Scotiabank on Wednesday trimmed its price objective for Datadog (NASDAQ:DDOG) to $160.00 from $180.00 but left its Sector Outperform rating unchanged.
The firm said the cut in target reflects valuation considerations even as it retained a positive stance on Datadog’s medium-term revenue trajectory. Scotiabank noted that the company’s 2026 revenue guidance came in ahead of buy-side expectations and cited an "8-figure deal" that the bank believes involves AI firm Anthropic as evidence of Datadog’s position as "the gold standard for cloud native observability."
Scotiabank highlighted what it described as a fourth-quarter reacceleration among Datadog’s core customer cohort, calling the result a "strong rebuttal to the bear narrative" that the company’s momentum is concentrated in a limited group of customers. The firm also estimated that spending from OpenAI likely declined on a quarter-over-quarter basis.
The analyst note expressed confidence that Datadog should remain relatively insulated from competitive pressures. Scotiabank pointed to the "critical nature of observability" within cloud infrastructure and said it sees "no evidence that the LLMs themselves can provide similar functionality."
Addressing recent share-price action, Scotiabank labeled the roughly 32% drop in Datadog stock over the prior three months as "unwarranted." The bank pointed to factors supporting adoption and growth, including accelerating demand tied to AI, ongoing cloud modernizations, share gains and expansion of the company’s platform.
Datadog’s fourth-quarter results have prompted varied responses across the analyst community. The company reported 29% revenue growth in the quarter, a pace Scotiabank and others noted as beating some expectations and contributing to operating margins of 24.1%. Scotiabank and other analysts attributed the revenue strength to continued customer demand for cloud migration and digital transformation.
Following the quarter, several firms adjusted their price targets on Datadog. Canaccord Genuity lowered its target to $185 while maintaining a Buy rating, pointing to accelerated revenue growth across important segments. BMO Capital reduced its target to $165, citing Datadog’s fiscal 2026 revenue guidance as below consensus. Raymond James trimmed its target to $170 despite acknowledging upside in several fourth-quarter metrics. By contrast, TD Cowen raised its price target to $215, underlining the 29% revenue increase that exceeded expectations by 4%.
Market participants will be watching whether Datadog’s guidance and the incremental customer wins cited by Scotiabank translate into sustained momentum and valuation improvement. For now, analysts remain split on appropriate targets even as several highlight the company’s leadership position in observability and AI-related adoption as key supports for future growth.
Key points
- Scotiabank cut its Datadog price target to $160 from $180 but kept a Sector Outperform rating.
- The bank cited 2026 revenue guidance that exceeded buy-side expectations and an "8-figure deal" involving Anthropic as validation of Datadog’s observability leadership.
- Datadog reported 29% revenue growth in the fourth quarter with operating margins of 24.1%, prompting mixed target adjustments from other analysts.
Risks and uncertainties
- Valuation pressure - Scotiabank lowered its target for valuation reasons, reflecting risk that market multiples may remain constrained for the stock. This affects equity investors in the technology sector.
- Revenue guidance vs. consensus - Some firms cited Datadog’s fiscal 2026 revenue guidance as below consensus, which introduces uncertainty for revenue-driven valuations in cloud and observability markets.
- Concentration and customer mix - Although Scotiabank argued the fourth-quarter reacceleration rebuts the concentration concern, the firm’s own calculation that OpenAI spending likely decreased quarter-over-quarter highlights variability in customer spending patterns that could impact cloud services demand.