BMO Capital has reduced its price objective on Datadog (NASDAQ:DDOG) to $165.00 from $170.00 but left its Outperform rating intact, the firm said on Tuesday. Datadog shares are trading at $129.57, and analyst targets across the market span from $113 to $260, according to InvestingPro data.
The modest downward adjustment follows the cloud monitoring provider's fiscal year 2026 revenue guidance, which BMO noted landed below consensus estimates but nonetheless exceeded what the firm believes buy-side participants were expecting. Datadog has sustained robust top-line momentum, reporting 26.63% revenue growth over the past twelve months.
BMO described the guidance as "reasonable," highlighting the company's progress in diversifying away from OpenAI-driven concentration. The research team pointed to improving core growth and healthy expansion in the AI cohort when OpenAI-related business is excluded. The firm also flagged Datadog's near-80% gross profit margins as a notable strength.
In BMO's view, the results and guidance acted as a clearing event that increased its confidence in Datadog's growth durability despite the possibility of some OpenAI customer attrition. The analyst group attributed the slight cut to the price target to a broader compression in software valuations rather than to deteriorating fundamentals at Datadog.
Datadog's recent fourth-quarter 2025 results provided additional context for the ratings activity. The company posted earnings per share of $0.59, beating the analyst consensus of $0.55. Revenue for the quarter reached $953 million, topping forecasts of $917.01 million, driven by customer additions and ongoing product innovation.
Following those results, several brokerages adjusted their outlooks. TD Cowen lifted its price target to $215 from $200 and reiterated a Buy rating, citing 29% revenue growth that outpaced expectations by 4%. Rosenblatt kept its Buy rating and set a $185 price target, noting the same 29% revenue increase that exceeded its forecast of 24.5% and consensus estimates by 3.7%. Raymond James trimmed its target to $170 from $205 but continued to carry an Outperform rating, observing that Datadog's initial 2026 guidance slightly surpassed its own projections.
During the quarter, operating margins reached 24.1%, and the company said revenue gains were largely driven by demand tied to cloud migration and digital transformation projects. Collectively, these analyst reactions and the company's reported metrics reflect a generally positive reception among sell-side firms, even as valuations in the software sector face downward pressure.
Key takeaways:
- BMO lowered its Datadog price target to $165 from $170 but retained an Outperform rating.
- Datadog reported Q4 2025 EPS of $0.59 and revenue of $953 million, both above expectations.
- Analysts remain largely constructive, with targets ranging widely from $113 to $260.
Context on market reaction:
The analyst moves underline a tension between durable company-level performance and sector-wide valuation dynamics. While Datadog's growth, margins, and product traction drew praise, the modest price-target cut from BMO was presented as a reflection of broader compression in software multiples rather than a change in the firm’s assessment of Datadog's fundamentals.