Key Takeaways
- Investment firm Piper Sandler identified Datadog and Varonis as premier infrastructure software investments for 2026
- Quarterly channel surveys indicate slight softening compared to late 2025, attributed to typical seasonal trends
- Datadog benefits from recent product expansion and accelerating AI-native customer adoption, including Anthropic
- Varonis introduced its Atlas AI security platform while maintaining prudent 2026 revenue projections
- Multiple firms including TD Cowen and Mizuho maintain Buy recommendations on Datadog with targets of $190 and $145 respectively
Investment firm Piper Sandler released research on Wednesday identifying two infrastructure software companies analyst Rob Owens considers optimally positioned entering 2026: Datadog and Varonis Systems.
Owens performed his regular quarterly assessment of the security and infrastructure software landscape through channel surveys. The research revealed moderate weakness versus the end of 2025, though Owens characterized this as “relatively par for the course” considering normal seasonal fluctuations.
Comparisons to the previous year showed results consistent with 2025 performance. Owens interpreted this data as confirmation of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of participants indicated artificial intelligence initiatives are influencing expenditures on traditional software categories. Owens noted this percentage falls within expected parameters and doesn’t signal a fundamental change in corporate budget allocation strategies.
Security software continues expanding its portion of technology spending throughout the industry. The United States maintains the strongest demand levels, the research indicated.
According to Piper Sandler, the firm holds “the most confidence” in Datadog and Varonis as they approach their quarterly earnings announcements.
Datadog
Regarding Datadog, Owens emphasized reduced guidance risk, advantageous market positioning, and robust usage metrics as primary drivers of his optimistic outlook.
The research also highlighted the April introduction of Datadog Experiments, characterizing it as “an important step” in broadening the company’s capabilities in product analytics.
Piper Sandler anticipates Datadog will surpass first-quarter estimates and increase forward guidance. TD Cowen analyst Andrew Sherman similarly reaffirmed a Buy recommendation on Tuesday, establishing a $190 price objective.
Sherman indicated expectations for another quarter of revenue outperformance. He referenced strengthening core business momentum, expanding AI-native customer base including Anthropic, and increasing observability spending as organizations implement artificial intelligence solutions.
Sherman additionally noted robust sales team expansion as a favorable forward-looking indicator for growth trajectory through 2026. He made a minor price target adjustment reflecting industry-wide valuation compression while preserving his Buy stance.
Mizuho Securities independently retained a Buy rating on Datadog with a $145 price objective.
While Datadog’s stock has declined year-to-date, Sherman characterized the present valuation as attractive for an organization delivering mid-20% growth rates at multi-billion-dollar revenue levels.
Varonis Systems
Concerning Varonis, Owens emphasized the introduction of its Atlas AI security platform as a significant growth driver.
The organization has incorporated cautious projections into its 2026 revenue outlook, which Owens suggested establishes a favorable risk-reward profile approaching the earnings release.
Piper Sandler projects Varonis will exceed first-quarter expectations and elevate its annual guidance.
Varonis shares climbed more than 4% on Wednesday. Datadog shares advanced over 6%.
