DDOG
Datadog
Usage-based SaaS
★ Quality 28/100Price today
$212.93
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What this business is made of
The business
Datadog is the control room that sees your entire cloud; leaving hurts.
Datadog is the observability platform for cloud applications: it monitors infrastructure, logs, and performance in real time. It charges by usage —hosts, gigs of logs ingested— so the bill goes up as the customer grows. Revenue of $3.4B in 2025 with 80% gross margin.
The moat is adoption and stickiness: once instrumented across thousands of servers, ripping out Datadog is painful. The land-and-expand model sells 12+ products to the same customer, and net retention tops 110%. It's not a monopoly —Grafana, New Relic, and the hyperscalers push hard— but the switching cost is real.
Revenue history
From $1.0B to $3.4B in 4 years — nearly 3.4x its size. Selling more and more is the base of everything else.
Where each $100 of sales goes
Revenue $3.4B · FY2025
Of every $100 in sales, $97 goes to costs and operations; $3 is left as net profit (3% margin).
Catalysts and risks
AI observability and LLM monitoring products, a nascent segment with customer traction in 2025.
Expansion into security (Cloud SIEM, ASM): cross-selling into the installed base toward a market worth tens of billions.
Over 3,500 customers with ARR >$100k, a base that multiplies spend as they migrate workloads to the cloud.
The usage-based model is double-edged: in a recession customers optimize spend and the bill drops without warning.
The hyperscalers (AWS, Azure, GCP) offer 'good enough' native tools at zero cost.
Net Income of just $0.1B on $3.4B: much of the profit is stock-based compensation that dilutes shareholders.
Charlie's note
“Excellent business, a cash-generating machine with customers glued in. The problem is the price: at 17.5x it already prices in 35% growth for years. I pay for quality, not for fantasy.”
Analysis · June 2026
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