2 Under-the-Radar Artificial Intelligence (AI) Stocks to Watch Closely in February

Datadog and Workiva are highlighting AI adoption as a key growth driver ahead of their Q4 2025 results: Datadog reported 32,000 customers at Q3-end with over 5,000 using at least one AI product (up 67% year-over-year) and AI customers accounted for 12% of $881 million in Q3 revenue (vs. 6% a year earlier), while Workiva posted Q3 revenue of $224 million (+21% YoY), saw customers spending ≥$300k and ≥$500k rise 41% and 42% respectively, and raised its full-year 2025 revenue guidance to $881 million. Both firms have launched AI products (Datadog’s Bits AI, LLM Observability and OpenAI Monitoring; Workiva’s AI assistant) that management says are accelerating customer acquisition and monetization, making their Feb. 10 (Datadog) and Feb. 19 (Workiva) earnings reports potential stock-moving catalysts.

Analysis

Market structure: AI adoption in observability (DDOG) and reporting/compliance (WK) disproportionately benefits cloud-native SaaS vendors, hyperscalers (AWS/MSFT/GCP) and LLM providers (OpenAI) via higher telemetry and API spend; legacy on‑prem tooling and smaller MSPs are at risk as customers consolidate. Datadog's AI customers were 12% of revenue (Q3) and customer AI usage +67% YoY — if that share expands to ~20% in 12–18 months it supports 5–10 pts of incremental revenue growth and improved pricing power.

Risk assessment: Near-term risk centers on earnings catalysts (DDOG Feb 10, WK Feb 19) and LLM pricing shocks (API cost spikes) or regulatory action on model outputs/SEC disclosure liability (material for WK). Tail scenarios: an OpenAI API price increase >30% or an SEC enforcement trend could compress margins/ARPU; expect elevated event volatility +/-15–25% around prints and structural outcomes playing out over 6–24 months.

Trade implications: Tactical plays: favor WK for asymmetric upside after its guide raise — lean into 2–3% longs with 3–6 month horizon; treat DDOG as binary around Feb 10 — use small directional options (call spreads if beat, put spreads if miss) sized 1–1.5% portfolio. Rotate 4–6% from cyclical tech into enterprise AI-enabled SaaS and reduce exposure to legacy on‑prem vendors; hedge macro duration via modest long IG tech credit and keep tech beta neutral vs S&P.

Contrarian angles: Consensus underestimates cost-side pressures — rapid AI feature uptake can raise cloud/compute costs and compress gross margins for both vendors in the near term. DDOG’s -31% from its 52‑week high may be overdiscounting AI monetization; conversely WK’s re-rating already prices continued top‑client expansion — monitor large-account counts (>$300k and $500k) as the real signal over headline AI mentions.

Key Decisions for Investors

• Establish a 2–3% long position in Workiva (WK) ahead of Feb 19, 2026 earnings; add to 4% if full‑year revenue beats $881M and large-account (> $300k) count growth >40% YoY. Use a 10% stop‑loss and target +25% in 3–6 months.
• Do not initiate a material DDOG long before Feb 10, 2026; instead deploy a 1–1.5% notional long 6–8 week call spread (10–15% OTM) sized to risk tolerance if DDOG reports AI revenue share ≥15% and AI customer growth >50% YoY. Alternatively buy a 1% cost‑efficient put spread (5–7% OTM) to hedge existing exposure.
• Construct a relative-value pair: long WK (2%) / short DDOG (1.5%) to express conviction that compliance/reporting SaaS will re‑rate faster than observability over next 3–9 months. Rebalance if the pair diverges >10% or if either company misses guidance.
• If implied volatility spikes >25% into earnings, sell premium only with strict risk caps: consider buying calendar call spreads on WK (roll after print) rather than naked short‑strangles; keep aggregate options exposure <3% portfolio and close within 48–72 hours post‑earnings to avoid gap risk.