Bernstein raises Datadog stock price target to $147 on strong Q2 results

Datadog (DDOG) reported a 'blowout' Q2 2025, with revenue of $827 million marking 28% year-over-year growth that significantly exceeded guidance and Street expectations. The company delivered its largest dollar beat versus midpoint guidance and subsequently raised full-year guidance by a record amount, largely driven by its 'Born-in-AI' customer cohort which now represents 11% of revenue. Despite multiple analyst price target increases, including Bernstein to $147 and Evercore ISI to $170, the stock declined post-earnings, suggesting investor concerns regarding the source of the outperformance.

Analysis

Datadog (DDOG) delivered a historically strong second quarter for 2025, characterized by a 'blowout' performance that surpassed even the pandemic-era peak of Q4 2021. The company reported revenue of $827 million, a 28% year-over-year increase, which constituted the largest dollar beat versus midpoint guidance in its history. This robust top-line growth, accompanied by in-line operating margins of 20%, prompted management to issue its largest-ever upward revision to full-year guidance. The primary driver of this outperformance was the 'Born-in-AI' customer cohort, which accelerated its contribution to 11% of total revenue, up from 8% in the prior quarter, and provided a 10 percentage point tailwind to overall growth. Despite this fundamental strength and a wave of analyst price target upgrades from firms like Bernstein (to $147) and Evercore ISI (to $170), the stock declined post-announcement. This paradoxical price action suggests investor apprehension, potentially stemming from concerns about the sustainability or quality of the AI-driven growth surge.

Key Decisions for Investors

• Given the record financial beat and guidance raise, investors with a high conviction in the AI-native growth story may view the post-earnings stock decline as a compelling buying opportunity.
• The negative stock reaction to overwhelmingly positive news is a significant red flag, warranting a deeper investigation into market concerns about the sustainability of the AI customer cohort's contribution before adding to positions.
• Monitor the growth rate and revenue contribution of the 'Born-in-AI' customer segment in subsequent quarters, as this is now the key metric for validating the durability of the company's re-accelerated growth trajectory.