diff --git a/dashcaddy-api/scripts/dashcaddy-update.sh b/dashcaddy-api/scripts/dashcaddy-update.sh
index 4413434..e16aaae 100644
--- a/dashcaddy-api/scripts/dashcaddy-update.sh
+++ b/dashcaddy-api/scripts/dashcaddy-update.sh
@@ -115,7 +115,7 @@ main() {
     exit 1
   fi
 
-  # 3. Backup current API files
+  # 3. Backup current API files AND data directory
   local backup_dir="${BACKUPS_DIR}/${from_version}"
   mkdir -p "$backup_dir"
   log "Backing up current API files to ${backup_dir}"
@@ -126,9 +126,14 @@ main() {
   done
   [[ -d "$api_source_dir/routes" ]] && cp -rf "$api_source_dir/routes" "$backup_dir/"
   [[ -d "$api_source_dir/src" ]] && cp -rf "$api_source_dir/src" "$backup_dir/"
-  # VERSION (commit hash) was copied from api_source_dir above; preserve as-is
-  # so a rollback restores the original commit marker. The version *string* is
-  # already encoded in the backup dir name (${from_version}).
+
+  # Backup data directory (services.json, config.json, credentials, TOTP, etc.)
+  # This is the critical gap — without this, user data is lost on every update.
+  if [[ -d "$api_source_dir/data" ]]; then
+    log "Backing up data directory: ${api_source_dir}/data/"
+    rm -rf "$backup_dir/data"
+    cp -rf "$api_source_dir/data" "$backup_dir/data"
+  fi
 
   cleanup_old_backups
 
@@ -212,6 +217,12 @@ main() {
       rm -rf "$api_source_dir/src"
       cp -rf "$backup_dir/src" "$api_source_dir/src"
     fi
+    # Restore data directory (services.json, config.json, credentials, TOTP, etc.)
+    if [[ -d "$backup_dir/data" ]]; then
+      log "Restoring data directory from backup"
+      rm -rf "$api_source_dir/data"
+      cp -rf "$backup_dir/data" "$api_source_dir/data"
+    fi
 
     write_result "false" "$version" "$(( $(date +%s) - start_time ))" "Docker build failed"
     rm -f "${TRIGGER_FILE}.processing"
@@ -237,6 +248,12 @@ main() {
       rm -rf "$api_source_dir/src"
       cp -rf "$backup_dir/src" "$api_source_dir/src"
     fi
+    # Restore data directory
+    if [[ -d "$backup_dir/data" ]]; then
+      log "Restoring data directory from backup"
+      rm -rf "$api_source_dir/data"
+      cp -rf "$backup_dir/data" "$api_source_dir/data"
+    fi
 
     docker compose build --quiet 2>&1 || docker-compose build --quiet 2>&1 || true
     docker compose up -d 2>&1 || docker-compose up -d 2>&1 || true
@@ -267,6 +284,12 @@ main() {
       rm -rf "$api_source_dir/src"
       cp -rf "$backup_dir/src" "$api_source_dir/src"
     fi
+    # Restore data directory
+    if [[ -d "$backup_dir/data" ]]; then
+      log "Restoring data directory from backup"
+      rm -rf "$api_source_dir/data"
+      cp -rf "$backup_dir/data" "$api_source_dir/data"
+    fi
 
     docker compose build --quiet 2>&1 || docker-compose build --quiet 2>&1 || true
     docker compose up -d 2>&1 || docker-compose up -d 2>&1 || true