Datadog coverage update: BofA stays bullish on weakness

Datadog Inc. (DDOG) spent past summertime defending itself against 1 accusation: that its biggest lawsuit was softly gathering its mode retired the door.

In July 2025, Guggenheim downgraded the banal to sell, informing that OpenAI was processing in-house monitoring tools that could carve a $150 million spread successful Datadog's revenue. The banal brushed it disconnected and astir doubled implicit the pursuing year.

On August 6, the informing arrived anyway, delivered not by a bearish expert but by Datadog's ain management.

The institution bushed second-quarter gross and net estimates and raised its full-year guidance for a 3rd consecutive quarter. Investors sold the banal down arsenic overmuch arsenic 19% the aforesaid day, according to The Motley Fool.

Related: Datadog's largest lawsuit renews woody but cuts usage

The crushed wasn't the 4th that conscionable happened. It was the 1 up of it. Datadog told investors its unnamed largest customer, wide believed by analysts to beryllium OpenAI, would propulsion backmost usage starting successful the 3rd quarter, contempt precocious signing a nine-figure renewal covering 17 products, Benzinga reported.

Bank of America work the aforesaid guidance and reached a antithetic conclusion. Analysts Koji Ikeda and George McGreehan reiterated their buy rating and $305 terms nonsubjective successful a enactment to clients that was shared with TheStreet, arguing the marketplace is treating 1 account's slowdown arsenic a company-wide problem.

That people implies 33% upside from wherever the banal closed aft the selloff.

The banal sold disconnected for a crushed that's mostly already implicit

The scariest fig successful Datadog's guidance is simply a maturation rate. The much utile fig is simply a dollar amount, and it's the 1 BofA's enactment focused on.

Third-quarter guidance implies astir $19 million of caller gross beyond what the institution conscionable booked, compared with $115 million of caller gross added successful the 2nd 4th alone.

That's adjacent to a six-fold driblet successful gait wrong a azygous quarter, connected paper. BofA's work is that absorption built maximum caution into the fig astir 1 customer's pullback alternatively than a wide slowdown.

On the 3rd 4th guidance net call, CEO Olivier Pomel enactment it simply: the institution doesn't power what happens with a circumstantial customer, Benzinga reported. That framing turns an alarming maturation fig into a bounded, known hazard alternatively of an open-ended one.

Datadog's concern extracurricular its biggest lawsuit is getting stronger

The item overshadowed by the selloff is that maturation extracurricular Datadog's largest relationship has present accelerated for 4 consecutive quarters, reaching the high-20% range, according to BofA's note.