Founded in 1993 by brothers Tom and David Gardner, The Motley Fool's mission is to make the world smarter, happier, and richer. Through various channels like websites, podcasts, books, newspaper columns, radio shows, and premium investing services, The Motley Fool helps millions of people achieve financial freedom. While this article offers free opinions that may differ from The Motley Fool's Premium Investing Services, becoming a member grants instant access to top analyst recommendations, in-depth research, and valuable investing resources. To learn more, become a Motley Fool member today. Datadog (DDOG 2. 38%) recently received an upgrade by Wolfe Research strategist Alex Zukin, who upgraded the stock to outperform. Zukin set a 12-month price target of $140 per share, indicating a potential 26% increase from its current price. He mentioned the indispensable nature of Datadog's performance-monitoring software and expressed optimism about the company's growth potential with the rising interest in generative artificial intelligence. Datadog specializes in observability and cybersecurity software for development, operations, and security teams. Their platform integrates data from various aspects of corporate technology, enabling real-time visibility into applications, networks, and infrastructure for identifying and resolving performance issues and security threats efficiently. Datadog has also incorporated a powerful artificial intelligence engine that automates problem detection and investigation to expedite resolution time. Forrester Research recognized Datadog as a leader in AI for IT operations, highlighting its data insights, visualizations, extensive team of data scientists, and innovative pipeline. Gartner acknowledged their leadership in application performance monitoring and observability software, citing their well-integrated product portfolio, while G2 recognized them as a leader in network monitoring, log monitoring, and database monitoring software. Datadog's solid presence in observability software verticals has consistently translated into strong financial results. In the first quarter, their customer count increased by 29% to reach 25, 500, and the average customer spent over 30% more than the previous year. As a result, first-quarter revenue rose by 33% to $482 million, and non-GAAP net income increased by 17% to $0. 28 per diluted share. Looking ahead, Datadog's track record of innovation suggests that the company can maintain its momentum. What started as a real-time data platform has evolved into a comprehensive suite of observability and cybersecurity software, with continued product portfolio growth.

Their recent introductions include workflow automation and data streams monitoring products, along with integrations with OpenAI for monitoring usage patterns, performance, and costs associated with generative AI models. Investing in Datadog offers a compelling opportunity. With increasingly complex IT environments due to cloud migrations and digital transformations, observability and cybersecurity software become even more critical. Datadog estimates its total addressable market to be $45 billion in 2023, which is projected to increase to $62 billion by 2026. Given its strong presence in observability software and its capacity for innovation, Datadog is well-positioned to benefit from this growing market. While the stock is trading at approximately 20 times sales, which is a significant discount compared to the three-year average of 36. 7 times sales, patient investors could consider buying a small position in this AI growth stock. Disclosure: Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog and Gartner. The Motley Fool has a disclosure policy. Calculated by the average return of all stock recommendations since the inception of the Stock Advisor service in February 2002. Returns as of 07/28/2023. Discounted offers are only available to new members. Stock Advisor list price is $199 per year. Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.