Datadog NASDAQ:DDOG fell 4.63% in premarket after Bernstein SocGen downgraded the cloud monitoring company to Market Perform from Outperform, raising its price target to $226 from $180. At $260.36, the stock sits 15% above Bernstein's new $226 target. Analyst Peter Weed cited caution on Q3 and later earnings versus what he described as more optimistic investor expectations, with demand signals slowing in both enterprise and some AI Labs.
The core concern is what happens outside AI. Non-AI revenue accounts for roughly 85% of Datadog's total, and Bernstein sees that segment's growth peaking in Q3 before declining 100 to 200 basis points in Q4. The firm's quarter-over-quarter expectations for Born-in-AI revenue in Q3 are also low relative to recent growth trends, and it flagged signs that AI Labs are seeing demand plateau. The result is that Q4 growth could fall around 500 basis points to approximately 29% year-over-year, well short of the high 30%-to-40%-plus peak growth some investors are modeling.
Datadog reports next quarter's results on August 6, where the Q3 guide will be the first real test of whether Bernstein's deceleration thesis holds.