to investigate the theme among 55 AI infrastructure stocks.

The Two Datadog Stories Investors Had To Weigh

The shares cost US$136 at the start of the period, so anyone backing Datadog was really choosing between two very different stories about AI demand and regulation.

On the optimistic side, a Fair Value of US$160, or 18% above the start price, assumed revenue growth of 19.9% a year and profit margins reaching 7.8%, with AI workloads helping customers consolidate more monitoring spend on Datadog.

The cautious view put Fair Value at US$105, or 23% below the start price, and focused on stricter data privacy rules that could raise compliance costs and make global expansion slower and more complex.

What The Datadog Evidence Put To The Test

Datadog clearing US$1.12b in Q2 2026 revenue, up from US$826.76m a year earlier with net income rising from US$2.65m to US$44.56m and margin moving from 0.3% to 4.0%, backed the optimistic view that AI workloads could support both scale and profitability. The renewed large customer contract and new AI wins sat against guidance that flagged slower usage from the biggest client. Overall, the evidence cut both ways.

The lesson is simple. When weighing an AI demand story, track two items in each report. Watch how much of Datadog’s revenue and backlog depends on a handful of users, and compare any AI product headlines with the net margin line to see whether scale is actually improving economics.

What Datadog’s Run Leaves You Paying For Now

Datadog now trades at US$266 after a 99.0% gain from the start of the year. The selected Narrative’s Fair Value sits below that level, which frames today’s quote as a premium that leans heavily on AI and multi product adoption.

The Narrative states that current pricing depends on Datadog converting substantial AI and R&D spending into durable usage growth. As a buyer at today’s price, you would be assuming that this occurs despite concrete signs of AI workload optimization among large customers.

"Although Datadog is seeing strong interest from AI focused customers, the disclosed usage reduction from its largest AI client following renewal of a nine figure contract shows how quickly AI workloads can be optimized, which could limit future AI related telemetry growth and constrain revenue and gross margin expansion from this cohort."

That disagreement has a full argument behind it. → Uncover the lower Fair Value this Narrative argues for

Go Straight To The Source

You may be late to this rally, but that does not have to mean arriving late to every opportunity. Start with companies whose prices leave room for a different view of their future. Here are three trading below our estimates.

• Company 1 - 47% below our estimate - targets banks that overhaul branches into unified mobile-first digital service hubs.
• Company 2 - 38% below our estimate - scales device trade in programs as policy backed recycling nudges consumers to resell.
• Company 3 - 25% below our estimate - rides demand for injectables that reshape obesity and diabetes treatment expectations.

That is three of the list. See every one of the 33 undervalued companies on it →

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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