Datadog (DDOG) Fell Along with Peers in Q1

Sands Capital, an investment management company, released its “Sands Capital Select Growth Strategy” Q1 2025 investor letter. A copy of the letter can be downloaded here. Select Growth Strategy primarily targets U.S. companies that are leading the way in crucial areas of positive structural transformation within the economy. U.S. growth equities, tracked by the Russell 1000 Growth Index, experienced their poorest quarterly performance since 2022, significantly lagging behind U.S. value equities, represented by the Russell 1000 Value Index, in the widest gap observed since 2001. The strategy slightly underperformed the Russell 1000 Growth Index in the quarter. You can check the fund’s top 5 holdings to know more about its best picks for 2025.

In its first-quarter 2025 investor letter, Sands Capital Select Growth Strategy highlighted stocks such as Datadog, Inc. (NASDAQ:DDOG). Datadog, Inc. (NASDAQ:DDOG) is an observability and security platform for cloud applications. The one-month return of Datadog, Inc. (NASDAQ:DDOG) was 11.52%, and its shares gained 7.81% of their value over the last 52 weeks. On May 30, 2025, Datadog, Inc. (NASDAQ:DDOG) stock closed at $117.88 per share with a market capitalization of $40.71 billion.

Sands Capital Select Growth Strategy stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q1 2025 investor letter:

“Datadog, Inc. (NASDAQ:DDOG) provides essential monitoring and observability tools for modern cloud infrastructure. Shares declined during the quarter alongside the broader software sector, which was one of the largest detractors from the Russell 1000 Growth Index. Consumption-based models like Datadog’s tend to be more volatile than subscription-based peers during periods of macroeconomic uncertainty. Beyond these broader pressures, investor concerns focused on guidance and Datadog’s growing concentration among AI customers. This group now represents approximately 6 percent of annual recurring revenue, up from less than 1 percent eight quarters ago. While this validates Datadog’s value to leading-edge users, it introduces short-term risk if usage slows or renewals come at lower rates. Bigger picture, we view the recent selloff as an opportunity. The core business remains stable, and Datadog retains a leading position in observability. Secular trends—including growing cloud complexity and the rise of AI applications—continue to drive long-term demand.”

Datadog, Inc. (NASDAQ:DDOG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held Datadog, Inc. (NASDAQ:DDOG) at the end of the first quarter, which was 83 in the previous quarter. Datadog, Inc. (NASDAQ:DDOG) reported revenue of $762 million in the first quarter of 2025, an increase of 25% year-over-year. While we acknowledge the potential of Datadog, Inc. (NASDAQ:DDOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Datadog, Inc. (NASDAQ:DDOG) and shared the latest analyst views on Coatue’s favorite 33 AI stocks. Artisan Mid Cap Fund sold its investment campaign in Datadog, Inc. (NASDAQ:DDOG) during Q1 2025. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.