Datadog's Core Growth Backed by Digital Transformation, Cloud Migration Projects, Morgan Stanley Says

MT Newswires Live01-13

Datadog's (DDOG) accelerating core growth is being supported by the main pillars of observability adoption such as cloud migration and digital transformation projects, Morgan Stanley said in a note Monday.

In addition, increasing deployments by companies of "agentic applications require observability to be successful, creating a new vector of growth over the next several years," the note said.

Meanwhile, newer products like "cloud security, database monitoring and incident management are starting to contribute meaningfully to growth," the investment firm said.

Morgan Stanley is forecasting a 23% compound annual growth rate for Datadog's core revenue, excluding contributions from the company's client OpenAI, and 25% free cash flow, or FCF, compound annual growth rate from 2025 through 2028, which is expected to lead to $4.09 in FCF per share by 2028.

There is "ongoing uncertainty with respect to the company's future growth prospects with its largest AI customer" OpenAI, the note said.

Morgan Stanley upgraded Datadog to overweight from equal-weight, while keeping the company's $180 price target.

Price: 127.33, Change: +1.84, Percent Change: +1.47

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