Is Datadog, Inc. overvalued or undervalued?

As of 7 July 2025, the valuation grade for Datadog, Inc. has moved from fair to very expensive, indicating a significant shift in its market perception. The company appears overvalued based on its high valuation ratios, including a P/E ratio of 255, an EV to EBITDA of 351.05, and a PEG ratio of 6.59. In comparison, peers such as Veeva Systems, Inc. and Electronic Arts, Inc. have P/E ratios of 55.64 and 38.67, respectively, highlighting Datadog's substantial premium.
While Datadog has shown a 20.88% return over the past year, this is less than the S&P 500's 17.14% return during the same period, and its longer-term performance has lagged significantly, with a 5-year return of 59.66% compared to the S&P 500's 96.61%. This underperformance, coupled with its very expensive valuation metrics, reinforces the conclusion that Datadog, Inc. is overvalued in the current market.