Datadog (NASDAQ:DDOG) shares gained 3.6% in premarket trading on Monday after Bernstein SocGen Group upgraded the cloud monitoring software provider from Market Perform to Outperform and increased its price target to $350 from $237.
The revised target represents an increase of approximately 48% and reflects a change in Bernstein’s assessment of Datadog’s growth prospects, particularly in relation to demand from artificial intelligence companies.
The upgrade follows a period of selling pressure for the stock, which declined approximately 14% during the previous week amid broader weakness in technology shares.
Bernstein Revises Outlook Following Previous Downgrade
Bernstein had downgraded Datadog during the previous quarter after identifying potential risks to the company’s revenue growth.
One factor was an approximately $100 million reduction in annual recurring revenue (ARR) associated with Datadog’s largest customer in the category it describes as “Born in AI”.
The customer was believed to be OpenAI, although its identity was not confirmed in the information provided.
Bernstein had also identified signs of slower demand among Datadog’s more established customers, which account for approximately 85% of the company’s revenue.
At the time, the brokerage expected revenue growth from AI-native customers to moderate to between 50% and 60% in 2027, compared with an estimated 80% to 90% in 2026.
The analysts have now revised their assessment, stating that their previous expectations were too conservative.
The change reflects updated information about AI-related computing activity and its potential implications for demand for Datadog’s monitoring and observability services.
AI Token Consumption Data Supports Revised Assessment
Bernstein said its alternative data indicate that enterprise AI token consumption among major artificial intelligence laboratories is increasing by at least 50% quarter on quarter.
Token consumption is a measure of activity involving AI models and can provide an indication of the scale at which businesses and consumers are using these systems.
Higher AI usage may increase demand for cloud infrastructure monitoring, application performance management and observability services.
Datadog provides software that allows organisations to monitor the performance, availability and operation of applications and computing infrastructure.
The brokerage also cited the introduction of consumer-facing AI agents, including Muse and Dots, as a factor contributing to increased AI activity.
According to Bernstein, these developments suggest that the expansion of AI-related workloads could exceed its earlier forecasts.
However, growth in token consumption does not necessarily translate directly into equivalent revenue growth for Datadog, and the company’s financial performance will depend on customer spending and demand for its services.
Datadog Shares Recover Following Weekly Decline
The Bernstein upgrade followed a decline of approximately 14% in Datadog shares during the previous week.
The stock had retreated from its reported 52-week high of $300.68 as technology companies experienced broader selling pressure.
The decline occurred during a period of increased investor attention to AI infrastructure expenditure, borrowing costs and valuations across the technology sector.
Monday’s premarket increase represented a partial recovery from the previous week’s losses.
Bernstein’s revised recommendation and price target provided investors with an updated assessment of the company’s potential growth, although the target remains an analyst projection rather than an indication of future share price performance.
Mizuho Also Raises Datadog Price Target
Bernstein’s upgrade followed a separate revision from Mizuho earlier in the week.
Mizuho increased its price target for Datadog to $330 from $300.
The two brokerage updates indicate that both firms have revised their valuation expectations for the company, although their individual forecasts and assumptions may differ.
The changes come ahead of Datadog’s scheduled third-quarter fiscal 2026 earnings announcement on 4 November 2026.
The results will provide further information about revenue growth, customer demand and the contribution of AI-related workloads to the company’s business.
Investors will also be assessing whether spending patterns among traditional enterprise customers have changed since the concerns identified by Bernstein in the previous quarter.
Technology Shares Advance Alongside Broader Market Recovery
Datadog’s premarket gains coincided with an increase in US equity index futures following the previous week’s decline in technology stocks.
The Nasdaq Composite was indicated 1.19% higher, while the S&P 500 was gaining 0.55%.
The Nasdaq had recorded its largest weekly decline since the spring, reflecting selling pressure across technology-related companies.
The subsequent recovery occurred ahead of a series of quarterly earnings announcements from major US technology businesses.
These results are expected to provide additional information about corporate investment in artificial intelligence, cloud computing demand and the financial performance of companies exposed to AI development.
The broader market movement may also have contributed to Datadog’s premarket share price increase alongside the brokerage recommendations.
Investors Await November Earnings Report
Datadog’s next financial results, scheduled for 4 November, will provide an opportunity to assess the assumptions underlying Bernstein’s revised outlook.
The brokerage’s decision to upgrade the stock is based partly on indications of higher AI-related computing activity and expectations that demand for observability services could benefit.
At the same time, the company’s traditional enterprise customer base remains an important component of revenue, accounting for approximately 85% of the total according to the figures cited in the report.
Investors will therefore be monitoring both AI-related customer demand and spending trends across Datadog’s established business.
The company’s forthcoming earnings announcement will offer further evidence of whether its operating performance is consistent with the growth expectations reflected in the latest analyst price targets.