Key Highlights
- Piper Sandler identified Datadog and Varonis as premier infrastructure software investments for 2026
- Quarterly channel surveys reveal moderate deceleration compared to Q4 2025, consistent with typical seasonal trends
- Datadog benefits from fresh product introduction and expanding AI-focused client base, featuring Anthropic partnership
- Varonis introduced Atlas AI security platform alongside measured 2026 revenue projections
- TD Cowen and Mizuho sustain Buy recommendations on Datadog with targets of $190 and $145 respectively
On Wednesday, Piper Sandler analyst Rob Owens released research identifying two infrastructure software companies as the strongest opportunities for 2026: Datadog and Varonis Systems.
Owens completed his regular quarterly assessment across the security and infrastructure software landscape. The research revealed moderate deceleration versus the final quarter of 2025, though Owens characterized this trend as “relatively par for the course” when accounting for standard seasonal dynamics.
Comparisons to the prior year showed results aligned with 2025 performance levels. Owens interpreted these findings as confirmation of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of participants in the survey indicated that AI initiatives are influencing expenditures on traditional software categories. Owens noted this percentage falls within historical norms and does not signal a fundamental transformation in corporate budget allocation strategies.
Security software continues expanding its share of technology budgets throughout the sector. The strongest demand patterns persist in United States markets, the research indicates.
Piper Sandler expressed having “the most confidence” in Datadog and Varonis as they approach their quarterly earnings announcements.
Datadog
Regarding Datadog, Owens referenced reduced guidance risk, advantageous competitive standing, and robust usage patterns as primary factors supporting his conviction.
The research also highlighted the April introduction of Datadog Experiments, characterizing it as “an important step” in broadening the company’s product analytics offerings.
Piper Sandler anticipates Datadog will surpass first-quarter projections and elevate guidance. TD Cowen analyst Andrew Sherman reinforced a Buy recommendation on Tuesday, establishing a $190 price objective.
Sherman indicated expectations for another period of revenue outperformance. He referenced accelerating fundamental growth momentum, an increasing roster of AI-native clients including Anthropic, and expanding observability investments as organizations implement AI technologies.
Sherman additionally noted robust sales team expansion as a favorable forward-looking growth indicator extending into 2026. He marginally adjusted his price target downward reflecting industry-wide valuation compression, while maintaining his Buy stance.
Mizuho Securities independently sustained a Buy rating on Datadog with a $145 price objective.
Datadog shares show negative year-to-date performance, though Sherman characterized current pricing as attractive for an enterprise achieving mid-20% growth rates at multi-billion-dollar revenue scale.
Varonis Systems
For Varonis, Owens emphasized the introduction of its Atlas AI security platform as a significant growth driver.
The company has incorporated prudent assumptions into its 2026 revenue projections, which Owens suggested establishes a favorable risk-reward profile approaching earnings.
Piper Sandler anticipates Varonis will exceed first-quarter expectations and increase its annual guidance.
Varonis shares climbed over 4% on Wednesday. Datadog shares advanced over 6%.
