Should You Buy Datadog Stock Before Aug. 7?

Core Insights - Datadog is successfully transitioning into the artificial intelligence (AI) sector, leveraging its cloud observability platform to monitor digital infrastructure and now AI models [1][2][5] Company Overview - Datadog had approximately 30,500 customers by the end of Q1 2025, operating across various industries such as retail, financial services, manufacturing, and entertainment [5] - The company aims to assist businesses in managing AI technology effectively, similar to how it manages cloud infrastructure [5] AI Product Development - Datadog launched LLM Observability, a monitoring tool for large language models (LLMs), which helps developers identify technical bugs, track costs, and evaluate output accuracy [6] - Another product, OpenAI Monitoring, was created for businesses utilizing LLMs from OpenAI, allowing them to monitor usage, costs, and error rates [7] Customer Adoption and Revenue Growth - By the end of Q1 2025, 4,000 customers were using Datadog's AI products, a significant increase from the previous year [8] - Datadog reported $762 million in total revenue for Q1 2025, exceeding forecasts, with AI-native customers contributing 8.5% of total revenue, up from 3.5% year-over-year [9][10] Future Expectations - Investors are anticipating an update on AI revenue figures during the upcoming earnings report on August 7, which could indicate AI's contribution surpassing 10% of total revenue [10] - Following strong Q1 results, Datadog raised its full-year guidance for 2025 from $3.185 billion to $3.225 billion, suggesting continued momentum in AI revenue [11] Stock Performance and Valuation - Datadog's stock has gained 27% over the past year but is trading below its 2021 peak, reflecting a recovery trajectory [12] - The stock currently has a price-to-sales (P/S) ratio of 19, indicating a higher valuation compared to other cloud and AI software stocks [13] - While short-term gains may be uncertain, long-term investors could benefit from the growth of Datadog's AI business [15]