Shares of Datadog (DDOG -0.74%) have risen about 7.2% as of 2:30 p.m. ET on Wednesday. The move follows a fresh analyst initiation from Wells Fargo analysts, who assigned an overweight rating and a $190 price target to the software company, framing Datadog as a key beneficiary as artificial intelligence (AI)-native start-ups and traditional enterprises ramp up their cloud workloads.
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A new bullish call and why it matters
Wells Fargo analysts Ryan MacWilliams and Chris Brazeau initiated coverage of Datadog with a $190 12-month price target, representing about 25% upside from where the stock is trading at the time of this writing. The analysts highlighted accelerating adoption of AI tools across software stacks -- a backdrop that tends to increase the value of unified monitoring, logging, and security. That positioning aligns with Datadog's strength in offering a unified platform that monitors applications, infrastructure, logs, and security all in one place -- giving developers and information technology workers a single view of performance across massive cloud environments.
The enthusiasm also builds on a string of solid updates from Datadog. In the second quarter of 2025, revenue rose 28% year over year to $827 million and management raised full-year guidance. Additionally, large-customer metrics continued to expand, with about 3,850 customers at $100,000 or more in annual recurring revenue. This foundation of robust fundamentals helps explain why a bullish initiation can move the stock.
Investors should be cautious
But there's good reason to view the analyst's optimism with a skeptical eye. The stock currently has a price-to-sales multiple of about 17 -- a premium that assumes continued mid-20s top-line growth and ongoing product expansion for the foreseeable future. That said, if Datadog sustains top-line growth rates similar to those it has been achieving recently while expanding its profit margins, it may live up to the stock's valuation.
