12 Best Enterprise Software Stocks to Buy Now

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5. Datadog Inc. (NASDAQ:DDOG)

Number of Hedge Fund Holders: 83

Datadog Inc. (NASDAQ:DDOG) operates a global observability and security platform for cloud applications. It offers diverse products, such as infrastructure and application performance monitoring, log management, digital experience monitoring, error tracking, and workflow automation among other services.

On March 17, DA Davidson analysts assigned a Buy rating and a $165 price target on the company. This was due to the company’s ongoing transition from AI hardware to AI software infrastructure. It focuses on its monitoring and analytics platform which integrates infrastructure monitoring, application performance monitoring (APM), log management, and cloud security for various enterprises. About 3,500 of the company’s customers adopted AI and ML integrations into their ML, AI, and LLM usage in Q4 2024.

The company’s existing customers are increasingly adopting multiple products. As of Q4, 83% of customers used 2+ products, 50% used $4+, and 26% used 6+ products. Larger enterprise customers have also grown with 45% of the Fortune 500 now using Datadog Inc. (NASDAQ:DDOG). This indicates a 42% rise in the customer base year-over-year. However, the median ARR for Fortune 500 customers is below $0.5 million, which showcases substantial growth potential in this direction.

Parnassus Growth Equity Fund stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q4 2024 investor letter:

“We also added several new positions, including two in Information Technology: Atlassian, a maker of innovative software that allows IT developers and other employees to seamlessly collaborate on complex projects, and Datadog, Inc. (NASDAQ:DDOG), a dominant cloud monitoring platform.

Datadog, a dominant cloud monitoring platform, should have outsized growth due to its category leadership, sticky product suite, best-in-class product innovation and highly regarded management team. We believe the market has misinterpreted cyclical headwinds, such as reductions in IT spending, as secular trends, and we see Datadog benefiting from growth in Cloud Infrastructure-as-a-Service.”

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