Key Takeaways
- Investment firm Piper Sandler identifies Datadog and Varonis as leading infrastructure software investments for 2026
- Recent channel surveys indicate slight seasonal softening compared to Q4 2025, consistent with historical patterns
- Datadog benefits from new product introduction and expanding AI-focused client base, featuring companies like Anthropic
- Varonis debuts Atlas AI security solution with prudent revenue projections for 2026
- Multiple Wall Street firms maintain positive outlook on Datadog, with TD Cowen setting a $190 target and Mizuho at $145
In a research note issued Wednesday, Piper Sandler’s Rob Owens identified two infrastructure software companies he considers optimally positioned for success in 2026: Datadog and Varonis Systems.
Owens’ quarterly channel survey covering security and infrastructure software sectors revealed moderate weakening versus the final months of 2025. However, he characterized this trend as “relatively par for the course,” attributing it to predictable seasonal fluctuations.
When examined on an annual basis, the findings aligned closely with 2025 benchmarks. Owens interpreted these results as indicators of a “stable operating environment that is conducive to solid quarters.”
Approximately 70% of those surveyed indicated that artificial intelligence initiatives are influencing expenditures on traditional software categories. According to Owens, this percentage remains consistent with established norms and doesn’t suggest a fundamental realignment in corporate budget allocation strategies.
The security software segment continues expanding its share of enterprise IT budgets. Geographic analysis shows the strongest demand concentration in the United States, the research note indicated.
Piper Sandler stated it holds “the most confidence” in Datadog and Varonis as both companies approach their quarterly earnings announcements.
Datadog
Regarding Datadog, Owens emphasized reduced guidance risk, advantageous competitive standing, and robust usage patterns as primary factors supporting his optimistic view.
The investment firm also highlighted the April introduction of Datadog Experiments, characterizing it as “an important step” in broadening the company’s capabilities in product analytics.
Piper Sandler anticipates Datadog will surpass first-quarter projections and elevate forward guidance. TD Cowen’s Andrew Sherman separately reaffirmed a Buy recommendation Tuesday, establishing a $190 price objective.
Sherman indicated expectations for another quarter of revenue outperformance. He referenced accelerating fundamental growth, an expanding roster of AI-native customers such as Anthropic, and increasing observability spending as enterprises embrace artificial intelligence technologies.
Sherman also noted substantial sales team expansion as a favorable forward-looking growth indicator extending into 2026. While he modestly reduced his price target reflecting broader sector multiple contraction, his Buy rating remained unchanged.
Mizuho Securities independently sustained a Buy recommendation on Datadog with a $145 price objective.
Despite year-to-date stock price decline, Sherman characterized current valuation levels as attractive for an enterprise achieving mid-20% growth rates at multi-billion-dollar revenue scale.
Varonis Systems
For Varonis, Owens spotlighted the introduction of its Atlas AI security platform as a significant growth driver.
The company has incorporated cautious projections into its 2026 revenue outlook, which Owens believes establishes a favorable risk-reward profile approaching the earnings release.
Piper Sandler projects Varonis will exceed first-quarter expectations and increase full-year guidance.
Varonis shares climbed more than 4% Wednesday. Datadog shares advanced over 6%.
