Datadog's Trading Volume Drops 43.97% to $327 Million, Stock Price Rises 0.99%

On June 24, 2025, Datadog (DDOG) saw a trading volume of $327 million, marking a 43.97% decrease from the previous day. Despite this, the stock price rose by 0.99%, marking two consecutive days of gains and a total increase of 2.59% over the past two days.

Datadog has positioned itself at the forefront of the AI transformation in cloud infrastructure, with recent financial results and strategic moves indicating a potential for a valuation re-rating. The company's first-quarter 2025 results showed a 25% year-over-year revenue growth to $762 million, driven by a 13% increase in its core customer base. Operating cash flow reached $272 million, with free cash flow at $244 million, reflecting a 32% margin. Datadog's Rule-of-40 metric, which combines revenue growth and operating margins, stands at 47%, exceeding the 40% threshold and signaling a healthy balance of growth and profitability.

Datadog's AI-native revenue segment has seen a 200% year-over-year jump, now accounting for 8.5% of its annual recurring revenue (ARR). This growth is driven by enterprises prioritizing tools to manage AI workloads. The company's Bits AI and Watchdog products, unveiled at its June 2025 DASH conference, aim to capitalize on this demand by automating root-cause analysis for AI systems and detecting security threats in real time, respectively. These tools are foundational to Datadog's vision of becoming the “operating system” for AI-driven businesses.

Datadog's customer momentum is impressive, with 3,770 large customers representing a 13% annual increase. The average ARR per large customer has risen to $255,000, up from $225,000 a year ago, indicating deeper product adoption. The company's global expansion, including a new data center in Australia, aligns with its strategy to be the “anywhere observability” platform for distributed enterprises, a key differentiator in the era of hybrid cloud adoption.

Despite margin pressures, Datadog is strategically reinvesting in AI R&D, global infrastructure, and acquisitions to drive long-term value creation. The company's recent acquisitions of Eppo and Metaplane add talent and capabilities to its AI stack. Analysts argue that margins will stabilize as cloud costs normalize and scale benefits kick in, with AI-native ARR's 200% growth rate suggesting the company is redefining its total addressable market (TAM) from traditional IT monitoring to a multi-billion AI infrastructure layer.

Datadog trades at approximately 23x 2025E forward revenues, a discount to peers like Snowflake and MongoDB. The market has not yet fully priced in the potential of its AI pivot. If the $150 price target materializes, it implies a 28% upside from current levels. Key catalysts include the adoption metrics from the DASH 2.0 conference, the ramp of AI-native revenue to 15-20% of ARR by 2026, and a return to 25-30% operating margins by 2026. For investors focused on 2025, Datadog's H2 catalysts make it a top pick for tech rotation, reflecting the company's execution and leadership in the AI infrastructure gold rush.