Three Data Infrastructure Stocks Where the Rally Has Further to Run

Snowflake generated $4.68 billion of revenue in fiscal 2026 (ended January), up from $3.63 billion in fiscal 2025, a 29% lift. Free cash flow came in at $1.12 billion, up from $913 million, with a FCF margin approaching 24% on the full year. The company remains unprofitable on a GAAP basis, but the cash generation is now substantial and growing at a faster rate than revenue.

The thesis on Snowflake has always been that the data platform commands pricing power and that the AI workload onboarding would accelerate consumption. That is happening. The Cortex AI product suite, launched through 2024-2025, has been gaining adoption at the enterprise tier, and the revenue per customer has been expanding. The net revenue retention rate, while down from the 158% peak in 2022, has held around 125%, which is still one of the strongest in public software.

The complicating factor is the securities class action noted in the 16 April news flow. This is a civil securities proceeding related to disclosures around a specific historical period and is not directly a thesis changer. The legal exposure is within a range that the balance sheet can absorb, and the claim pool is bounded. More relevant is the operational execution. At $148 today (52-week range $118 to $281), the stock has de-rated meaningfully from the 2024 peak while the fundamentals have continued to compound.

Forward P/E of 80.6x on 2026 earnings looks expensive. The better lens is price-to-FCF: roughly 44x on 2026 FCF, compressing to 35x on 2027 estimates. That is not cheap but is defensible for a business growing FCF at 25-plus percent with expanding margins.

Datadog (DDOG) is the observability platform that has crossed the billion-dollar free cash flow threshold, covered in more detail in our Datadog listicle piece earlier this week. Fiscal 2025 FCF came in at $1.00 billion on $3.43 billion of revenue, a 29% conversion ratio. The growth rate has held above 28% through a period where many software peers have decelerated into the mid-teens.

The differentiator on Datadog is the new-product velocity. Security, Cloud SIEM, LLM Observability, and the recent AI-assist feature suite have each added incremental revenue streams to the core infrastructure monitoring franchise. Net revenue retention has stayed above 115%, which is the operational tell that the platform is not losing share and is expanding within existing accounts.

At $125 per share, DDOG trades at roughly 45x forward price-to-FCF, below the implied multiple for Snowflake despite a similar growth profile and a more mature path to GAAP profitability. The PEG of 0.91 reflects the valuation compression relative to growth. Fair value on our model is $170-185.

The Datadog setup complements Snowflake in a basket because the two platforms address different problems (compute and storage for data workloads at Snowflake; observability across all workloads at Datadog) and have minimal revenue overlap. Owning both is closer to owning two different axes of the data infrastructure spend.

Cloudflare (NET) is the edge infrastructure pure-play that has emerged as the preferred inference compute layer for distributed AI workloads. Fiscal 2025 FCF came in at $324 million on $2.17 billion of revenue, a 15% FCF margin that is still expanding. The company is GAAP unprofitable but generates positive cash flow on a predictable and growing basis.

The catalyst setup on Cloudflare is the most optionality-rich of the three. Workers AI, R2 object storage, and the Zero Trust/SASE platform each represent multi-year product expansion tracks. The company does not break out revenue contribution by product, but the adoption metrics across the enterprise base suggest a blended growth contribution that supports the 28-30% revenue compounding through 2027.

The valuation is the highest of the three. Forward price-to-sales of 32x and forward P/E of 163x look aggressive, and they are. The counter is that the TAM is large enough that the growth runway is structurally longer than the average software platform. Fair value on our model is $220-240. The stock at $203 sits near the upper end of the fair value range but with enough runway that we remain holders rather than sellers.

Across the three names, Cloudflare is the highest-risk, highest-upside expression. Snowflake is the balanced quality compounder. Datadog is the cleanest valuation setup. A balanced basket allocates to all three with Datadog receiving the largest weight on the current multiples.