Key Takeaways
- Piper Sandler identified Datadog and Varonis as leading infrastructure software investments heading into 2026
- Recent channel surveys indicate mild weakness 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 cautious 2026 revenue projections
- Multiple analysts including TD Cowen and Mizuho maintain Buy recommendations on Datadog with targets ranging from $145 to $190
In a Wednesday research note to investors, Piper Sandler analyst Rob Owens identified two infrastructure software companies positioned for success in 2026: Datadog and Varonis Systems.
Owens’ latest quarterly channel assessment across security and infrastructure software sectors revealed slight softening versus the final months of 2025, though he characterized this trend as “relatively par for the course” given customary seasonal dynamics.
Comparisons on a year-over-year basis aligned with 2025 performance levels. Owens interpreted these findings as indicators of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of those surveyed reported that AI initiatives are influencing expenditures on traditional software categories. Owens noted this percentage falls within expected parameters and doesn’t signal a fundamental transformation in corporate budget allocation strategies.
Security software solutions continue capturing increased market share throughout the industry. The United States remains the strongest market for demand, the research note indicated.
According to Piper Sandler, the firm holds “the most confidence” in Datadog and Varonis as they approach their forthcoming quarterly earnings announcements.
Datadog
Regarding Datadog, Owens emphasized derisked forward guidance, advantageous competitive dynamics, and robust usage metrics as primary drivers of his optimistic outlook.
The analyst also highlighted the April introduction 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 projections and elevate its guidance. TD Cowen analyst Andrew Sherman similarly reaffirmed a Buy stance on Tuesday, establishing a $190 price objective.
Sherman indicated expectations for another period of revenue outperformance. He referenced accelerating core business expansion, an increasing roster of AI-native clients including Anthropic, and expanding observability spending as organizations implement AI technologies.
Sherman also noted robust sales team growth as a favorable forward-looking indicator for momentum extending into 2026. He modestly reduced his target price reflecting broader sector valuation compression, while maintaining his Buy recommendation.
Mizuho Securities independently sustained a Buy rating on Datadog with a $145 price target.
Despite year-to-date declines in Datadog’s stock price, Sherman characterized the current valuation as attractive for a company delivering mid-20% growth at multi-billion-dollar revenue scale.
Varonis Systems
For Varonis, Owens emphasized the rollout of its Atlas AI security platform as a significant growth driver.
The company has incorporated prudent assumptions into its 2026 revenue outlook, which Owens suggested establishes a favorable risk-reward profile approaching earnings.
Piper Sandler projects Varonis will exceed first-quarter expectations and increase its full-year guidance.
Varonis shares climbed more than 4% on Wednesday. Datadog shares 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
