Morgan Stanley Optimistic on Software Stocks Growth Potential
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Apr 16 2026
0mins
Should l Buy DDOG?
Source: seekingalpha
- Healthy Demand Environment: Despite a 15% decline in infrastructure software stocks over the past month, Morgan Stanley analysts noted a healthy demand environment heading into Q1, with strong public cloud spending and software development growth expected for 2026, indicating a gradual recovery in market confidence for software stocks.
- Optimistic Outlook for Datadog: Morgan Stanley has an Overweight rating and a $180 price target on Datadog, with analysts highlighting strong underlying momentum heading into Q1, predicting revenue growth could accelerate to over 30%, suggesting a favorable stock reaction if results meet expectations.
- Strong Performance from JFrog and Palantir: JFrog also received an Overweight rating with a $70 price target, as analysts noted strong momentum and expected reacceleration in Q1; Palantir enters Q1 with an Equal-weight rating and a $205 target, supported by strong fundamentals and increasing customer adoption, making its revenue goals increasingly credible.
- Challenges for Atlassian and Dynatrace: While Atlassian is expected to exceed revenue growth expectations in Q3, analysts remain cautious about its future performance, and Dynatrace needs to provide stronger evidence of sustained annual recurring revenue acceleration, facing a higher bar for re-rating.
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Analyst Views on DDOG
Wall Street analysts forecast DDOG stock price to rise
33 Analyst Rating
30 Buy
3 Hold
0 Sell
Strong Buy
Current: 188.730
Low
140.00
Averages
207.39
High
255.00
Current: 188.730
Low
140.00
Averages
207.39
High
255.00
About DDOG
Datadog, Inc. provides an observability and security platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security and many other capabilities to provide unified, real-time observability and security for its customers’ entire technology stack. Its platform consists of products that can be used individually or as a unified solution and includes a marketplace where customers can access products built by its partners on top of the Datadog platform. Its products include Infrastructure Monitoring, Application Performance Monitoring, Log Management, Digital Experience Monitoring, Continuous Profiler, Database Monitoring, Data Observability, Universal Service Monitoring, Network Monitoring and others. It owns Metaplane, an end-to-end data observability platform that provides advanced machine learning-powered monitoring and column-level lineage.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Solid Customer Base: Datadog now has approximately 4,550 customers with annual recurring revenue exceeding $100,000, reflecting significant growth in its high-value customer segment, which strengthens its competitive position in the AI observability platform market and prepares it for future challenges.
- CrowdStrike's Continued Growth: CrowdStrike's annual recurring revenue reached $5.25 billion in Q4 of fiscal 2026, up 24% year-over-year, highlighting the relevance of its AI-native cybersecurity platform in complex environments, with guidance for fiscal 2027 revenue projected between $5.86 billion and $5.92 billion.
- Unique Advantages of Software Platforms: The supply chain crisis has underscored the advantages of software platforms like Datadog and CrowdStrike, which do not rely on physical resources, allowing them to attract customers and achieve growth even as AI deployments become increasingly complex, reflecting strong market recognition of software solutions.
See More
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- Customer Base Expansion: Datadog now has approximately 4,550 customers with annual recurring revenue exceeding $100,000, reflecting significant growth in its core customer segment, which underscores the essential nature of its product in monitoring AI workloads and solidifying revenue stability.
- CrowdStrike's Sustained Growth: CrowdStrike's annual recurring revenue reached $5.25 billion in Q4 FY2026, up 24% year-over-year, with total revenue at $1.31 billion, highlighting the importance of its AI-native cybersecurity platform in complex environments, and projecting FY2027 revenue growth to $5.86 to $5.92 billion.
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See More
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- Positive Jobs Data: The U.S. nonfarm payroll report exceeded expectations, leading to a 1.71% rise in the Nasdaq Composite Index, indicating positive signals of economic recovery that bolster investor confidence and market activity.
- Tech Stocks Surge: This week, tech stocks performed strongly, with Datadog (DDOG) gaining 40.68% as the top winner, followed closely by Micron (MU) at 36.98%, reflecting a resurgence of optimism in the tech sector.
- Market Volatility: Despite declines in sectors such as healthcare, finance, and consumer goods, the Nasdaq remained robust due to gains in chip and AI-related stocks, showcasing the resilience of tech stocks and a trend of market differentiation.
- Investor Sentiment: Analysts suggest that investors should stop overthinking the market rally, emphasizing that the current market movements may be a reasonable response to improving fundamentals, further encouraging investor participation.
See More
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- Financial Performance Breakthrough: In Q1, Datadog reported revenue of $1.006 billion, marking its first billion-dollar quarter and exceeding analyst expectations of $959.9 million, with adjusted EPS at $0.60, significantly above the $0.51 forecast, showcasing robust profitability.
- Customer Base Expansion: The company expanded its enterprise customer base to approximately 4,550 clients generating over $100,000 in annual recurring revenue, an increase of about 780 clients from the previous year, reflecting ongoing penetration in the high-value SaaS market.
- Market Sentiment Optimism: Retail investor sentiment around Datadog remains extremely bullish, with message volume surging 1,377% in 24 hours, indicating strong confidence in the company's future growth prospects.
See More
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- Market Volatility: Doubts surrounding the Iran deal led to volatility in the stock market on Thursday, with major indices experiencing declines, reflecting investor sensitivity to geopolitical risks and uncertainty.
- Tech Stocks Resilience: Despite the overall market pressure, Nvidia and Tesla showed strong performance, indicating investor confidence in the long-term growth potential of these companies, which may attract more capital into the tech sector.
- Earnings Movers: CoreWeave, Rocket Lab, Cloudflare, and IREN's earnings reports became focal points for the market, with investors closely monitoring their performance to assess future growth prospects and competitive positioning.
- Jobs Report Anticipation: The market is set to receive a new jobs report, with analysts expecting it to provide crucial signals regarding economic recovery, which could further influence investor decisions and market trends.
See More
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- Market Weakness: On Thursday, the S&P 500 Index fell by 0.38%, the Dow Jones Industrial Average dropped by 0.63%, and the Nasdaq 100 Index decreased by 0.12%, reflecting investor skepticism regarding a potential US-Iran peace deal, which led to a reversal of early gains and impacted market confidence.
- Economic Data Support: Despite the market decline, initial jobless claims rose by 10,000 to 200,000, below the expected 205,000, indicating resilience in the labor market, while Q1 nonfarm productivity increased by 0.8%, surpassing the 0.6% forecast, providing some support to the market.
- Earnings Report Impact: As of Thursday, 84% of the 425 S&P 500 companies that reported earnings exceeded expectations, with Q1 earnings projected to rise by 12% year-over-year, although growth outside the tech sector is only expected to be around 3%, indicating a divergence that may influence investor allocation strategies.
- Oil Price Recovery: WTI crude oil prices rebounded after a 4% decline on Thursday, as the market focused on the potential resumption of US military operations to ensure safe passage through the Strait of Hormuz, which is expected to have ongoing implications for global oil prices and related stocks.
See More
