Datadog vs Dynatrace: what the filings show

Datadog and Dynatrace compete in the same market (observability software for cloud applications), and their latest quarterly filings arrived within a day of each other in August 2026. The numbers inside describe two quite different businesses. One is re-accelerating from the larger revenue base while reporting almost no operating profit; the other is slowing to the weakest growth in its filed history while reporting close to its strongest profitability. All figures below are trailing-twelve-month (TTM) values computed from SEC XBRL data: Datadog's run to its FY2026 second quarter, Dynatrace's to its FY2027 first quarter.

The filings side by side

Growth

Datadog's TTM revenue of $3,966.7m grew 31.5% year on year, and the rate is rising: growth accelerated 2.0pp against the prior quarter's reading. Dynatrace's $2,095.6m grew 17.9%, a deceleration of 0.9pp, and a rate that sits below the 18.2% minimum of its entire prior TTM history. On these filings the growth gap is wide and widening, and it runs in favour of the larger company.

History adds a caution on each side. Datadog's 31.5% ranks at only the 46th percentile of its own record, which once reached 80.8%. That is brisk against any external yardstick, middling against its own past. Dynatrace has no equivalent consolation: no TTM period in its filing history has grown more slowly than this one.

Margins

Dynatrace is the clear leader on reported profitability. Its 12.1% TTM operating margin sits near the top of its recorded range (the maximum is 13.1%, and the current figure ranks at the 86th percentile of its history), and it improved 0.9pp year on year. Datadog's operating margin is 0.4%: effectively break-even on a GAAP basis, though even that is elevated by its own standards, against a recorded maximum of 2.9%. Gross margins are close, with Dynatrace ahead at 81.4% to Datadog's 79.5%.

Below the operating line, the ranking flips. Datadog earned $177.5m of TTM net income, up 42.5% year on year, for a 4.5% net margin. Dynatrace earned $151.7m, a higher net margin at 7.2%, but its net income fell 69.3% from the year before, even as its operating margin improved. The structured XBRL data used here does not identify what moved below operating income; the filing's management discussion is the place to look before attributing a cause.

Cash generation

Whatever separates the income statements, the cash flow statements read like siblings. Datadog generated $1,182.1m of TTM free cash flow, a 29.8% FCF margin; Dynatrace generated $570.6m, a 27.2% margin. Both run very light capital budgets, at 1.2% and 1.3% of revenue respectively.

The direction of travel differs. Datadog's FCF margin slipped 0.9pp year on year even as free cash flow grew 27.7%; the current margin still ranks at the 74th percentile of its history. Dynatrace's FCF margin rose 0.9pp, with free cash flow up 21.9%, while in the same period its net income fell 69.3%. That divergence between cash and reported earnings is the most significant single pattern in Dynatrace's filings this period, and it is why its income statement alone undersells the year.

Dilution and capital returns

The share count points in opposite directions. Datadog's diluted share count rose 1.7% year on year, the familiar software pattern of stock-based pay outrunning any offsetting repurchases. Dynatrace's fell 1.1%: net of all issuance, the count shrank, leaving each remaining share a slightly larger claim on the business. The structured data used here does not break out repurchase spending for either company, so the net change in the diluted count is the cleanest available measure of what capital returns achieved.

What it means for value

Running each company through the same two-stage DCF model shows where each story is levered, and in both cases the answer is growth. Datadog's base case assumes stage-1 growth of 20.0% (its TTM revenue growth, clamped at the model's cap): growth 5pp lower cuts its model value by 23.6%, while 5pp higher adds 30.2%. Dynatrace's base case assumes 17.9% growth, and the equivalent moves are -22.9% and +29.4%.

The margin lever is far smaller for both. A 1pp lower FCF margin takes 3.3% off Datadog's model value and 3.5% off Dynatrace's. That scales the year's actual margin moves: Datadog's 0.9pp FCF-margin slip, if it persists, implies a model value 2.9% lower, while Dynatrace's 0.9pp gain implies one 3.2% higher. Both effects are modest beside what any change in the growth trajectory would do. That is why Datadog's 2.0pp acceleration and Dynatrace's slide below its historical growth floor matter more to these models than either margin line. Discount-rate sensitivity is similar at both companies: a 1pp higher rate lowers Datadog's model value by 15.9% and Dynatrace's by 15.2%. These are model values under stated assumptions, not a comparison with the share price.

The other reading

The tidy version of this comparison (Datadog the accelerating growth company, Dynatrace the maturing margin company) may flatter both. Read only against its own record, Datadog's acceleration is a return towards form rather than a new peak, achieved while GAAP operating profitability hovers near zero and the share count expands. Read charitably, Dynatrace's year looks like a deliberate trade: the weakest revenue growth in its filed history, accepted alongside a near-record operating margin, a rising FCF margin and a shrinking share count. On that reading the difference between the two is not quality but strategy (one spending to grow, the other consolidating), and a filings snapshot cannot say which trade ages better. The next few quarters will, by showing whether Datadog's acceleration and Dynatrace's deceleration persist.

Bottom line

Two observability vendors, two very different income statements, nearly the same cash machine. Datadog leads on growth (larger, faster, accelerating) while Dynatrace leads on reported profitability and share-count discipline; on free cash flow they are separated by a sliver of margin moving in opposite directions. In both DCF models the growth input dominates the margin input, so the durability of Datadog's 31.5% and the depth of Dynatrace's slowdown are the claims on which each model value rests. The filings set out the trade with unusual clarity; they do not pick a winner, and neither do we.