Truist Securities upgraded Datadog (DDOG) to Buy from Hold on Monday and increased its price target to $300 from $190, citing field research that pointed to durable AI-driven demand and easing concerns about the company’s ties with its largest customers.
Analyst Miller Jump said the rating shift - while aligned with consensus - was grounded in differentiated primary research conducted at Datadog’s DASH user conference and other industry events. That work produced two central takeaways, according to Jump: enterprises are prioritizing AI adoption over near-term cost cutting, and Datadog’s relationships with frontier lab customers appear more stable than market worry implied.
“Despite increased awareness around AI consumption, we believe urgency of AI adoption in the enterprise is significantly outweighing the urgency to optimize AI, and customers remain early in their agentic journeys,” Jump wrote, summarizing how corporate behavior observed at the events favors continued consumption growth.
A major source of uncertainty for Datadog has been OpenAI, which became the company’s largest customer in under two years and has been the subject of speculation that it could migrate workloads to competing observability platforms. At DASH, OpenAI’s Head of Product and Platform told attendees that the company does not trust its internal analytics dashboards and relies on Datadog as its source of truth for live traffic metrics, adding that his team now deploys agents on top of that observability data to replace manual monitoring.
From Jump’s perspective, those disclosures point to a more nuanced outcome than a complete customer churn. Truist expects OpenAI to preserve use cases across both Datadog and Chronosphere rather than fully migrating away from Datadog. In a modeled base case, Truist assumes OpenAI’s Datadog spend declines by half between fiscal year-end 2025 and 2027, and that Anthropic’s ramp will help offset that reduction.
Beyond frontier labs, Jump said Datadog is seeing an acceleration in its non-AI-native customer cohort, driven by vendor consolidation, stronger enterprise sales execution, and coding agents that compress migration timelines. He described that acceleration as the first leg of a broader growth runway.
The analyst anticipates a second, larger leg as enterprises progress from simple call-and-response AI interactions toward fully agentic workflows. Those agentic workflows are expected to generate substantially more telemetry data and, consequently, require denser observability tooling.
“Increased visibility into the stability of relationships with frontier labs mitigates risk around what we see as the most likely near-term risk to the bull thesis,” Jump wrote. “As such, we see opportunity for continued upside momentum in shares.”
On the modeling side, Truist’s fiscal 2027 revenue growth estimate of 25% sits above the FactSet consensus of 20.5%, a difference the firm attributes to a more constructive view on the durability of non-AI-native growth. Datadog’s shares trade at 20 times Truist’s FY26 revenue estimate, which Jump says is a premium to peers but justified by Datadog’s positioning along the AI consumption pathway.
Context for investors
- Upgrade and price-target raise reflect fieldwork findings at DASH and industry events.
- Truist models potential partial decline in OpenAI spend but expects offset from other frontier lab customers like Anthropic.
- Revenue growth assumptions are more aggressive than consensus, driven by expected durability in non-AI-native customer growth and evolving enterprise AI workflows.