Key Takeaways
- Investment firm Piper Sandler identifies Datadog and Varonis as premier infrastructure software investments heading into 2026
- Recent channel surveys reveal slight softening compared to Q4 2025, though analysts attribute this to typical seasonal trends
- Datadog benefits from fresh product offerings and expanding AI-driven customer base, notably including Anthropic
- Varonis introduced its Atlas AI security solution while maintaining prudent revenue projections for 2026
- Multiple financial institutions including TD Cowen and Mizuho sustain Buy recommendations on Datadog with targets ranging from $145 to $190
In a research note distributed to investors this Wednesday, Piper Sandler’s analyst Rob Owens identified two infrastructure software companies as particularly well-positioned for success in 2026: Datadog and Varonis Systems.
Owens’ quarterly assessment of the security and infrastructure software landscape through channel research revealed a slight deceleration relative to the closing months of 2025. However, he characterized this pattern as “relatively par for the course,” consistent with expected seasonal fluctuations.
When measured against the previous year’s performance, current results aligned closely with 2025 benchmarks. Owens interpreted this consistency as indicative of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of those surveyed indicated that artificial intelligence initiatives are influencing budget allocations for traditional software categories. Owens noted this percentage falls within historical norms and doesn’t signal a fundamental reallocation of corporate spending priorities.
Cybersecurity solutions continue capturing increased budget share throughout the sector. According to the research, the United States market demonstrates the most robust demand patterns.
According to Piper Sandler’s assessment, the firm maintains “the most confidence” in both Datadog and Varonis as they approach their quarterly earnings announcements.
Datadog
Regarding Datadog specifically, Owens emphasized reduced guidance risk, advantageous competitive dynamics, and robust consumption metrics as primary drivers of optimism.
The investment firm also highlighted the April introduction of Datadog Experiments, characterizing it as “an important step” toward broadening the company’s product analytics portfolio.
Piper Sandler anticipates Datadog will surpass first-quarter projections and elevate forward guidance. TD Cowen’s analyst Andrew Sherman similarly reaffirmed his Buy stance on Tuesday, establishing a $190 price objective.
Sherman projected another quarter of revenue outperformance, citing accelerating core business growth, an expanding roster of AI-native clients such as Anthropic, and increasing observability spending as organizations implement artificial intelligence strategies.
Sherman additionally noted robust expansion in sales personnel as an encouraging forward-looking growth indicator extending into 2026. While he marginally reduced his price target reflecting broader sector valuation compression, his Buy recommendation remains intact.
Mizuho Securities independently sustained its Buy rating on Datadog, setting a $145 price target.
Despite year-to-date stock price declines, Sherman characterized Datadog’s current valuation as attractive for an enterprise achieving mid-20% growth rates at multibillion-dollar revenue scale.
Varonis Systems
For Varonis, Owens spotlighted the debut of its Atlas AI security platform as a significant growth driver.
The company has incorporated cautious projections into its 2026 revenue forecast, which Owens suggested establishes a favorable risk-reward dynamic approaching the earnings release.
Piper Sandler projects Varonis will exceed first-quarter expectations and upgrade its annual guidance.
Varonis shares climbed more than 4% on Wednesday’s trading session. Datadog shares advanced over 6%.
