Buy Rating on Datadog: Solid Near-Term Beat Potential, Strengthening AI-Driven Growth, and Attractive Valuation Entry Point

Analyst Andrew Sherman from TD Cowen maintained a Buy rating on Datadog and decreased the price target to $200.00 from $235.00.

Andrew Sherman has given his Buy rating due to a combination of factors that point to both near-term upside and attractive longer-term positioning. He expects Datadog to deliver results above its already solid fourth-quarter guidance, supported by a recent trend of consistent outperformance versus management’s targets and a notable reacceleration in core usage growth. Sherman also views the company’s upcoming fiscal 2026 revenue outlook as likely to be set at a level that balances management’s conservative history with still-healthy demand, particularly as its AI-native customer cohort is expanding rapidly and becoming a more meaningful revenue contributor. In his view, concerns about competitive pressures are overstated, especially given positive signals from customer behavior and recent contract renewals.

In addition, Sherman highlights Datadog’s expanding sales force and strong sales rep retention as key drivers that should sustain robust growth into 2026, even as the company moves past an historically slower seasonal quarter. His proprietary sales headcount tracking shows continued investment in go-to-market capacity, which he believes will translate into higher productivity and revenue over the next several years. Survey work on IT budgets further supports this outlook, as a large majority of respondents plan to increase spending with Datadog over the next twelve months. With the stock trading roughly 40% below its prior highs and at about 27x EV/FCF, Sherman sees the current valuation as an appealing entry point relative to the company’s growth prospects, reinforcing his Buy recommendation.

In another report released yesterday, Bernstein also maintained a Buy rating on the stock with a $180.00 price target.