Why Datadog Is the AI Infrastructure Firm to Watch Out For

Core Viewpoint - Datadog's stock has experienced significant volatility in 2023, with a year-to-date performance of -11.4%, despite strong earnings and growth potential in the cloud and AI sectors [1][2][4]. Financial Performance - Datadog's Q2 2025 earnings report showed revenue growth of 28% year-over-year (YOY) to nearly $827 million, exceeding forecasts by $35 million, while earnings per share (EPS) was $0.46, five cents above estimates [4][7]. - The company raised its full-year 2025 revenue guidance to a range of $3.312 billion to $3.322 billion, indicating confidence in continued growth driven by AI tools [11]. Customer Base and Growth Drivers - The AI-native customer segment now accounts for approximately 11% of total revenue and contributes about 10% to YOY growth, a significant increase from 4% a year ago [5][8]. - Datadog has seen a 14% YOY increase in large customers with annual recurring revenue (ARR) of at least $100,000, totaling around 3,850 customers [9]. Product Development and Market Position - Datadog announced a range of new AI-centered products at its annual DASH conference, including autonomous AI agents and enhanced data observability tools, aimed at meeting increasing demand for cloud and security solutions [12][13]. - Security-related ARR surpassed $100 million in Q2, reflecting mid-40% YOY growth, positioning Datadog as a key player in AI security solutions [14]. Analyst Ratings and Stock Forecast - Despite recent stock declines, 24 out of 30 analysts rate Datadog as a Buy, with a consensus price target of $152.93, approximately 20% above current levels [2][3]. - The stock has a high forecast of $200.00 and a low forecast of $105.00, indicating a potential upside of 18.62% based on the average forecast of $153.10 [6][7].