Datadog's (DDOG) AI Growth Accelerates, Driven by OpenAI-But for How Long?

Datadog, Inc. (NASDAQ:DDOG) is one of the AI Stocks in the Spotlight Today. On July 28, Stifel analyst Brad Reback reiterated a “Hold” rating on the stock with a $135.00 price target.

The firm expects Datadog to deliver a stronger-than-expected quarter due to accelerating usage by OpenAI. According to the firm, OpenAI’s usage has the potential to drive 9-10% of revenue. In the previous quarter, this growth was at 6%.

In turn, this usage will push Datadog’s overall growth into the high-20% range. While the firm is hopeful that OpenAI will renew its contract in the second half of the year, it also anticipates that the deal will likely come with additional price discounting and workload churn.

Moreover, a lot of work from OpenAI is currently being outsourced to Datadog. Stifel believes that this setup may change soon and that OpenAI will eventually bring most of the work in-house. Keeping this in mind, Stifel believes that an earlier transition away from OpenAI would help investors focus on Datadog’s main business.

Based on current valuations, Stifel is cautious on the stock and noted that a more aggressive approach could be adopted in the case that there is potential acceleration in core growth in Q4 2025 or the first half of 2026, in turn followed by improving margins.

Datadog, Inc. (NASDAQ:DDOG) offers a cloud-based SaaS platform for monitoring and analytics, specializing in cloud computing and AI-powered cybersecurity products.

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Disclosure: None.