Datadog, Inc.

(NASDAQ Global Select)
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Slightly Bullish +20

Salesforce vs. Datadog: Which Technology Stock Is a Better Buy in 2026?

Acquisition AI-generated analysis

πŸ“ˆ Datadog achieved a 36% revenue growth in the quarter ended June 30, 2026, demonstrating strong expansion momentum.

πŸ’° Salesforce reported nearly $41.5 billion in annual revenue and $7.5 billion in net income for the fiscal year ended Jan. 31, 2026.

πŸ“‰ Datadog recorded an operating loss for fiscal year 2025 as operating expenses grew faster than revenue.

πŸ’Έ Salesforce's debt-to-equity ratio shifted from conservative levels to approximately 1.0x in March 2026 following a $25 billion senior note issuance.

πŸ“Š The article concludes that Salesforce is the better buy for 2026 due to its lower valuation and cash flow availability compared to Datadog's high premium.

🌍 Datadog serves approximately 32,700 customers across more than 160 countries using a land-and-expand model.

⚠️ Salesforce faces risks from intense competition, large acquisition integration complexity, and cybersecurity threats associated with its AI initiatives.

πŸ“‰ Datadog trades at a high valuation premium that reflects its faster revenue growth despite thin GAAP profits.

πŸ’‘ The author suggests waiting to see if Datadog's multiple compresses before considering it as a value entry point.

Bullish Signals
  • Datadog demonstrated strong business momentum with revenue accelerating to a 36% year-over-year increase in the quarter ended June 30, 2026.
  • The company maintains a large and growing customer base of approximately 32,700 clients across more than 160 countries, indicating broad market adoption.
  • Datadog converted about a quarter of its revenue into free cash flow in the second quarter, showing efficient capital generation despite operating losses.
  • The company holds a strong liquidity position with a current ratio of roughly 3.4x as of December 2025, well-positioned to cover short-term obligations.
Risk Factors
  • Datadog reported a decline in net income to $107.7 million for fiscal year 2025, down from $183.7 million the previous year.
  • The company recorded an operating loss for fiscal year 2025 as research and development expenses grew faster than revenue.
  • Investors are paying a steep valuation premium on Datadog's expected earnings, which may compress if growth slows or market sentiment shifts.
  • A significant portion of reported free cash flow is inflated by stock-based compensation, which accounted for roughly 71.5% of operating cash flow in the prior year.
Full Analysis
The article compares Salesforce and Datadog as investment options for 2026, concluding that Salesforce offers a lower valuation with established profitability, while Datadog provides superior growth but at a high price premium. The author suggests Salesforce is the better buy for investors prioritizing value and cash flow, whereas Datadog suits those seeking aggressive revenue expansion. Datadog reported fiscal year 2025 revenue of nearly $3.4 billion, up 27.7% year-over-year, with net income dropping to $107.7 million due to rising operating expenses. In the quarter ended June 30, 2026, revenue accelerated to a 36% increase, though the company recorded an operating loss for the full year. Salesforce generated nearly $41.5 billion in revenue for the fiscal year ended Jan. 31, 2026, with net income reaching $7.5 billion. However, the company's balance sheet shifted significantly in March 2026 when it issued $25 billion in senior notes to fund share repurchases and acquisitions, causing total debt to roughly match shareholder equity by July 31, 2026. Valuation analysis indicates Salesforce trades at a lower multiple relative to earnings compared to Datadog's high premium. The author notes that while Datadog converts about a quarter of its revenue into free cash flow, investors are paying steep prices for its expected earnings growth, making the cheaper entry point into enterprise software via Salesforce more attractive for a 2026 portfolio.