Goldman Sachs turned bearish on Datadog this week, cutting its rating to Sell and setting a $113 price target, a 14% downside from current levels. The bank warns that 2026 will see tighter observability budgets as rivals such as Grafana, ClickHouse, Chronosphere and even Amazon push lower‑cost alternatives, while broader AI adoption inflates data volumes and may force customers to rethink spending. Goldman expects a shift toward deflationary architectures that could curb revenue growth and pressure margins, potentially prompting higher R&D or acquisition outlays.

In contrast, Morgan Stanley upgraded the stock to Overweight with a $180 target, citing accelerating cloud migration and renewed digital‑transformation projects that boost core demand for observability tools. The firm points to emerging “agentic” applications and AI‑driven architectures as fresh growth engines, noting that Datadog’s newer offerings—cloud security, database monitoring and incident management—should drive a 23% CAGR in core revenue and a 25% CAGR in free cash flow through 2028. Investors now weigh competing forecasts as the company navigates a crowded market and evolving tech spend.