Datadog Earnings: We Like Datadog’s Continued March Upmarket as Customer Spending Remains Strong

We are maintaining our $115 fair value estimate for narrow-moat Datadog after the firm reported solid second-quarter results, ahead of our estimates on topline and profitability. While the macro environment remains challenging as customers continue to rationalize their cloud spending, we remain impressed by Datadog’s ability to navigate this environment while continuing to grow its topline and improve its profitability. As customers increasingly leverage cloud workloads, a trend that has been accelerated as companies invest more in AI, we forecast strong demand for observability solutions that monitor those additional workloads and track the health of these cloud environments. At the same time, we think that a lot of our optimism is baked into Datadog’s current valuation with the company’s shares trading in the three-star range.