Executive Summary
- Piper Sandler identified Datadog and Varonis as leading infrastructure software investments for 2026
- Recent channel checks indicate minor weakness compared to late 2025, attributed to standard seasonal trends
- Datadog benefits from fresh product releases and expanding AI-focused customer base, including Anthropic partnership
- Varonis introduced Atlas AI security platform while maintaining cautious 2026 revenue projections
- Multiple firms including TD Cowen and Mizuho sustain Buy recommendations on Datadog with targets at $190 and $145 respectively
On Wednesday, Piper Sandler’s analyst Rob Owens released research highlighting two infrastructure software companies he considers optimally positioned entering 2026: Datadog and Varonis Systems.
Datadog, Inc., DDOG
Owens performed his quarterly assessment of market conditions across the security and infrastructure software landscape. His findings revealed slight weakness versus the final months of 2025, though he characterized this pattern as “relatively par for the course” considering traditional seasonal dynamics.
When examined on a year-over-year basis, the results aligned with 2025 performance levels. Owens interpreted these findings as confirmation of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of participants in the survey indicated that artificial intelligence initiatives are influencing expenditures on conventional software solutions. However, Owens noted this figure falls within expected parameters and doesn’t signal a fundamental transformation in corporate budget allocation strategies.
Security software continues expanding its share of enterprise IT budgets throughout the sector. The United States maintains the strongest demand levels, the research noted.
According to Piper Sandler, the firm holds “the most confidence” in Datadog and Varonis as both companies approach their quarterly earnings announcements.
Datadog
Regarding Datadog, Owens emphasized derisked financial guidance, advantageous competitive standing, and robust usage metrics as primary factors supporting his optimistic outlook.
The analyst also drew attention to the April debut of Datadog Experiments, describing this release as “an important step” in broadening the company’s product analytics offerings.
Piper Sandler anticipates Datadog will surpass first-quarter projections and elevate its forward guidance. TD Cowen’s analyst Andrew Sherman similarly reaffirmed a Buy position on Tuesday, establishing a $190 price objective.
Sherman projected another period of revenue outperformance. He referenced accelerating core business expansion, an increasing roster of AI-native clients such as Anthropic, and expanding observability budgets as enterprises implement artificial intelligence solutions.
Sherman additionally noted robust sales team expansion as a favorable forward-looking indicator for growth trajectory into 2026. While he modestly reduced his price target reflecting broader sector valuation compression, he preserved his Buy recommendation.
Mizuho Securities independently maintained its Buy stance on Datadog, setting a $145 price target.
Despite Datadog’s year-to-date stock decline, Sherman characterized current valuations as attractive for an organization delivering mid-20% growth rates at multi-billion-dollar revenue scale.
Varonis Systems
For Varonis, Owens spotlighted the rollout of its Atlas AI security platform as a significant growth driver.
The organization has incorporated prudent assumptions into its 2026 revenue outlook, which Owens suggested establishes a low-risk scenario approaching earnings disclosure.
Piper Sandler projects Varonis will exceed first-quarter expectations and upgrade its annual guidance.
Varonis shares climbed more than 4% during Wednesday trading. Datadog shares advanced over 6%.
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