TLDR
- Piper Sandler named Datadog and Varonis its top infrastructure software stocks for 2026
- Channel checks show modest softening vs late 2025, but analysts say this is normal seasonality
- Datadog has a new product launch and strong AI customer growth, including Anthropic
- Varonis launched its Atlas AI security platform with conservative 2026 revenue guidance
- TD Cowen and Mizuho both maintain Buy ratings on Datadog with price targets of $190 and $145
Piper Sandler analyst Rob Owens published a note to clients on Wednesday pointing to two infrastructure software stocks he believes are best positioned heading into 2026: Datadog and Varonis Systems.
Owens conducted quarterly channel checks across security and infrastructure software. He found a modest softening compared to late 2025, but said this is “relatively par for the course” given typical seasonal patterns.
Year-over-year results were in line with 2025 levels. Owens described this as evidence of a “stable operating environment that is conducive to solid quarters.”
Around 70% of survey respondents said AI projects are affecting spending on non-AI software. Owens said this remains within normal ranges and does not point to a major shift in how companies are prioritizing budgets.
Security software continues to gain wallet share across the sector. Demand remains strongest in the United States, according to the note.
Piper Sandler said it has “the most confidence” in Datadog and Varonis heading into their upcoming earnings reports.
Datadog
For Datadog, Owens cited derisked guidance, favorable competitive positioning, and strong usage trends as key reasons for confidence.
The firm also pointed to the April launch of Datadog Experiments, calling it “an important step” in expanding the company’s product analytics capabilities.
Piper Sandler expects Datadog to beat first-quarter expectations and raise guidance. TD Cowen analyst Andrew Sherman also reiterated a Buy rating on the stock on Tuesday, setting a price target of $190.
Sherman said he expects another quarter of revenue outperformance. He pointed to accelerating core growth, a rising number of AI-native customers including Anthropic, and growing observability budgets as enterprises adopt AI.
Sherman also flagged strong sales headcount expansion as a positive leading indicator for growth into 2026. He slightly trimmed his price target due to sector-wide multiple compression, but kept his Buy rating.
Mizuho Securities separately maintained a Buy rating on Datadog with a price target of $145.
Datadog’s stock is down year-to-date, but Sherman described the current valuation as appealing for a company growing in the mid-20% range at multi-billion-dollar scale.
Varonis Systems
For Varonis, Owens highlighted the launch of its Atlas AI security platform as a key catalyst.
The company has embedded conservative assumptions into its 2026 revenue guidance, which Owens said creates a low-risk setup heading into earnings.
Piper Sandler expects Varonis to beat first-quarter results and raise its full-year guidance.
Varonis shares rose over 4% on Wednesday. Datadog shares were up over 6%.
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