Post # 3: DDOG-Defensive AI, Or Are Investors Just Defensive?
Position: $25 | Holding Period: 12+ Months
What is Datadog?
Datadog is a digital dashboard that keeps an eye on a company’s entire technology setup. It tracks the health of websites, applications, and computer servers in order to ensure everything runs smoothly without any issues.
If a website gets slow, crashes, or gets hacked, Datadog immediately flags what exactly went wrong so engineers can fix it before customers notice.
Why Datadog?
Over the past few weeks, I have become more comfortable with financial modeling. I’ve become more adept at using the comparative valuation technique and—again—I decided that I wanted to focus on stocks in the technology sector.
Datadog serves not as a traditional cybersecurity company, but as an observability and cloud security platform. The difference lies in the fact that cybersecurity relies on external defense, whereas DDOG relies on creating visibility in issues.
I chose DDOG because I recently came across headlines featuring the company; Datadog crossed a billion dollars in revenue this past Q1, shattering analysts expectations of mid-nine-hundred millions.
The Numbers:
Revenue Trend YoY
2025 - $3.43B (+ 27.68%)
2024 - $2.68B (+26.12%)
2023 - $2.13B
The Bull Case:
As an incoming finance student, I’ve felt that learning technical skills is of utmost importance. As such, I’ve learned more about the comparative valuation model. I used a comparative valuation model to gauge the relative value of DDOG using a collection of companies I thought to be comparable peers.
After doing the necessary calculations and ensuring there was no error in my formulas, I found that the implied share price using revenue was ~$199 despite DDOG trading at ~$269.
At first, I figured that DDOG was massively overvalued, but then I got to thinking. I began wondering if the form 10-K had information that would explain the gap. I realized that a gap like this between the implied share price and the actual share price can be explained by the market anticipating growth, an unthought of metric, or the stock just being massively overvalued.
Comps says DDOG is overpriced even after adjusting for growth — my model implies $199-something versus its actual ~$269. But the 10-K shows something the multiple can’t capture: net revenue retention climbed to ~120% in FY2025, up from the high-110s the year before. That means DDOG’s existing customers are spending meaningfully more each year, not just holding steady — a land-and-expand engine that’s getting stronger, not weaker. That’s the kind of quality-of-growth signal that can justify a premium multiple even when the peer-relative math says ‘expensive.’
Risks I’m Watching:
I calculated DDOGS adjusted growth rate and compared it to the median of its peers’ growth rates and I saw the DDOG was still expensive relative to its growth.
Using the comps model, it became clear that DDOG was massively overvalued and it isn’t exactly clear that the current cost is a justifiable cost to purchase a share at, as it is technically overvalued—by the comps model of course.
Verdict:
DDOG in comparison to the peers I selected has been shown to be severely overvalued. This overvaluation can mean that the stock is just overrated, or there is something not accounted for in the comps model. While ~$199 to ~$269 is a significant gap showcasing how expensive DDOG currently is, the gap can largely be explained by investor expectations. The gap cannot be explained by current growth or revenue, but the net revenue retention. NRR in FY2025 climbed to 122%, meaning that customers were not only spending the same as 2024, but actually 22% more, and in years previous, the NRR has also been over 100%. One thing I have learned is that the comps model alone cannot determine whether a stock is a buy or a sell, there is always other metrics and factors to account for. In light of all that, I’ve decided to buy—and watch—$25 of DDOG in anticipation that the exceptional NRR will continue and further generation growth. I’m taking a small $25 position — betting the market’s paying for durability the comps model doesn’t see — while staying aware that if that expansion rate decelerates, this stock has more room to fall than a ‘fairly priced’ one would.
References:
Datadog, Inc. (2026). Annual report (Form 10-K) for the fiscal year ended December 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1561550/000162828026008819/ddog-20251231.htm
MongoDB, Inc. (2025). Annual report (Form 10-K) for the fiscal year ended January 31, 2025. https://investors.mongodb.com/static-files/2e35ada9-36d6-4ea2-a03a-bbba3b559770
Palantir Technologies Inc. (2025). Annual report (Form 10-K) for the fiscal year ended December 31, 2024. https://investors.palantir.com/files/2025%20FY%20PLTR%2010-K.pdf
Snowflake Inc. (2025). Annual report (Form 10-K) for the fiscal year ended January 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1640147/000164014725000052/snow-20250131.htm
Stock Analysis. (n.d.). Datadog (DDOG) statistics. https://stockanalysis.com/stocks/ddog/statistics/
Stock Analysis. (n.d.). MongoDB (MDB) statistics. https://stockanalysis.com/stocks/mdb/statistics/
Stock Analysis. (n.d.). Palantir Technologies (PLTR) statistics. https://stockanalysis.com/stocks/pltr/statistics/
Stock Analysis. (n.d.). Snowflake (SNOW) statistics. https://stockanalysis.com/stocks/snow/statistics/
Legal disclaimer: Not financial advice. I’m a student investor documenting my learning journey publicly. Always do your own research.