Salesforce vs. Datadog: Which Technology Stock Is a Better Buy in 2026?

Investors often weigh established profitability against rapid expansion when choosing software stocks. Deciding whether Salesforce (NYSE:CRM) or Datadog (NASDAQ:DDOG) is the better buy depends on your preference for stability versus growth.

Salesforce provides a unified platform for customer data and AI, while Datadog offers observability and security for cloud applications. Both sell subscription software to enterprises running complex digital operations, which makes them a natural pairing for investors weighing the sector in 2026.

The case for Salesforce

Salesforce provides a comprehensive cloud platform that helps businesses manage everything from sales to agent-based AI automation. It has established itself as a leader among tech stocks in enterprise software. Its customers include organizations that utilize its Agentforce and Slack integrations.

The annual report provides no total customer count, and no single customer accounts for more than 10% of revenue, suggesting a well-diversified user base.

In the fiscal year ended Jan. 31, 2026, revenue reached nearly $41.5 billion, up about 9.6% year over year. The company reported a net income of close to $7.5 billion during this period. This performance was an improvement over the prior fiscal year, when the company recorded a net income of roughly $6.2 billion on lower total sales.

The momentum carried into the quarter ended July 31, 2026, when revenue grew 11% to $11.3 billion, and management raised its full-year outlook.

As of its January 2026 balance sheet, the debt-to-equity ratio was approximately 0.2x. This ratio measures total borrowings relative to shareholder equity, excluding lease obligations, and it indicated a conservative use of leverage at the time. That picture has since changed.

In March 2026, Salesforce issued $25 billion in senior notes and used the proceeds to accelerate a share repurchase, so by July 31, 2026, total debt of about $39.3 billion roughly matched shareholder equity.

The current ratio, which compares current assets to current liabilities, was roughly 0.8x at fiscal year-end. Free cash flow reached nearly $14.4 billion, though note that stock-based compensation accounted for roughly 23.4% of operating cash flow, inflating reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

The case for Datadog

Datadog offers a cloud-based observability and security platform that helps organizations monitor and secure their software systems.

The company uses a land-and-expand model that has attracted about 32,700 customers in more than 160 countries. Its platform serves businesses in hybrid or public cloud environments, allowing them to act on live data to prevent outages.

In the fiscal year ended Dec. 31, 2025, revenue reached nearly $3.4 billion, up roughly 27.7% from the prior fiscal year. The company reported net income of about $107.7 million, down from $183.7 million the previous year. Operating expenses, led by research and development, grew faster than revenue, resulting in a small operating loss for the year. Growth then accelerated, with revenue up 36% year over year in the quarter ended June 30, 2026.

As of its December 2025 balance sheet, the debt-to-equity ratio was roughly 0.3x, on the same total-borrowings basis used for Salesforce. Its current ratio was about 3.4x, suggesting the company is well positioned to cover its short-term obligations.

Free cash flow was about $915 million under the company's own definition, which excludes capitalized software costs and equipment purchases. Note that stock-based compensation accounted for roughly 71.5% of operating cash flow, inflating reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

Risk profile comparison

Salesforce faces cybersecurity and data privacy risks, particularly as AI-driven cyberattacks become more sophisticated.

The company must also manage the operational complexity of integrating large acquisitions, such as its November 2025 purchase of Informatica, which involved $6.0 billion in new debt. The deal pace has not slowed.

On Oct. 20, 2026, Salesforce agreed to buy Braze (NASDAQ:BRZE) for about $5.66 billion, weeks after closing two smaller cash deals, Contentful and Fin, in September. Furthermore, it faces intense competition from larger enterprise software vendors and newer AI-native start-ups that could threaten its market share.

Datadog operates in a crowded market and faces competition from legacy systems management vendors such as IBM (NYSE:IBM), Cisco (NASDAQ:CSCO), and SolarWinds. It also competes with native observability tools from major cloud platforms, including Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL).

Datadog also outsources much of its hosting infrastructure to third-party providers, so an incident at one of them could disrupt its service.

Valuation comparison

Salesforce currently trades at a much lower valuation relative to its earnings, while Datadog trades at a high premium that reflects its faster revenue growth.

Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.

The Forward P/E ratio helps investors understand how much they are paying for each dollar of estimated future earnings. The P/S ratio measures a company's market value relative to its sales over the past 12 months, providing a lens for valuing companies that may not yet have high net margins.

Which stock would I buy in 2026?

Salesforce looks like the better buy for 2026, provided you can live with a balance sheet that changed sharply after the fiscal year covered above.

In March 2026, the company borrowed heavily through a senior note sale and used the proceeds to accelerate a buyback, so total debt now roughly matches shareholder equity rather than sitting at a small fraction of it.

The second-quarter report that followed showed revenue growing 11% on a smaller share count, with full-year guidance raised. Management says organic growth should pick up in the second half, and the company reports Agentforce recurring revenue has more than tripled in a year, though it broadened that definition in the second quarter.

I'd take that view with a grain of salt until the Braze deal announced on Oct. 20 closes and the acquisition pace slows.

Datadog is the stronger business in terms of growth, and the second quarter made that plain, with revenue up 36% and about a quarter of it converted into free cash flow. The problem is the price.

Investors are paying a steep premium on this year's expected earnings for a company with thin GAAP profit and stock-based pay that absorbed a large share of operating cash flow last year. Those are familiar trade-offs for a growth stock. For a 2026 entry, though, Salesforce offers a far cheaper way into enterprise software with cash flow to spare. If Datadog's multiple ever compresses, it deserves a closer look, since its large customer base has continued to grow in the double digits.

Mike Schwenk has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Braze, Cisco Systems, Datadog, International Business Machines, Microsoft, and Salesforce. The Motley Fool has a disclosure policy.