Bank of America Sees 15% Upside for Datadog After Software Sector Falls 25%
Bank of America identified Datadog as one of four software stocks to accumulate following a 25% sector decline, assigning a price objective implying roughly 15% upside. The firm highlighted Datadog’s 30% year-over-year ARR growth and expanding gross margins as key catalysts.
1. Sector Decline Spurs Selective Buys
The global software sector has retraced about 25% from its recent highs, prompting Bank of America strategists to single out four names they believe are poised for a rebound. The pullback reflects broader investor caution around valuation multiples and growth sustainability.
2. Datadog Receives Buy Rating
Datadog was elevated to a Buy with a $155 price objective, suggesting approximately 15% upside from current levels. Analysts cited the company’s 30% year-over-year annual recurring revenue expansion and continued expansion of gross margins, forecasting sustained free-cash-flow growth in fiscal 2026.
3. Key Catalysts and Risks
BofA pointed to Datadog’s innovation in AI-driven observability tools and increasing adoption among enterprise clients as primary growth drivers. Potential headwinds include intensifying competition and macroeconomic pressure on IT spending, which could dampen license renewals.