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Datadog Growth Outlook Improves as AI Demand Builds, Morgan Stanley Says

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-- Datadog (DDOG) could see more growth from AI-driven usage, stronger core demand, and large AI customer deals, Morgan Stanley said in a note Friday.

The firm said Datadog's revenue growth accelerated to 32%, helped by the strongest usage growth since Q1 2022 and a record quarter for new annual recurring revenue, and the core business, excluding AI native customers, grew in the mid-20% range for the third straight quarter as AI projects supported cloud migration and digital work.

Two large deals with AI research labs should help revenue growth later in 2026 because they did not add much to Q1 results, according to the note.

Datadog's Q2 revenue outlook was well above market expectations, while the higher full-year 2026 forecast still looks conservative given recent momentum, Morgan Stanley said.

Morgan Stanley kept its overweight rating and raised its price target for Datadog to $225 from $180.

Price: $190.26, Change: $+1.53, Percent Change: +0.81%

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