Bernstein Downgrades Datadog, Warns Q4 Growth May Slow to 29%
Miles Bennett
Bernstein downgraded Datadog from Outperform to Market Perform while raising its price target to $226 — the contradiction flags analyst concern that Q4 growth could drop to roughly 29%, well below the Street's 30%+ expectations.
Downgrade but a higher price target — what's the contradiction?
Analyst Peter Weed cut Datadog's rating to Market Perform but raised the target from $180 to $226.
This means → he is not bearish on the company itself; he thinks the stock already prices in the good news and near-term upside is limited.
In plain terms = the business is solid, but the ticket is already full-price — not worth chasing here.
What underpins the long-term bull case?
Weed still calls Datadog an "AI winner": its observability platform — tools that monitor how software systems run — is well-positioned, and cybersecurity could become a new revenue pillar.
The recent DASH conference reinforced its AI narrative; Weed sees the risk of disruption declining.
This reflects a key distinction: the long-term thesis is intact — what has changed is the short-term rhythm.
Why does the non-AI business make him nervous?
Non-AI revenue accounts for roughly 85% of Datadog's total. Weed nudged his growth estimate up a few points, but flagged that demand signals have plateaued.
He expects non-AI growth to peak in Q3, then slip 100 to 200 basis points sequentially in Q4.
This means → Datadog's bread-and-butter revenue is decelerating, and AI is not yet strong enough to carry growth alone.
Has growth from AI-lab customers peaked?
Weed sees plateau signs among AI-lab clients — Q3 sequential growth for "AI-native" customers already trails the recent trend.
Combining non-AI deceleration with AI-client plateauing, he projects Q4 overall growth will fall roughly 500 basis points from the prior pace to about 29% year-over-year.
In plain terms = the AI story is compelling, but the growth engine is not yet powerful enough to offset the older business slowing down.
What does 29% growth mean — and why might the market balk?
Weed notes that some investors expect Datadog's growth to peak in the high-30% to 40%+ range and stay above 30% into next year.
If Q4 actual growth lands near 29%, it would represent a material reset of the prevailing consensus.
This means → the issue is not whether 29% is fast enough in absolute terms; it is that 29% falls below what the stock has already priced in — and the expectation gap is where the share-price risk lives.
Content is for reference only, not financial advice.