Snowflake, Datadog and Zscaler are all potential multibaggers for patient investors.
Many investors dream of generating millionaire earnings from their high-growth technology stocks. But assuming a stock’s price-to-sales ratio is steady, a company would need to grow its top line at a compound annual growth rate (CAGR) of 16% over the next 20 years to turn a $50,000 investment into $1 million.
It might be hard to maintain that momentum, but three tech companies — Snowflake (SNOW 0.43%), Datadog (DDOG 1.50%)and Zscaler (ZS 0.66%) – could generate those multibagger earnings if they play their cards right.
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1. Snowflake
Many large companies store their data across a wide range of IT platforms, but those fragmented silos can make it difficult to make quick data-driven decisions. Snowflake addresses these challenges with its cloud-based data stores—which aggregate that information, clean it all, and organize it so it can be easily read by other applications.
Snowflake stores run on popular cloud infrastructure platforms such as Amazon Web Services (AWS) and Microsoft Azure, and they only charge customers fees for the storage they use instead of locking them into recurring subscriptions. This flexibility makes Snowflake a popular option for companies that use multiple cloud platform services.
Snowflake’s revenue grew at a CAGR of 96% from fiscal 2019 to fiscal 2024 (which ended this January). Its growth is slowing as its business matures, but analysts still expect its revenue to increase at a CAGR of 24% from fiscal 2024 to fiscal 2027. The company is still not profitable and its stock it’s not a deal at 9 times later. sales of the year, but it could still have a lot of room to grow as the explosive growth of the artificial intelligence (AI) market pushes more companies to crunch more data.
2. Datadog
The fragmentation of a company’s software infrastructure can also make it challenging for IT professionals to spot and fix potential problems. To simplify this process, Datadog’s platform pulls all diagnostic data from a company’s infrastructure, applications and logs into unified real-time dashboards. It also implemented new generative AI tools to make it even easier to track and diagnose those issues.
Market demand for Datadog’s services is growing. From 2018 to 2023, its revenue increased at a CAGR of 66%. It also became profitable for the first time in 2023, as it cools its spending. From 2023 to 2026, analysts expect its revenue to grow at a CAGR of 24% as its earnings per share (EPS) grow at a CAGR of 77%.
Datadog isn’t a bargain at 13 times next year’s sales, but it could generate more multibagger earnings over the next decade as more companies aggressively expand their IT infrastructure to support the century-long growth of the cloud and AI markets .
3. Zscaler
Zscaler is a cybersecurity company that primarily develops “zero trust” services, which treat everyone as a potential threat. But unlike many of its industry peers, who deploy their services through on-site appliances, Zscaler only provides its services as cloud-native services, which are easier to scale with ‘and an organization expands.
From fiscal 2015 to fiscal 2024 (which ended this July), Zscaler’s revenue grew at a CAGR of 51%. Its business is still maturing in a tougher market, but analysts still expect its revenues to grow at a CAGR of 21% from fiscal 2024 to fiscal 2027. They also expect it to gradually narrow its net losses and they became profitable from the last year.
Zscaler’s stock is not priced at 9 times next year’s sales, but it is a balanced way to benefit from the expansion of the cloud and cybersecurity markets. It also capitalized on the advantage of its first move into the cloud-native zero-trust market to launch additional cybersecurity services to increase its average revenue per customer. So, in the long run, I believe this high-growth cybersecurity stock could still generate millionaire earnings for patient investors.
John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions and recommends Amazon, Datadog, Microsoft, Snowflake and Zscaler. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.