Issue #35

AI infrastructure + AI lending: two unstoppable growth engines for 2026.

The next wave of market winners won’t come from hype — it will come from companies building real, scalable, profit-generating technology. And right now, two of the most explosive trends in the market — AI-powered cloud infrastructure and AI-driven consumer FinTech — are converging around a pair of companies executing at the highest level.

👉 One powers the backbone of the modern internet, monitoring everything from cloud performance to AI model behavior — and just delivered one of its strongest quarters in years.
👉 The other is quietly becoming the most profitable neobank in America, helping millions of consumers navigate rising costs with AI-powered lending at massive scale.
👉 Both are growing fast, deeply profitable, and backed by overwhelmingly strong analyst conviction heading into 2026.

Today, we break down why Datadog (DDOG) and Dave (DAVE) are two tech names investors should be watching closely — and what catalysts could push them even higher over the next 12–18 months.

Datadog (NASDAQ: DDOG)

Datadog is the monitoring and security platform for cloud applications. It provides a unified, real-time view of an organization's entire technology stack—from infrastructure and applications to logs and user experience—allowing development, operations, and security teams to seamlessly collaborate, accelerate development, and quickly resolve issues. As organizations increasingly adopt complex, multi-cloud, and AI-driven architectures, Datadog's platform becomes a mission-critical tool for maintaining the health and performance of their digital businesses.

Business Model and Revenue Streams 📦

Datadog operates on a Software-as-a-Service (SaaS) model with a consumption-based pricing structure and a "land and expand" growth strategy.

• Consumption-Based SaaS Revenue: This is Datadog's primary revenue stream. Customers pay based on the volume of service they use, such as the amount of data ingested (logs, metrics, traces), the number of hosts (servers/virtual machines) monitored, or the number of monitored users (for Real User Monitoring). This model links Datadog's revenue directly to the growth of its customers' cloud adoption and digital workloads.
• "Land and Expand" Strategy: The company initially "lands" a new customer by offering one or two products (e.g., Infrastructure Monitoring). Once embedded, it "expands" its relationship by cross-selling and upselling its wide portfolio of products (Application Performance Monitoring, Log Management, Security, etc.) to the same customer base. This is highly effective, as evidenced by its high Net Revenue Retention rate (currently around 120%) and the fact that a vast majority of its customers use two or more products.

Impact of Macroeconomic Policies

The consumption-based model makes Datadog's revenue sensitive to customer spending behavior, particularly during periods of economic uncertainty.

• Headwinds: When macroeconomic conditions are challenging (e.g., high-interest rates, recession fears), companies often implement cloud cost-optimization measures, leading to a temporary slowdown in their Datadog usage (a "pause" or "optimization" in consumption). This directly impacts Datadog's revenue growth.
• Tailwinds: Despite short-term optimization, the long-term trend of cloud migration and digital transformation remains a powerful tailwind. Furthermore, the burgeoning Artificial Intelligence (AI) application development cohort is a significant growth driver. Companies building AI-native applications are heavy users of Datadog's observability platform, with this cohort representing a rapidly growing portion of quarterly revenue. The mission-critical nature of the platform for large, high-value customers (who contribute a vast majority of the total Annual Recurring Revenue or ARR) provides a strong buffer against market fluctuations.

Recent Performance and Corporate Developments 📈

Datadog recently delivered a robust Q3 2025 performance, surpassing analyst expectations and demonstrating accelerating growth in key areas.

Q3 2025 Financial Highlights: 💰

Total Revenue: $886 Million (Up a robust 28.4% YoY). The market cheered this reacceleration in their core business.

Non-GAAP EPS: $0.55 (Shattered analyst expectations by nearly 20% YoY).

Non-GAAP Gross Margin: 81.2%. This elite margin confirms the platform's incredible pricing power and capital efficiency.

Free Cash Flow (FCF): $214 Million. A massive cash engine that fuels future innovation without heavy reliance on external funding.

$100k+ ARR Customers: 4,060 (A solid 16% YoY increase). The company is deepening its relationships with its most valuable, sticky enterprise clients.

Management's guidance for Q4 2025 and the full year 2025 was also raised, projecting full-year revenue between $3.386 billion and $3.390 billion, representing approximately 26% YoY growth.

Strategic Initiatives and Mergers: 🤝

Datadog’s corporate strategy is heavily focused on organic innovation and platform expansion to capture emerging cloud and AI workloads.

• AI Observability and Security: The company is rapidly integrating new products and capabilities for the AI space, including LLM Observability and Bits AI Agents for SREs and security teams. This focus capitalizes on the massive new demand for monitoring the highly complex, AI-native applications being deployed by its customer base.
• Product Expansion: Datadog achieved a milestone of over 1,000 integrations and has been named a leader in the 2025 Gartner® Magic Quadrant™ for Digital Experience Monitoring. Recent product announcements include Storage Management to help customers optimize cloud costs, and it is pursuing a GovRAMP High Authorization for its Government sector offerings.
• Mergers & Acquisitions: There have been no major recent mergers or acquisitions, with the company's growth being overwhelmingly organic, supplemented by smaller, technology-focused acquisitions (like Eppo in recent quarters).

Path to Profitability and Fair Value 🎯

Datadog has already achieved substantial profitability, a crucial differentiator for a high-growth technology stock in the current market.

• Path to Sustained Profitability: The company's path forward is built on scalability and operational leverage. With a consistently high Non-GAAP Gross Margin (over 80%) and strong Free Cash Flow, Datadog demonstrates excellent unit economics. As revenue grows faster than operational expenses, its non-GAAP operating margin is strong (23.4% in Q3 2025). The focus on upselling multiple, higher-margin products to existing customers drives highly efficient revenue expansion.
• Fair Value Assessment: Datadog currently trades at a premium valuation (high Price-to-Sales and Price-to-Earnings ratios) compared to the broader software industry. However, this premium is often justified by its superior growth rate, high gross margins, positive free cash flow, and strong market leadership. While a Discounted Cash Flow (DCF) analysis might suggest a slight undervaluation compared to its future cash generation potential, the elevated P/S ratio indicates high market expectations for its continued rapid growth and market penetration, especially in the AI observability space.

Analyst Estimates and Ratings 📊

Analyst sentiment for Datadog is overwhelmingly positive, with numerous positive revisions following the Q3 2025 earnings beat.

• Consensus Rating: The consensus rating from a wide group of Wall Street analysts is a "Strong Buy," with a vast majority of analysts maintaining or upgrading their Buy/Outperform ratings in the last 30 days.
• Price Target: The average 12-month price target is approximately $218.13, which suggests a significant upside potential from the current price. High-end forecasts range up to $255.00.

Investor-Focused Takeaway: Is DDOG Right for Your Portfolio?

Datadog is a top-tier investment for long-term growth focused on the indispensable need for cloud observability and security in the modern digital economy. Its consumption-based model is highly scalable, and the company has successfully transitioned to meaningful profitability while still delivering high growth.

What to Watch in the Near Term: 📈

• Cloud Consumption Trends: Pay close attention to management commentary on customer "optimization" versus "expansion," as this is the primary short-term driver of revenue volatility.
• AI Observability Adoption: The rate at which customers adopt new AI-focused products is key to tapping into the next major growth cycle.
• Gross Margin Stability: Continued gross margins over 80% will confirm the company's excellent long-term unit economics.

Recommendation:

Datadog (DDOG) is viewed as a Strong Buy due to its market-leading unified platform, its ability to execute on profitability while sustaining high growth, and the strong catalyst of the AI observability boom. While its premium valuation requires a belief in the long-term cloud and AI secular trends, the stock is strongly backed by analyst conviction and superior financial performance.

Dave (NASDAQ: DAVE)

Dave, Inc. is a leading U.S. neobank that offers a digital financial platform designed to help everyday Americans manage their cash flow, find supplementary income, and, critically, avoid the debilitating overdraft fees charged by traditional banks. The company positions itself as a financial advocate, providing a crucial safety net—primarily through its flagship interest-free cash advance product, ExtraCash®—built on proprietary AI-driven underwriting.

Business Model and Revenue Streams 📦

Dave's business model is a high-growth, technology-driven platform focusing on high-volume, low-cost financial services that challenge traditional banking structures. Its core strategy relies on low customer acquisition costs and multiple, diverse revenue streams that monetize its large member base.

• ExtraCash® Monetization (The Engine): This is Dave's largest and fastest-growing revenue stream. It is generated through the ExtraCash product, which provides small, interest-free cash advances. Revenue comes from two primary sources:
  • Optional Express Fees: Fees charged for instantly receiving the cash advance.
  • Voluntary Tips: A unique, non-mandatory tip system where members can choose to compensate the company.
• Subscription Model (High-Margin Foundation): Dave charges a low, recurring monthly subscription fee (e.g., the LevelUp fee) for access to premium services, including higher ExtraCash limits and credit-building tools. This stream provides high-margin, predictable recurring revenue, which grew a staggering 57% year-over-year in Q3 2025.
• Interchange Fees (Banking Services): Revenue generated from fees charged to merchants when members use the Dave debit card.

Impact of Macroeconomic Policies

Dave's business model exhibits a complex relationship with the macro economy.

• Headwinds (Recession/High-Interest Rates): Economic uncertainty and rising costs can put pressure on its target demographic (the paycheck-to-paycheck consumer). This could lead to a minor increase in delinquency rates (as seen in the Q3 2025 report) and greater scrutiny on credit performance. The lending environment is also highly sensitive to regulatory shifts, which can impose compliance costs.
• Tailwinds (The Core Proposition): The current high-inflation and high-fee environment is, paradoxically, a major tailwind. As traditional banks raise fees and consumers feel the pinch of inflation, the demand for Dave's low-cost, fee-avoiding products (like ExtraCash) surges. This structural demand for financial safety nets, coupled with the company's ultra-low Customer Acquisition Cost (CAC) of just $19 per new member, allows Dave to scale efficiently during times when competitors struggle.

Recent Performance and Corporate Developments 📈

Dave delivered an outstanding performance in Q3 2025, demonstrating that its strategic pivots to enhance monetization and control credit risk are paying massive dividends in both growth and profitability.

Q3 2025 Financial Highlights: 💰

Total Revenue: $150.8 Million (Sizzling +63% YoY growth!).

Adjusted EBITDA: $58.7 Million (More than doubled, up an electrifying +137%!).

GAAP Net Income: $92.0 Million (Achieved record profitability).

ExtraCash®: $2.0 Billion in originations (Demand is soaring, up +49%).

Net Monetization Rate: 4.8% (+45 bps improvement) – They're making more money on every dollar loaned!

Strategic Initiatives and Mergers: 🤝

Dave’s recent focus has been on product enhancement and operational efficiency, driven heavily by AI.

• CashAI v5.5 Implementation: The company fully implemented the latest iteration of its proprietary machine learning underwriting engine, CashAI v5.5. This upgrade leverages a significantly larger data set to optimize credit outcomes, which directly resulted in a record-high net monetization rate and allowed for increased approval limits for customers. This AI focus is the core risk management and monetization strategy.
• Executive Appointment: Dave appointed a new Chief Product Officer with deep experience in the FinTech space, signaling a strategic push to broaden its product suite and strengthen its credit and AI capabilities for the next growth phase.
• Share Repurchase Program: In a major show of confidence in its valuation and cash generation, the Board expanded its share repurchase authorization to $125 million, actively returning capital to shareholders.

Path to Profitability and Fair Value 🎯

Dave has not only achieved but dramatically accelerated its profitability, reporting record Net Income and doubling its Adjusted EBITDA year-over-year.

• Path to Sustained Profitability: The company’s path is clearly defined by increasing Average Revenue Per User (ARPU) through its subscription model and improving its Net Monetization Rate on ExtraCash through superior AI-driven underwriting. The incredibly low Customer Acquisition Cost means that as the platform scales, the operating leverage is immense, allowing profit to grow much faster than revenue.
• Fair Value Assessment: Dave’s stock currently trades at a premium valuation relative to some peers, reflecting its explosive growth (63% revenue growth) and newfound, substantial profitability. The market is increasingly valuing FinTechs that can demonstrate high margins, which Dave’s non-GAAP Gross Margin of 69% supports. Analysts generally consider the stock undervalued relative to its growth trajectory and cash flow generation, suggesting the current price has not fully factored in the strength of the recent profitability shift.

Analyst Estimates and Ratings 📊

Analyst sentiment is exceptionally high, with recent upgrades following the Q3 earnings report.

• Consensus Rating: The consensus rating from analysts is a strong "Strong Buy." Recent analyst reports have been overwhelmingly positive, with a rare 100% of tracked analysts in the last month recommending a "Buy" or "Strong Buy."
• Price Target: The average 12-month price target is approximately $310.14, indicating an aggressive expected upside from the current share price. High-end targets are as high as $347.00.

Investor-Focused Takeaway: Is DAVE Right for Your Portfolio?

Dave (DAVE) is an investment in the burgeoning neobank sector, distinguished by its massive scale, high growth, and proven ability to achieve and rapidly expand profitability. The core mission of providing a necessary financial safety net creates a business model that is structurally insulated against many macro forces that hurt traditional banks.

What to Watch in the Near Term: 📈

• Credit Performance: Monitor the 28-day delinquency rate. While contained, its stability is key to sustaining the record net monetization rate.
• Product Diversification: Look for announcements regarding the expansion of its product suite beyond ExtraCash (e.g., Buy Now, Pay Later) to further boost ARPU.
• Share Repurchase Execution: The completion of the expanded share buyback will signal management’s confidence in the company’s valuation and financial health.

Recommendation:

Dave (DAVE) is a compelling Strong Buy for investors seeking a high-growth FinTech stock with a defensible, AI-driven model that has already achieved significant, rapidly scaling profitability. Analyst support is at near-unanimous levels, pointing to a strong belief in the stock’s ability to reach its elevated price targets.

🚀 Final Take: Two Profitable Innovators Leading the Next Tech Wave

As the market moves past speculation and into execution, Datadog (DDOG) and Dave (DAVE) are standing out for all the right reasons: real revenue, real profitability, and real product-market fit in two of the fastest-growing corners of tech — cloud infrastructure and consumer FinTech.

One is a mission-critical platform powering AI-native apps in the enterprise.
The other is redefining everyday banking for millions of Americans with lightning-fast growth and strong unit economics.

☁️ Datadog (DDOG) – AI Observability With Hyper-Scale Margins
✔ 28% YoY revenue growth and 80%+ gross margins
✔ Dominates multi-cloud observability with 4,000+ $100K+ customers
✔ Top-rated by analysts, with targets up to $255
➤ Best for: Long-term investors seeking exposure to the AI infrastructure trend with a deeply profitable SaaS platform.

💸 Dave (DAVE) – The FinTech Challenger With Real Profits
✔ 63% YoY revenue growth and record $92M net income
✔ AI underwriting engine driving monetization and scale
✔ 100% of analysts rate it a “Buy” after blowout earnings
➤ Best for: Growth investors looking for a breakout FinTech with viral adoption, high margins, and expanding shareholder returns.

Investor Insight:

📊 Want a cloud platform at the heart of AI model monitoring? → DDOG
​ 🏦 Want a FinTech that’s already profitable and scaling fast? → DAVE

These aren’t hype stocks — they’re high-growth tech names with strong fundamentals, analyst conviction, and massive 2026 upside. Investors looking for leaders in the next tech cycle may want to take a close look before the market fully catches up.

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Happy Trading
​— Team Premium Stock Alerts