Shares of Datadog(NASDAQ: DDOG) shot up nearly 15% on July 3 after it was revealed that the provider of cloud-based observability, monitoring, and security solutions will join the S&P 500 index on July 9.
Datadog will be replacing Juniper Networks in the index after the latter was acquired by Hewlett Packard Enterprise. It is easy to see why Datadog’s inclusion in the index has sent its stock soaring. To enter the index, a company needs to demonstrate solid profitability in the past four quarters, along with enough liquidity.
Datadog’s inclusion in the S&P 500 over other contenders is a positive for the stock, as it demonstrates the market’s confidence in the company. It’s also worth noting that the stock has shot up a remarkable 76% in the past three months following its latest surge. Does this mean it is too late to buy Datadog stock? Let’s find out.
Image source: Getty Images.
Datadog’s cloud-based observability platform allows customers to monitor their cloud activity across servers, databases, and applications to detect issues, while its security features scan for vulnerabilities so that they can be fixed quickly. The demand for Datadog’s cloud observability solutions has been rising at an impressive pace, thanks to the secular growth of the cloud market.
Now, the company is also providing tools for monitoring large language models (LLMs) and other artificial intelligence (AI) applications. The company is targeting lucrative end markets that are currently worth around $80 billion. This indicates that it has a lot of room for long-term growth. It has generated $2.8 billion in revenue in the trailing 12 months.
However, investors will now have to pay a rich premium to buy into Datadog’s potential growth. That’s because it is now trading at a whopping 330 times trailing earnings. Though the forward earnings multiple of 82 is significantly lower than the trailing multiple, it is still on the expensive side when compared to the S&P 500 index’s average earnings multiple of 24.
The price-to-sales ratio of 20 is over 6x the index’s average sales multiple. The only way Datadog stock can sustain its impressive stock market momentum is by delivering stronger-than-expected growth and outpacing Wall Street’s growth expectations. But can the company do that?
We have already seen that Datadog is scratching the surface of a massive end-market opportunity in the cloud observability market. The advent of AI is likely to help it corner a bigger portion of the addressable market on offer by opening up a cross-selling opportunity. Datadog had 30,500 customers at the end of the previous quarter, and 4,000 of them have been using one or more of its AI services.
Importantly, Datadog management says that this number doubled on a year-over-year basis in the previous quarter, and the good part is that this trend is likely to continue. After all, customers are flocking toward Datadog to improve the performance of their LLMs with its observability solutions. The company points out that “the number of companies using LLM Observability has more than doubled in the past 6 months.”
That’s the reason why Datadog is now pushing the envelope on the product development front by bringing new AI-focused solutions to customers. Its Bits AI platform helps customers investigate incidents, fix code, and review security alerts autonomously. All this should eventually allow Datadog to accelerate its growth rate in the future as the adoption of AI applications in the cloud increases.
For instance, the size of the LLM market is expected to jump by more than 6x by 2030, which should lead to an increase in the demand for Datadog’s offerings. Not surprisingly, analysts are forecasting an acceleration in Datadog’s growth going forward.
However, don’t be surprised to see Datadog’s earnings grow at a faster pace than Wall Street’s expectations as a large chunk of its existing customer base is yet to adopt its AI solutions. This huge cross-selling opportunity should enable the company to win a bigger share of existing customers’ wallets and improve its margin profile.
Datadog seems to be in a position to justify its expensive valuation by stepping on the gas. That’s why it could entice growth-oriented investors, even after the impressive gains that it has clocked in recent months.
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Warwickshire County Council’s Cabinet has agreed to invest up to £730,000 in a new programme of Artificial Intelligence (AI) projects.
The investment, taken from the council’s Revenue Investment Fund, will be used over the next two years to explore and implement AI solutions to improve productivity andenhance service delivery. It will also help the council meet its target of £419,000 in savings through its Digital Roadmap by 2027/28.
The decision was made after recognising the rapid growth of AI and the potential for it to help the council deliver more efficient and effective services. The new approach will allow the council to take a strategic and coordinated approach to AI, moving away from ad-hoc projects.
The funding will be used to establish dedicated subject matter expertise, grow internal capabilities, and cover the costs of cloud computing, data processing, and licensing. Each individual AI project will be carefully evaluated with a business case to ensure it delivers clear financial and efficiency benefits before being approved.
Councillor Michael Bannister, Warwickshire County Council Portfolio Holder for Customer and Localities, said: “As a Council, we’re committed to exploring how new technologies can help us serve our communities better and make sure we’re getting the most out of every pound of taxpayers’ money. This new programme will allow us to safely, ethically, and cost-effectively explore how AI can help us improve our services and support our staff.
“We’re not just jumping on a trend; we’re taking a sensible, measured approach to a technology that is already changing how we work. By investing in a clear, coordinated programme, we can make sure we’re focusing on the right projects that deliver real benefits for our residents and help us meet our financial goals.”
ARTIFICIAL INTELLIGENCE NOW permeates daily life From the smartphone assistants many of us carry to credit scoring, healthcare imaging, and government services, technological high-end systems (pro-AI-driven) are becoming progressively foundational, invisible, and everywhere in our institutions and economy.
AI is set to be deployed not just in consumer chatbots but in serious public services, such as predictive crop insurance models for farmers, citywide surveillance networks, service-enabled welfare delivery, and voice-based legal assistance in local languages. This technological ubiquity tends to inspire both wonder and anxiety. Yet many users and policymakers instinctively frame AI as a tool or assistant – a way to augment human capabilities – rather than as a competitor or replacement.
We seek the benefit of AI’s speed or pattern-recognition while expecting humans to remain in the loop. This view – that AI should help us rather than supplant us – is a useful starting point when thinking about its impact. It suggests that as we build laws and policies, we treat AI as an enabler of human goals, not a separate “being” with rights.
Even so, we must confront a knotty question: what are “digital rights” in an age of AI? The term appears increasingly in policy debates, but its definition is not self-evident. At a minimum, it implies that citizens retain rights and protections in the digital realm – over their data, their devices, their online speech, and access. AI governance sits atop a vast array of “digital” issues: not just data privacy and security, but digital property, service rights, contract rights, infrastructure access, and more. In practice, “digital rights” often parallel our traditional civil liberties (privacy, expression, equality, etc.) but take on a new shape when technology is involved.
India’s Supreme Court, for instance, has treated privacy as a fundamental right under Article 21 of the Indian Constitution, and that has become the constitutional grounding for digital protections in privacy cases. We may even codify rights like data protection or internet access into constitutions for permanence. But, before debating AI ethics or rulemaking, we shall clarify what rights we mean. Should a “right to algorithmic fairness” be elevated to the same level as speech or equality? Do we expect new rights beyond the existing roster of liberties, or are our current rights simply being translated into code?
There’s a concept in technology called Amara’s Law, named after the Futurist Roy Amara. The law basically states that humans tend to overestimate the effect of a technology in the short run and underestimate its effect in the long run.
I think there might be an exception to this rule, at least from today’s starting point.
Artificial intelligence (AI). In my view, I think people are wildly underestimating its impact in the short as well as the long term.
I’ll start with some background. AI, at its most basic, is about creating computer systems that can replicate human intelligence a…
