Datadog Offered $4 Billion to Buy Cloud Security Startup ‘Upwind’

Enterprise software firm Datadog recently offered to buy Israeli cloud cybersecurity startup Upwind Security for nearly $4 billion, according to someone with direct knowledge of the talks, the latest sign of white-hot interest in such firms.

Upwind has fielded other takeover attempts from multiple bidders in recent months but hasn’t accepted any offers. It is finalizing a $300 million funding round at a roughly $3.8 billion valuation, meaning the Datadog offer doesn’t carry much of a premium over the private valuation, said two people with knowledge of the situation. The startup sells software to keep tabs on applications, including so-called AI agents, that run in the cloud and to detect and automatically respond to potential evidence of hacks or breaches.

Datadog, which has a $90 billion market capitalization, sells so-called data observability software that helps companies collect and observe data from a wide range of software applications. It also sells security software, meaning adding real-time security capabilities from a product like Upwind’s could be a fit.

The deal discussions come as the cybersecurity sector has been rocked by AI-related threats, as new AI models have shown they can find serious flaws in widely used software, such as the code underlying the PHP programming language, that attackers could exploit. Companies are planning to spend a lot more on cybersecurity software in the wake of such threats.

More businesses are using AI agents that connect to other cloud-hosted applications within their systems for tasks like generating and running applications or automating workplace tasks. That has sparked demand for software to track the agents, such as Upwind’s, according to executives who buy security software.

Companies such as Roku and Brazilian neobank Nubank use Upwind’s software to monitor and protect their cloud-hosted applications, according to Upwind’s website.

Datadog tried to buy Upwind last year for around $1 billion, one of the people said, but the talks petered out at the time.

Upwind has since grown quickly: its annual recurring revenue has exceeded $50 million, implying about $4 million in revenue per month, up from roughly $20 million in ARR at the end of 2025, according to someone with knowledge of the figures. A deal at close to $4 billion would be around 80 times the startup’s ARR, which is higher than the revenue multiple of Google’s takeover of cloud security firm Wiz earlier this year.

A representative of Upwind did not have a comment, and Datadog did not immediately respond to requests for comment.

Large security software providers Palo Alto Networks, Google, and Crowdstrike have each acquired cloud security startups that compete in some areas with Upwind in recent years, including Google’s $32 billion acquisition of Wiz.

Upwind, founded in 2022 by CEO Amiram Shachar, has already raised over $400 million in total, including a $250 million round in January that valued it at $1.5 billion. Its biggest backers include Bessemer Venture Partners, Craft Ventures, and Cyberstarts; other investors include Salesforce Ventures and Greylock. Globes and Bloomberg earlier reported on the startup’s ongoing funding round.