DDOG's Multi-Year Contracts Grow: Is Revenue Growth More Predictable?

Datadog DDOG is making its revenue growth more predictable as momentum in multi-year customer agreements improves revenue visibility and reinforces the durability of its subscription-based business model. During the first quarter of 2026, the company reported a 51% year-over-year increase in remaining performance obligations (RPO) to $3.48 billion, with management attributing the growth partly to a higher mix of multi-year contracts and longer contract durations. This expanding backlog provides greater visibility into future revenues, strengthening the predictability of recurring subscription revenues while reducing reliance on short-term renewals.

Datadog continues to win large enterprise expansion deals, with several customers expanding their usage across 10 or more Datadog products. Higher multi-product adoption, coupled with gross retention in the mid-to-high 90% range and net revenue retention in the low 120% range in the first quarter of 2026, supports longer-term customer commitments, increases switching costs and strengthens recurring revenue growth. AI-driven deployments are further contributing to larger enterprise engagements, expanding the company's long-term revenue opportunity.

Reflecting this momentum, management raised its full-year 2026 revenue outlook to $3.225-$3.245 billion from $3.175-$3.195 billion, underscoring confidence in customer demand and execution. While longer-duration contracts enhance revenue visibility and improve growth predictability, Datadog's ability to sustain this momentum will depend on continued customer renewals, platform expansion and healthy enterprise IT spending.

How Do Datadog's Rivals Stack Up?

Dynatrace DT emphasizes large enterprise platform standardization over maximizing RPO, unlike Datadog's expanding multiyear contracts. Dynatrace wins bigger end-to-end observability deals, records $1 million-plus ACV contracts in the fourth quarter of fiscal 2026 and broader platform adoption through DPS subscriptions. Dynatrace focuses on durable ARR expansion, enterprise consolidation and long-term consumption while benefiting from strategic AI-driven platform commitments rather than emphasizing deferred revenue metrics.

Snowflake SNOW competes more directly with Datadog through rising RPO and multiyear enterprise commitments. In the first quarter of fiscal 2027, Snowflake reported 38% RPO growth, a new five-year AWS agreement and increasing $10 million-plus customers, supporting long-term revenue visibility. While Datadog benefits from larger multiyear observability contracts, Snowflake leverages AI-driven data platform expansion and enterprise consumption, making the company a formidable long-duration subscription competitor.

DDOG’s Share Price Performance, Valuation & Estimates

Shares of DDOG have surged 68.5% over the past year, outperforming the broader Zacks Computer and Technology sector's growth of 22.8%.

DDOG’s Price Performance

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From a valuation standpoint, DDOG appears overvalued, trading at a trailing 12-month price-to-sales ratio of 24.92X, above the industry’s 5.27X. DDOG has a Value Score of F.

DDOG’s Valuation

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The Zacks Consensus Estimate projects earnings of $2.41 per share for 2026 and $2.88 for 2027, reflecting year-over-year growth of 17.56% and 19.29%, respectively.

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Datadog stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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