Datadog (DDOG) opened Q1 2026 with revenue of US$1.0 billion and basic EPS of US$0.15, alongside net income of US$52.6 million, setting the tone for how investors read the latest print against its recent history. The company has seen quarterly revenue move from US$737.7 million in Q4 2024 to US$1.0 billion in Q1 2026, while basic EPS has ranged from US$0.13 to US$0.15 over the same span. This gives a clear view of how the top and bottom lines are tracking as margins remain a key lens on the story.

See our full analysis for Datadog.

With the latest numbers on the table, the next step is to see how they compare with the widely followed growth and margin narratives that investors have been using to frame Datadog’s potential.

Net Margins Trail Multi Year Profit Story

• On a trailing 12 month basis, Datadog reports a net profit margin of 3.7%, compared with 5.8% a year earlier, alongside trailing revenue of US$3.7b and net income of US$135.7 million.
• Consensus narrative points to analysts expecting margins to rise from 3.1% to 6.3% over three years, yet the recent margin level of 3.7% sits below last year, which creates a tension between:
  • Past profitability growth, with earnings reported to have grown 57.2% per year over five years and trailing earnings described as high quality.
  • The more cautious view that higher R&D and global expansion costs, plus data regulation and competition, could keep pressure on margins if revenue growth does not keep pace.

Premium P/S Multiple With DCF Gap

• Datadog trades on a P/S of 18.3x compared with about 3.7x for the US software industry and 4.7x for peers, while the DCF fair value of US$180.02 sits below the current share price of US$188.73.
• Critics highlight that this valuation already bakes in strong expectations, and the bearish narrative leans on this by arguing that:
  • Even with bearish revenue growth assumptions of 15.2% per year and margins at 5.3% in three years, the implied P/E of 234.7x on future earnings stays well above the US software industry P/E of 33.3x.
  • The combination of a premium P/S, a share price above DCF fair value, and a lower trailing net margin of 3.7% versus 5.8% a year ago gives bears concrete data points to question how much more valuation headroom is available.

Skeptics who see stretched multiples as a red flag may want to see how that case is built out in detail in the 🐻 Datadog Bear Case.

Forecast Growth Versus Recent EPS Trend

• Basic EPS for recent quarters moved from US$0.07 in Q1 2025 to US$0.15 in Q1 2026, while trailing 12 month EPS is US$0.39 against US$0.31 at the end of 2025.
• Supporters of the bullish narrative point to forecast earnings growth of about 30.3% per year and revenue growth of 15.8% per year, and Q1 2026 numbers give them some backing and some friction:
  • On the supportive side, quarterly revenue stepping from US$761.6 million in Q1 2025 to US$1.0b in Q1 2026 and trailing revenue at US$3.7b show the top line progressing alongside higher quarterly EPS.
  • On the challenging side, the current net margin of 3.7% is below 5.8% a year earlier, so the path from today’s profitability to the higher margin profiles in bullish scenarios will likely need ongoing cost discipline as well as continued revenue expansion.

Bulls who see Q1 as a stepping stone toward those higher growth and margin assumptions can test that view against the detailed upside case in the 🐂 Datadog Bull Case.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Datadog on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With that mix of optimism and concern in mind, now is the time to look through the numbers yourself, pressure test the narratives, and weigh both upside and downside using the 1 key reward and 3 important warning signs.

See What Else Is Out There

Datadog combines a premium P/S and DCF gap with lower net margins and a very high implied future P/E, which some investors may see as stretched.

If you are uneasy about paying up for rich multiples and modest profitability, you may want to shift your focus toward ideas where value and quality line up using the 51 high quality undervalued stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.