Penguin Solutions, Inc. PENG and Datadog, Inc. DDOG are emerging beneficiaries of the AI infrastructure boom, but they represent very different ways to invest in the trend. Penguin provides AI infrastructure, high-performance computing and integrated solutions for deploying large-scale AI workloads, while Datadog delivers the cloud-native monitoring and observability software that enterprises rely on to manage increasingly complex AI applications.
The widespread adoption of AI is driving increased demand for both computing infrastructure and the software required to monitor increasingly complex workloads; consequently, comparing these two stocks has become quite compelling in the current landscape. With spending on AI infrastructure expected to remain robust in the coming years, an opportunity has emerged to profit by investing in one of the market's most attractive long-term growth prospects. But which stock looks more promising right now — PENG or DDOG? Let us delve deeper.
The Case for PENG Stock
Penguin has evolved into a leading AI infrastructure provider focused on designing, building, deploying and managing AI factories for enterprises, sovereign AI initiatives and neocloud providers. Its AI Factory Platform combines infrastructure software (ClusterWareAI), advanced memory (MemoryAI), compute systems (ComputeAI), reference architectures (OriginAI) and end-to-end managed services, providing customers with an integrated platform across the AI infrastructure stack rather than standalone hardware solutions.
A key competitive advantage is its exposure to production AI inference. Management noted that AI-driven businesses (Integrated Memory and non-hyperscale AI Infrastructure) represented 74% of third-quarter fiscal 2026 revenues and grew 104% year over year, supported by rising demand for agentic AI workloads, expanding backlog and increasing customer adoption. Penguin added four new AI infrastructure customers during the quarter while several previously acquired customers expanded their deployments, strengthening long-term revenue visibility.
Financial momentum remains robust. Third-quarter fiscal 2026 revenues surged 47.6% year over year to a record $478.7 million, operating income climbed to $50.9 million from $9.8 million a year earlier, and GAAP EPS improved to 68 cents from a loss of 1 cent per share. Reflecting strong AI demand, management raised fiscal 2026 guidance to approximately 22% (±2%) revenue growth.
Over the past month, Penguin launched an upgraded ClusterWareAI platform featuring an AI Factory Operations Agent for natural-language infrastructure management and automated GPU remediation, enhancing AI cluster resilience. The company also became an NVIDIA AI Factory Specialized Partner and was recognized as Dell Technologies' Global Alliances Americas AI Partner of the Year, reinforcing its ecosystem credibility and expanding its enterprise AI opportunities.
The Zacks Consensus Estimate for PENG's fiscal 2026 earnings has been revised upward over the past 30 and 60 days to $2.60 per share, indicating strengthening business fundamentals and projected earnings growth of 36.84% year over year.
Image Source: Zacks Investment Research
The Case for DDOG Stock
Datadog is strengthening its position as an AI infrastructure enabler by expanding beyond observability to deliver integrated monitoring, security and performance optimization for AI applications, GPU clusters and large-scale model training. The company delivered a strong first-quarter 2026, with revenues rising 32% year over year to $1.01 billion, free cash flow of $289 million and more than $4 billion in ARR, reflecting accelerating enterprise adoption.
AI is becoming an increasingly important growth driver. More than 6,500 customers now use one or more AI integrations, representing roughly 80% of Datadog's ARR, demonstrating the growing strategic importance of AI workloads to its business. The company launched GPU Monitoring, MCP Server, Bits AI Security Agent, Bits Assistant and expanded LLM Observability, enabling customers to optimize AI training workloads, improve GPU utilization, accelerate troubleshooting and automate security investigations. Management also highlighted major wins with AI research divisions at two of the world's largest technology companies, reinforcing Datadog's growing role in hyperscale AI infrastructure and AI model training.
Recent developments remain encouraging. Datadog acquired Adaptive ML to strengthen its AI research capabilities in agentic AI and reinforcement learning, supporting future product innovation. At DASH 2026, the company also introduced more than 100 new AI, security and autonomous operations capabilities, further expanding its AI platform and reinforcing its long-term growth strategy.
However, risks remain. Competition is intense across observability, cloud monitoring and AI software, while rapid AI innovation requires continued investment in infrastructure and research. Acquisitions may not deliver the expected synergies and integration benefits, and macroeconomic weakness could pressure enterprise IT spending. Additionally, the fast-evolving AI landscape increases execution, technology and competitive risks.
The Zacks Consensus Estimate for DDOG's full-year 2026 earnings is pegged at $2.41 per share and has remained unchanged over the past 30 and 60 days. The estimate reflects expected year-over-year earnings growth of 17.56%.
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Stock Performance: PENG vs. DDOG
While both PENG and DDOG have generated strong year-to-date returns, Penguin has emerged as the clear outperformer, with shares surging 208.9% versus Datadog's 90.3% gain.
The outperformance reflects growing investor optimism surrounding Penguin's AI Factory Platform strategy, expanding AI infrastructure business and strategic ecosystem partnerships with NVIDIA, SK Telecom, SK Hynix and Dell Technologies. As enterprises scale AI workloads, Penguin's integrated platform for AI infrastructure, memory and managed services has positioned the company to benefit from this long-term growth trend.
Stock Performance (YTD)
Image Source: Zacks Investment Research
Valuation: PENG Is Cheaper Than DDOG
Penguin stock looks more attractive than Datadog from a valuation standpoint. Going by the price/sales ratio, PENG’s shares currently trade at 1.45X forward sales, significantly lower than DDOG’s 19.16X. PENG's relatively low valuation multiple suggests meaningful upside potential if the company continues to execute on its AI-driven growth strategy.
PENG vs. DDOG: Forward 12-Month P/S Ratio
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Conclusion
While both companies are benefiting from the AI infrastructure boom, Penguin stands out with faster revenue and earnings growth, stronger estimate revisions, expanding AI infrastructure deployments and a significantly cheaper valuation.
Backed by strategic AI partnerships and growing exposure to production AI inference, PENG seems a better pick for investors than DDOG right now. While Penguin sports a Zacks Rank #1 (Strong Buy) at present, Datadog has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).