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Datadog's Observability Fuels Rapid Growth

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  Published in Stocks and Investing on Friday, February 20th 2026 at 1:33 GMT by The Motley Fool
      Locales: California, Texas, Massachusetts, UNITED STATES

The Rise of Observability: Datadog's Expanding Role

Datadog has rapidly become a cornerstone of modern IT operations. Its observability platform isn't merely about monitoring servers; it's about gaining comprehensive insight into the entire technology stack, from applications and infrastructure to logs and user experience. In 2023, the company reported a 33% year-over-year revenue increase in Q3, reaching $642 million. This growth isn't isolated; it's fueled by the relentless march towards cloud adoption. As businesses migrate to cloud-based infrastructure, the need to understand and optimize performance becomes paramount, and that's where Datadog excels.

Observability is increasingly crucial for several reasons. Traditional monitoring tools often fall short in complex, distributed cloud environments. Datadog provides a unified view, correlating data from disparate sources to pinpoint bottlenecks and proactively address issues. This isn't just about fixing problems; it's about preventing them, improving user experience, and driving business value. Furthermore, the platform's extensibility and integrations with a wide range of cloud providers and tools make it a natural fit for organizations of all sizes.

Looking ahead, the drivers of Datadog's growth will likely intensify. The increasing complexity of cloud-native applications, the proliferation of microservices, and the rise of edge computing all demand more sophisticated observability solutions. While a P/S ratio of around 28 reflects a hefty price tag, the company's continued innovation and expansion into adjacent markets--like security and application performance monitoring--justify a long-term investment thesis.

MongoDB: Powering the Future with Flexible Data Management

MongoDB, a leading DBaaS provider, is similarly benefiting from the digital transformation wave. Traditional relational databases, while robust, often struggle to keep pace with the demands of modern applications. MongoDB's document-oriented database offers greater flexibility, scalability, and developer agility. This is particularly important for applications that require handling unstructured or semi-structured data, such as those found in e-commerce, social media, and content management systems.

MongoDB's Q3 2023 revenue grew by an impressive 37% year-over-year, reaching $383 million. This growth is driven by the increasing adoption of cloud-native applications and the need for databases that can easily scale to meet changing demands. The DBaaS model further simplifies data management, allowing businesses to focus on innovation rather than infrastructure maintenance.

However, MongoDB's potential extends far beyond simply providing a database. The company is strategically positioning itself to capitalize on the AI boom. Artificial intelligence algorithms require vast amounts of data to train and operate effectively. MongoDB's flexible data model and scalable infrastructure make it an ideal platform for storing and managing the data needed for AI applications. This positions MongoDB as a critical enabler of the next wave of technological innovation.

Like Datadog, MongoDB's stock carries a high P/S ratio (around 25). This reflects investor confidence in the company's growth prospects, but also highlights the inherent risks of investing in growth stocks. However, with a strong track record of innovation, a robust customer base, and a strategic focus on emerging technologies, MongoDB appears well-positioned to deliver long-term value.

A Combined Strategy: Diversification and Long-Term Growth

Both Datadog and MongoDB operate in competitive landscapes, and technological disruption is a constant threat. However, their respective positions as leaders in their respective fields, combined with the underlying secular trends driving their growth, suggest that they are well-equipped to navigate these challenges. For investors seeking exposure to the long-term growth potential of cloud computing and data management, a combined strategy involving both Datadog and MongoDB could offer a balanced and diversified approach. While current valuations demand a long-term perspective, the potential rewards could be substantial.