Is DDOG a good stock to buy? We came across a bullish thesis on Datadog, Inc. on Elliot’s Musings’s Substack by Elliot. In this article, we will summarize the bulls’ thesis on DDOG. Datadog, Inc.’s share was trading at $260.36 as of July 2nd. DDOG’s trailing and forward P/E were 678.15 and 108.70 respectively according to Yahoo Finance.
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Datadog, Inc. operates an observability and security platform for cloud applications in the United States and internationally. Datadog, Inc. DDOG delivered its strongest quarter in years during Q1 2026, marking a potential inflection point in both its AI and core observability businesses. Revenue surpassed $1 billion for the first time, growing 32% year-over-year, while management raised full-year revenue guidance by approximately $240 million, largely reversing the conservative outlook that weighed on the stock after Q4 2025.
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The quarter demonstrated that growth is no longer dependent solely on AI-native customers, as non-AI customer revenue accelerated to the mid-20% range for a third consecutive quarter, new logo bookings and average deal sizes more than doubled year-over-year, and customers continued consolidating multiple monitoring tools onto Datadog’s platform. The company also secured its first seven- and eight-figure contracts within hyperscaler AI training labs, marking a meaningful expansion of its addressable market after management previously viewed AI training workloads as outside its core opportunity.
Growing adoption of GPU monitoring, expanding AI integrations, rising multi-product penetration, increasing multi-year commitments, and new capabilities such as FedRAMP High certification further strengthen Datadog’s long-term competitive position across enterprise, AI, and government markets. Although management maintained conservative assumptions for its largest customer in full-year guidance, the broader business continued to generate record ARR growth, accelerating billings, strong free cash flow, and healthy profitability, suggesting the core business is performing well even without additional contributions from that customer.
If the largest customer performs better than management’s cautious assumptions and hyperscaler AI training adoption expands as expected, guidance could prove materially conservative while GPU monitoring evolves into a significant new revenue stream. Combined with sustained non-AI re-acceleration, expanding operating leverage, and continued product innovation, Datadog appears well positioned for further earnings growth, multiple expansion, and meaningful long-term upside despite its recent share price re-rating.
Previously, we covered a bullish thesis on Datadog, Inc. (DDOG) by @bigbullcap in May 2025, which highlighted its diversified product portfolio, expanding product adoption, growing customer stickiness, and upside from operational leverage. DDOG’s stock price has appreciated by approximately 127.46% since our coverage. Elliot shares a similar view but emphasizes on Datadog’s AI-driven inflection, hyperscaler training wins, accelerating non-AI growth, and conservative guidance creating further upside potential.
Datadog, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 80 hedge fund portfolios held DDOG at the end of the first quarter which was 75 in the previous quarter. While we acknowledge the risk and potential of DDOG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DDOG and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
