Holding stocks of innovative companies can be very lucrative if you keep a long-term perspective. There can be a lot of divergence between a stock and the underlying company's performance in the short term, but over many years, stocks of growing companies can lead you to monster gains.

Here are two competitively positioned companies that could deliver great returns in the years to come.

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1. Datadog

The shift to cloud computing has created a need for tools to secure and identify problem areas across a company's cloud environment. Datadog (DDOG 3.56%) is a leader in cloud observability and security, an opportunity estimated at $72 billion in 2024 and still growing, according to Gartner. This provides significant long-term upside for the business and its shareholders.

The growing adoption of cloud computing and artificial intelligence (AI) is fueling Datadog's momentum in 2025. The company's revenue has consistently grown at high double-digit rates in recent years. Its revenue grew 25% year over year in the first quarter to $762 million.

Despite its strong growth, the company controls a small percentage of its addressable market. This indicates a highly competitive market with many vendors providing similar tools, including major cloud service providers like Microsoft Azure. The tech giants have much greater resources than Datadog to potentially offer better and more comprehensive solutions for their cloud customers, but Datadog is finding ways to stand out from the crowd.

The company is competing with innovation, and it regularly releases new features. It now offers solutions that help companies monitor the performance of their artificial intelligence (AI) workloads, and that's playing a key factor in driving demand. The number of customers using Datadog for AI monitoring doubled last quarter over the prior year's quarter.

There's no better way to win new customers than to show them how they can save money. Datadog recently landed a seven-figure deal with a pet supply company that expects to save $1 million every year with the company's platform.

It is also converting these deals into a healthy profit. Management expects 2025 adjusted earnings to be between $1.67 and $1.71. At the current share price of $112, the stock is trading at a high multiple of those earnings, but its consistent record of growth and opportunities justify a high valuation.

Its relatively small market share indicates enormous growth potential. Investors who start with a small position and gradually buy more shares as the company continues to report strong growth should have a rewarding investment.

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2. Cloudflare

With people connecting to the internet from so many devices these days, businesses need solutions to maintain secure access to their applications and networks. Cloudflare (NET 5.70%) is a leader in the field. It blocks billions of threats for its customers every day, and it has generated incredible returns for investors in recent years with more to come.

Cloudflare's advantage stems from its massive global network in more than 330 cities worldwide. The company continues to invest in expanding its network, which is strengthening its competitive advantage. The business helps secure nearly 20% of all websites, according to W3Techs, which performs web technology surveys.

It invests in network equipment so its customers don't have to. This is why so many businesses stick with the company. Its revenue, which is generated from subscriptions, has more than doubled in three years and grew 27% year over year in the first quarter.

The company continues to expand its capabilities, such as investing in servers optimized for AI to support demand for this cutting-edge technology. Its Workers AI platform lets companies run and deploy AI applications without investing in their own servers. This offering helped Cloudflare secure its largest deal in history, worth $100 million over five years with a leading technology company last year.

Cloudflare is a profitable, high-growth business that should increase in value over the long term. Its adjusted net income came to $58 million in the first quarter on $479 million of revenue. Wall Street analysts expect the company's adjusted earnings to nearly double to $1.44 by 2027.

The stock trades at high multiples to its annual revenue and earnings, but its valuation has always looked expensive. Starting with a small position and adding more shares over time, especially on dips, is a good strategy to benefit from Cloudflare's long-term growth.