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

We came across a bullish thesis on Datadog, Inc. on Rijnberk InvestInsights’s Substack by Daan | InvestInsights. In this article, we will summarize the bulls’ thesis on DDOG. Datadog, Inc.’s share was trading at $160.01 as of November 28th. DDOG’s trailing and forward P/E were 516.16 and 66.23 respectively according to Yahoo Finance.

Datadog, Inc. operates an observability and security platform for cloud applications in the United States and internationally. DDOG has firmly established itself as a mission-critical platform in enterprise software, providing real-time observability, monitoring, and security across cloud infrastructure, applications, logs, CI/CD pipelines, and user experiences for over 31,000 organizations. Its value proposition is clear: as cloud adoption and system complexity rise, organizations face enormous costs from downtime, performance issues, and security blind spots, which Datadog mitigates through its integrated console.

The company has achieved exceptional financial performance, growing revenue at a 41% CAGR since 2020 to a $3 billion+ run rate, maintaining gross margins above 80%, free cash flow margins near 30%, and a net retention rate of around 120%, all underscoring its capital efficiency and strong customer expansion. Q3 results highlight accelerating growth, with revenue of $886 million (+28.4% YoY) exceeding consensus and raised guidance. Billings rose 30% YoY, and RPO reached $2.79 billion (+53% YoY), signaling strong long-term contracts and adoption.

Usage growth drove the quarter, reflecting both AI-native and non-AI-native customer demand, while multi-module adoption continued to expand, with 84% of customers now using two or more products and 16% using eight or more, validating the “land-and-expand” model. New modules in security and digital experience contributed significantly, demonstrating Datadog’s ability to extend into adjacent markets while deepening its platform’s stickiness.

Financially, gross margins remained robust at 81%, while operating expenses grew faster than revenue due to strategic investments in R&D, sales, and headcount, pressuring operating margins to 23% non-GAAP. Non-GAAP EPS of $0.55 beat expectations, and free cash flow of $214 million (24% margin) preserves a strong balance sheet with $4.1 billion in cash against $1.3 billion in debt. Overall, Datadog combines accelerating top-line growth, platform stickiness, and strategic investments, positioning it to capitalize on secular trends like cloud migration and AI, offering a compelling risk/reward profile for long-term investors.

Previously we covered a bullish thesis on Datadog, Inc. (DDOG) by @bigbullcap in May 2025, which highlighted its multi-product engine, diversified ARR streams, and strong net retention as key growth drivers. The company’s stock price has appreciated approximately by 39.79% since our coverage. This is because the thesis played out. The thesis still stands as Datadog continues expanding product adoption. Daan | InvestInsights shares a similar view but emphasizes Q3 results, AI adoption, and accelerating usage trends.

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Disclosure: None.