Datadog stock (DDOG) stumbled Tuesday after Guggenheim Securities slapped it with a rare Sell rating, warning that OpenAI, reportedly its largest customer, may be walking away from key services. The firm sees this not as a one-time setback, but a signal that AI-native customers are starting to in-house their own observability stacks, putting real revenue at risk.
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DDOG shares fell 4.3% to $145.86, cutting into last week’s S&P 500 inclusion rally and raising new questions about how deep Datadog’s customer dependency runs.
OpenAI May Be Unplugging From Datadog, and the Clock Is Ticking
Guggenheim analyst Howard Ma downgraded the stock from Neutral to Sell and dropped a $105 price target, citing internal checks that suggest OpenAI has begun migrating off Datadog for log management, with more functions soon to follow.
The firm believes the transition is already underway and that it could blow a $150 million hole in 2026 revenue. That would significantly drag on Datadog’s projected 15% growth, even assuming other enterprise clients ramp up their spending.
In other words, this isn’t just about OpenAI, it’s about what happens when your biggest, most innovative customer stops needing you.
S&P 500 Bounce Meets Reality Check
Last week, Datadog shares surged after the company was tapped to join the S&P 500, replacing Juniper Networks. That index lift added credibility and visibility, but it didn’t address structural exposure.
The downgrade serves as a reminder that even cloud-first, AI-adjacent firms are not immune to customer churn. And when the departing customer is OpenAI, the optics matter just as much as the impact.
Analysts Say OpenAI Already Built the Replacement
Guggenheim said investors holding out hope for a partial renewal or discounted extension may be “wishful thinking.” According to their research, OpenAI has already built and tested its internal replacement system and begun deprecating Datadog dependencies.
The largest revenue hit is expected in Q4 2025, but the real pain may be felt in 2026, when the full effects of the offboarding settle in. And while Datadog could post a solid Q2 with 25% year-over-year growth, as Guggenheim concedes, the problem lies beyond the short-term beat.
Offsetting the Gap Won’t Be Easy
Analysts aren’t confident that smaller customers can plug the OpenAI gap quickly enough. Even with Datadog’s broader enterprise reach, a $150 million revenue vacuum is hard to fill if IT budgets remain tight and cloud optimization continues.
Guggenheim isn’t alone. Back in January, Stifel downgraded Datadog to Hold, citing OpenAI’s usage optimizations and signs of spend compression. At the time, they noted that while the contract had been renewed for a year, usage was being “meaningfully optimized.”
This week’s Sell call is more direct and more urgent.
Even AI Infrastructure Has Churn Risk
Datadog is widely seen as one of the key infrastructure providers for AI-first companies. But as platforms like OpenAI scale and mature, they’re proving they don’t want to stay renters forever. They’re becoming landlords of their own data visibility.
Is Datadog a Good Stock to Buy?
Despite fresh analyst concern over OpenAI’s potential exit, Wall Street is still leaning bullish on Datadog. According to TipRanks, the stock holds a “Strong Buy” rating based on 37 analysts, with 31 Buys and six Holds the past three months.
The average 12-month DDOG price target is $141.20, slightly below the current price of $145.80, implying a modest 3.2% downside.
