Key Takeaways
- Piper Sandler identifies Datadog and Varonis as the strongest infrastructure software investments for 2026
- Recent channel surveys indicate slight softness compared to Q4 2025, consistent with typical seasonal trends
- Datadog benefits from new product rollout and expanding AI-focused customer base, including Anthropic partnership
- Varonis debuts Atlas AI security platform while maintaining prudent revenue projections for 2026
- Multiple firms including TD Cowen and Mizuho maintain bullish stances on Datadog with targets ranging from $145 to $190
Investment firm Piper Sandler released research on Wednesday identifying two standout performers in the infrastructure software space that appear well-positioned for the year ahead: Datadog and Varonis Systems.
Analyst Rob Owens shared insights from his firm’s latest quarterly channel surveys covering the security and infrastructure software markets. The data revealed a slight pullback in activity versus the final months of 2025, though Owens characterized this as “relatively par for the course” given standard seasonal fluctuations.
When measured against the same period last year, results aligned closely with 2025 performance levels. Owens interpreted this consistency as validation of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of those surveyed indicated that artificial intelligence initiatives are influencing their non-AI software expenditures. According to Owens, this percentage falls within expected parameters and doesn’t signal any dramatic reallocation of corporate technology budgets.
Security solutions continue capturing an increasing portion of IT spending across the industry. The strongest demand signals persist in the U.S. market, the research indicated.
Piper Sandler expressed having “the most confidence” in both Datadog and Varonis as they prepare to release their quarterly earnings.
Datadog
Regarding Datadog specifically, Owens pointed to reduced guidance risk, advantageous competitive standing, and robust usage metrics as primary drivers of his optimistic outlook.
The research also highlighted the April debut of Datadog Experiments, describing it as “an important step” in broadening the company’s product analytics offerings.
Piper Sandler anticipates Datadog will surpass first-quarter consensus estimates and elevate its forward guidance. TD Cowen’s Andrew Sherman echoed this sentiment on Tuesday, reaffirming his Buy recommendation with a $190 price objective.
Sherman projects another period of revenue performance exceeding Wall Street expectations. He referenced accelerating fundamental growth, an expanding roster of AI-native clients such as Anthropic, and increasing observability spending as companies embrace artificial intelligence initiatives.
Sherman also noted robust expansion in sales team headcount as an encouraging forward-looking growth indicator extending into 2026. While he modestly reduced his target price reflecting broader sector valuation compression, his Buy thesis remains intact.
Mizuho Securities independently affirmed its Buy rating on Datadog shares with a $145 price objective.
Despite year-to-date declines in Datadog’s share price, Sherman views current valuation levels as attractive for a company delivering mid-20% growth rates at multi-billion-dollar revenue scale.
Varonis Systems
For Varonis, Owens emphasized the recent introduction of its Atlas AI security platform as a significant growth driver.
The company has incorporated cautious projections into its 2026 revenue outlook, which Owens believes establishes a low-risk scenario approaching the earnings announcement.
Piper Sandler forecasts Varonis will exceed first-quarter expectations and increase its full-year revenue guidance.
Varonis shares climbed more than 4% during Wednesday’s trading session. Datadog stock advanced over 6%.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
