Datadog upgrade signals further upside as Bernstein lifts target

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Datadog upgrade signals further upside

Highlights

Bernstein upgraded Datadog to outperform from market perform and raised its price target to $350 from $237, implying 42% upside.
Alternative data from Bernstein indicates enterprise token consumption grew at least 50% quarter over quarter among the largest AI labs.
Main downside risk cited is competition from open-source tools or in-house solutions as customers mature, but short-term risk remains low for fast-growing AI labs.

Bernstein backs AI-driven demand outlook

As reported by CNBC, Bernstein upgraded Datadog to outperform from market perform and raised its price target to $350 from $237, implying about 42% upside from Friday's close.

Analyst Peter Weed said in a Monday note that the firm's alternative data signals suggest enterprise token consumption has grown at least 50% quarter over quarter among the largest AI labs, and possibly faster among smaller customers that are "Born in AI." He added that new consumer AI agent launches, including Muse and Dots, suggest Bernstein's longer-term view may still understate the company's opportunity.

Weed said that as consumer AI agents increase engagement, traditional Datadog customers may face higher observability requirements to support that demand. That dynamic, he argued, could extend the company's growth beyond its current base of AI-focused clients.

Wall Street support and competitive risks

LSEG data show the broader analyst community already remains positive on the stock, with 46 of the 49 analysts covering Datadog carrying a buy or strong buy rating. The Bernstein call therefore aligns with an already favorable market view, even after the stock's roughly 82% gain year to date through Friday's close.

Bernstein said the main downside concern remains competition, especially from open-source tools or in-house replacements once customers reach sufficient scale. Weed said he is less concerned about that risk in the near term for fast-growing AI labs, which are unlikely to have the capacity to shift focus, but he warned it could become a longer-term issue as those customers mature.

In our earlier article on KPMG’s CEO survey about AI agents, we noted that many large U.S. companies are already seeing measurable efficiency and growth benefits, even if only a small share of leaders consider the technology transformational so far. The survey also highlighted that executives expect continued investment in AI infrastructure and increased hiring and retraining to support broader AI deployment across workflows.

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