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Back of Napkin

Datadog, Inc. DDOG

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The bet you're really making is that companies keep pouring money into cloud software, and keep paying Datadog to watch it, so they can see when their apps break and why. You're betting that as those companies bolt AI into everything, they buy even more watching, because AI systems fail in new and confusing ways that Datadog is racing to monitor. Right now it is going well: sales grew almost 36% last quarter to $1.12 billion, the fastest in over a year, speeding up rather than slowing. You pay about 19 times a year's sales, and hundreds of times last year's tiny reported profit, so sales is the honest ruler, and 19 times sits in the low-middle of the 13-to-30 range it has fetched since it went public in 2019.

Key data

Price$212.93
52-week range$98.01 – $292.72
P/E, ttm / FY28 est428x / 59x
EV / sales, ttm19.3x

DDOG · price with moving averages

Daily · 6MWeekly · 3Y
$67$121$175$229$283 Sep '23Apr '24Nov '24Jul '25Feb '26Sep '26 BID
EMAs82140

Source: market data.

The business

Datadog sells observability: software that watches other software. A company runs its apps across thousands of cloud servers, and when something slows or breaks, Datadog shows which piece failed, on one screen, with the logs, metrics and traces stitched together. You buy one product, then a second, then a tenth, because it is easier to see everything in one pane than to wire together six vendors. That is the whole moat, the switching cost of the system your engineers stare at all day during an outage. The pricing unit is usage: hosts monitored, gigabytes of logs, spans traced, so the bill climbs on its own as a customer's cloud footprint grows, before any salesperson calls. The newer bet is watching AI, monitoring the large language models and agents companies are now shipping, a fresh category of failures that needs its own dashboards.

Inside the complete Back of Napkin

  1. 01The business
  2. 02The numbers
  3. 03Management
  4. 04How it fails or surprises you
  5. 05Closing thoughts
  6. 06Methodology

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