Shares of Datadog ( DDOG ) ended roughly 15% higher on Tuesday after the observability service for cloud-scale applications came in well above Street estimates for its fiscal fourth quarter. As investors cheered the constructive release, DDOG soared above its 20-day moving average (MA), indicating that bullish momentum could be sustained in the short term.

Compared to its November high, Datadog shares are still up about 35%, indicating that long-term investors may still have time to initiate a position in this fast-growing artificial intelligence (AI) beneficiary.

While DDOG stock is expensive to hold at around 230 times forward earnings, the premium can be justified, given that the company is often considered the gold standard for SaaS efficiency.

Why? Because it grew its revenue by 29% year-over-year in the fourth quarter, and finding a publicly traded US software company that’s growing faster while trading at a compelling valuation is a bit of a challenge.

Additionally, expanding adoption of Datadog’s various products creates a sticky ecosystem, with 46% of customers now using six or more modules.

This deep integration, along with strong free cash flow ($915 million in 2025) and a dominant position in AI-driven workload monitoring, cements its long-term defensive moat.

DDOG’s outlook for up to $4.1 billion in revenue suggests its topline growth will slow to 20% this year.

But that shouldn’t dissuade investors from starting a position in Datadog stock, as the company’s management has a history of guiding low to set the floor for a “beat and raise.”

In addition, underlying demand is also accelerating. In the fourth quarter, the cloud-based observability company saw bookings rise 37% year over year to a record $1.63 billion.

With demands for tools for its AI agents growing 11x in one quarter and signing two deals worth more than $100 million, it’s conceivable that Datadog will remain a highly efficient ATM through the rest of 2026.

Wall Street analysts also seem to believe that DDOG stock will rise further after the positive fourth quarter impression.