Datadog upgraded at Keybanc after two key concerns materialized positively

Investing.com -- KeyBanc Capital Markets upgraded Datadog to Overweight from Sector Weight, saying the two concerns that had previously limited its stance have now turned positive.

These include accelerating revenue growth excluding OpenAI and renewed visibility into sustained OpenAI spending following an expanded commitment in the third quarter.

“We believe the positive growth inflection will continue given Datadog’s innovation leadership, platform breadth, relevance with AI-natives, increasing success with security, accelerating public cloud trends, and monitoring of AI workloads as they move to inference,” analyst Eric Heath wrote.

KeyBanc set a $230 price target, implying nearly 21% upside from the latest close.

Datadog reported third-quarter revenue of $886 million, up 28% year-on-year and ahead of consensus by 4%. Growth among both AI-native and non-AI customers accelerated, with sequential usage growth among non-AI clients hitting a 12-quarter high.

Earnings per share of $0.55 beat estimates by $0.09, while free cash flow of $214 million topped forecasts.

Management also highlighted that security revenue grew in the “mid-50s” percent range, up from the mid-40s in the previous quarter.

The company raised its 2025 guidance across the board. Revenue is now seen at about $3.39 billion, up from $3.32 billion, while EBIT margin expectations rose to roughly 22.3%. Full-year EPS was lifted to $2.00–$2.02 from prior guidance around $1.82.

In turn, KeyBanc raised its 2026 and 2027 revenue forecasts by 4% and 6%, respectively, and expects Datadog’s growth to remain supported by expanding adoption among AI-native firms and momentum in its security business.

The analysts noted that risks include potential consumption reductions from OpenAI in 2026 or renewed optimization among AI-native customers similar to post-COVID cycles.

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