In the rapidly evolving tech landscape, the battle between Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS) presents an intriguing opportunity for investors. Both companies operate within the software sector but focus on different aspects of cloud services—monitoring and analytics for Datadog versus cloud security for Zscaler. Their overlapping market spaces and innovative strategies make this comparison essential for investors looking to enhance their portfolios. Join me as we delve into which of these companies holds the most promise for your investment strategy.
Table of contents
Company Overview
Datadog, Inc. Overview
Datadog, Inc. (NASDAQ: DDOG) is a leading provider of a monitoring and analytics platform designed for cloud-based applications. Established in 2010 and headquartered in New York City, Datadog’s mission is to enhance observability across technology stacks by integrating various monitoring solutions such as infrastructure monitoring, application performance monitoring, and security monitoring. With a market capitalization of approximately $56.1B, the company has positioned itself as a vital tool for developers and IT operations teams, enabling real-time insights and efficient incident management. As of now, Datadog serves a diverse clientele, enhancing their ability to manage the complexities of modern cloud environments.
Zscaler, Inc. Overview
Zscaler, Inc. (NASDAQ: ZS) operates in the cloud security domain, providing solutions that ensure secure access to applications and data across various devices and networks. Founded in 2007 and based in San Jose, California, Zscaler’s mission revolves around simplifying secure connectivity for organizations worldwide. With a market cap of around $39.1B, the company offers services like Zscaler Internet Access and Zscaler Private Access, empowering businesses to protect their digital landscapes from cyber threats. Additionally, Zscaler measures user experiences, allowing enterprises to enhance their operational efficiency while maintaining a robust security posture.
Key similarities and differences
Both Datadog and Zscaler operate within the technology sector, focusing on cloud-based solutions; however, their business models differ significantly. Datadog emphasizes application performance and infrastructure monitoring, whereas Zscaler specializes in cloud security solutions. While both companies aim to enhance operational efficiency and security for their clients, Datadog leans towards observability, and Zscaler prioritizes secure access.
Income Statement Comparison
Below is a comparison of the most recent income statements for Datadog, Inc. and Zscaler, Inc. This analysis provides a snapshot of their financial performance.
| Metric | Datadog, Inc. (DDOG) | Zscaler, Inc. (ZS) |
|---|---|---|
| Market Cap | 56.1B | 39.1B |
| Revenue | 2.68B | 2.67B |
| EBITDA | 318M | 112M |
| EBIT | 211M | -9M |
| Net Income | 184M | -41M |
| EPS | 0.55 | -0.27 |
| Fiscal Year | 2024 | 2025 |
Interpretation of Income Statement
In the most recent fiscal year, both companies demonstrate strong revenue figures, with Datadog slightly ahead in sales. Notably, Datadog has improved its net income significantly compared to Zscaler, which reported a loss. While Datadog’s EBITDA margin appears robust, Zscaler’s operating income remains negative, indicating challenges in controlling expenses. The growth trend in Datadog’s revenue and net income reflects effective operational management, whereas Zscaler’s continued losses signal a need for strategic adjustments to enhance profitability.
Financial Ratios Comparison
Below is a comparative analysis of key financial metrics for Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS) based on the most recent data available.
| Metric | Datadog, Inc. (DDOG) | Zscaler, Inc. (ZS) |
|---|---|---|
| ROE | 6.77% | -2.31% |
| ROIC | 1.07% | -7.11% |
| P/E | 261.42 | N/A |
| P/B | 17.70 | 24.51 |
| Current Ratio | 2.64 | 2.01 |
| Quick Ratio | 2.64 | 2.01 |
| D/E | 0.68 | 0.99 |
| Debt-to-Assets | 31.84% | 27.98% |
| Interest Coverage | 7.68 | -13.49 |
| Asset Turnover | 0.46 | 0.42 |
| Fixed Asset Turnover | 6.72 | 4.22 |
| Payout Ratio | 0% | 0% |
| Dividend Yield | 0% | 0% |
Interpretation of Financial Ratios
The financial ratios indicate that Datadog, Inc. shows stronger profitability, evidenced by its positive ROE and ROIC, compared to Zscaler, Inc., which has negative returns. The high P/E ratio for Datadog may suggest overvaluation, while Zscaler’s lack of a P/E ratio indicates losses. Both companies maintain healthy current and quick ratios, but Zscaler’s higher debt-to-equity ratio could pose a risk. Interest coverage for Datadog is solid, whereas Zscaler’s negative coverage raises concerns about its ability to meet interest obligations.
Dividend and Shareholder Returns
Both Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS) do not pay dividends, focusing instead on reinvestment for growth and innovation. This strategy aligns with their high-growth phases where capital is prioritized for R&D and market expansion. While both companies engage in share buybacks, potential risks include the sustainability of their cash flows, given their current net losses. Overall, this approach may support long-term shareholder value, contingent on successful execution of growth strategies.
Strategic Positioning
Datadog, Inc. (DDOG) holds a significant position in the software application sector, with a market cap of approximately $56.1B. It primarily focuses on monitoring and analytics, facing competitive pressure from emerging technologies and established players like Zscaler, Inc. (ZS). Zscaler, with a market cap of around $39.1B, specializes in cloud security, indicating a rising trend in demand for secure access solutions. Both companies are navigating technological disruptions that could reshape their competitive landscapes.
Stock Comparison
In this section, I will analyze the recent stock performance of Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS), highlighting key price movements and trading dynamics over the past year.
Trend Analysis
Datadog, Inc. (DDOG) has demonstrated a robust bullish trend with a price change of +37.95% over the past year. The stock reached a notable high of 191.24 and a low of 87.93, indicating significant price fluctuations. The acceleration status suggests a strengthening momentum, supported by a standard deviation of 18.41, reflecting moderate volatility. Recently, from September 14, 2025, to November 30, 2025, the stock experienced a price increase of +17.22%, with a trend slope of 3.36, further confirming the bullish momentum.
Zscaler, Inc. (ZS) has also exhibited a bullish trend over the last year, with a price change of +19.87%. The stock’s price ranged between a high of 331.14 and a low of 156.78, indicating notable volatility, with a standard deviation of 47.31. However, in the recent period from September 14, 2025, to November 30, 2025, ZS faced a decline of -11.19%, accompanied by a trend slope of -1.15, which suggests a deceleration in momentum despite the overall yearly bullish trend.
In summary, while both companies are in bullish territory over the longer term, ZS’s recent performance indicates a potential need for caution due to its recent decline.
Analyst Opinions
Recent analyst recommendations for Datadog, Inc. (DDOG) indicate a cautious stance, with a rating of C+. Analysts highlight strong performance in discounted cash flow and returns on equity, but concerns about its price-to-earnings ratio. Zscaler, Inc. (ZS) received a rating of C-, reflecting challenges in return metrics and price ratios, despite a solid discounted cash flow score. Overall, the consensus leans towards hold for both companies in 2025, as analysts weigh growth potential against current valuations.
Stock Grades
As we analyze the latest stock grades, it’s evident that both Datadog, Inc. and Zscaler, Inc. maintain strong ratings from reputable grading companies.
Datadog, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Citigroup | maintain | Buy | 2025-11-12 |
| Canaccord Genuity | maintain | Buy | 2025-11-07 |
| Keybanc | upgrade | Overweight | 2025-11-07 |
| Evercore ISI Group | maintain | Outperform | 2025-11-07 |
| Barclays | maintain | Overweight | 2025-11-07 |
| Rosenblatt | maintain | Buy | 2025-11-07 |
| UBS | maintain | Buy | 2025-11-07 |
| RBC Capital | maintain | Outperform | 2025-11-07 |
| Scotiabank | maintain | Sector Outperform | 2025-11-07 |
| Goldman Sachs | maintain | Buy | 2025-11-07 |
Zscaler, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | maintain | Buy | 2025-11-26 |
| Rosenblatt | maintain | Buy | 2025-11-26 |
| B of A Securities | maintain | Buy | 2025-11-26 |
| Scotiabank | maintain | Sector Outperform | 2025-11-26 |
| Mizuho | maintain | Neutral | 2025-11-26 |
| UBS | maintain | Buy | 2025-11-26 |
| Needham | maintain | Buy | 2025-11-26 |
| Baird | maintain | Outperform | 2025-11-26 |
| BTIG | maintain | Buy | 2025-11-26 |
| Bernstein | maintain | Outperform | 2025-11-26 |
The overall trend for both companies shows a consistent commitment from analysts, with multiple “Buy” and “Outperform” ratings. This suggests positive sentiment and confidence in their operational performance going forward, which could be an encouraging sign for potential investors.
Target Prices
Currently, I have access to reliable target price data for both Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS), reflecting the consensus among analysts.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Datadog, Inc. | 215 | 105 | 179.25 |
| Zscaler, Inc. | 360 | 264 | 320.64 |
The target consensus for Datadog is 179.25, which suggests a potential upside from the current price of 160.01. For Zscaler, the consensus of 320.64 indicates a significant upside potential compared to its current price of 250.92. Overall, analysts are optimistic about both companies’ growth potential.
Strengths and Weaknesses
The following table summarizes the strengths and weaknesses of Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS) based on the most recent data.
| Criterion | Datadog, Inc. (DDOG) | Zscaler, Inc. (ZS) |
|---|---|---|
| Diversification | Moderate | Moderate |
| Profitability | Low (Net Margin: 6.8%) | Negative (Net Margin: -1.6%) |
| Innovation | High | High |
| Global presence | Strong | Strong |
| Market Share | Growing | Moderate |
| Debt level | Moderate (Debt/Equity: 0.68) | High (Debt/Equity: 0.99) |
Key takeaways indicate that while both companies are innovative and have a strong global presence, Datadog demonstrates better profitability and lower debt levels compared to Zscaler.
Risk Analysis
The following table outlines key risks associated with Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS):
| Metric | Datadog, Inc. | Zscaler, Inc. |
|---|---|---|
| Market Risk | Moderate | High |
| Regulatory Risk | Low | Moderate |
| Operational Risk | Moderate | High |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Low | Moderate |
Both companies face significant operational risks, particularly Zscaler, which operates in a highly competitive market. The ongoing regulatory scrutiny in the tech sector adds another layer of complexity, especially for Zscaler, whose business model heavily relies on compliance with data protection regulations.
Which one to choose?
When comparing Datadog, Inc. (DDOG) and Zscaler, Inc. (ZS), both companies exhibit strong revenue growth, but their financial health and market sentiment diverge significantly. Datadog shows a gross profit margin of 80.76% with a solid net profit margin of 6.85%, while Zscaler’s gross profit margin stands at 76.87%, but it operates at a loss with a net margin of -1.55%. Datadog’s current ratio is a robust 2.64, indicating strong liquidity, compared to Zscaler’s lower ratio of 2.01. Analyst ratings reflect this trend, with Datadog receiving a “C+” compared to Zscaler’s “C-“. From a risk perspective, both companies face challenges related to competition and fluctuating market conditions.
Recommendation: Investors focused on growth may prefer Datadog due to its stronger fundamentals and profitability indicators, while those prioritizing high-risk opportunities might consider Zscaler for its potential upside.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Datadog, Inc. and Zscaler, Inc. to enhance your investment decisions:
