Guggenheim downgraded Datadog (NASDAQ:DDOG) from Neutral to Sell, setting a $105 price target, citing looming risks tied to the potential departure of OpenAI, believed to be Datadog’s largest customer. The company’s shares dropped more than 4% intra-day today.
The analysts warned that OpenAI is shifting toward more cost-efficient, in-house observability solutions, potentially phasing out key Datadog functionalities such as log management, metrics, and traces. If realized, this move could significantly impact Datadog’s second-half revenue, particularly in Q4, where Guggenheim models 17% growth under a downside scenario.
While Datadog is still expected to post a strong Q2 — likely flat quarter-over-quarter growth around 25% — the firm believes the real challenge lies ahead, as this customer-specific headwind could create a $150M revenue gap in 2026, slicing off up to 5 percentage points of growth.
Even with potential acceleration from other AI-native or core customers, Guggenheim is skeptical these gains can offset the timing and magnitude of the OpenAI transition, especially if IT budgets remain tight. The firm now forecasts 2026 revenue growth of just 15%, notably below consensus expectations of 19%.
