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Investing.com -- Bank of America named Datadog (NASDAQ:DDOG) a top pick for the second half of 2025, citing strong execution, healthy demand trends, and its growing role in AI infrastructure.

In a note to clients Wednesday, the bank reiterated its Buy rating and raised its price target for the stock to $150 from $138, reflecting increased confidence in execution and a valuation of 13.6x CY26E revenue.

“We believe it’s positioned to drive durable 20%+ revenue growth and 20%+ FCF margins over the long-term (i.e., Rule-of-40+), which is an attractive investment trait,” BofA analysts wrote.

Recent positive checks from Datadog’s DASH customer conference and a proprietary survey are said to suggest strong customer momentum. 

“75% of customers we spoke with at DASH are planning to spend more with Datadog,” BofA noted. 

Their survey reportedly showed customers expect a +13.2% weighted average increase in Datadog spending for 2026, up from +8.3% the year before.

BofA believes Datadog is also benefiting from the AI boom. “Revenue generated from AI-natives is already notable, with 8.5% of ARR coming from them (+200% y/y, we estimate),” BofA said. 

While that figure captures only pure-play AI firms, the analysts expect broader adoption as more traditional enterprises launch AI-enabled experiences.

BofA further highlighted Datadog’s rapid pace of innovation. At DASH, the company unveiled multiple new products, which BofA says have the potential to become $100 million+ ARR contributors. 

These included tools centered on AI agents, automation, and deep observability into the AI tech stack.

“We believe the strong execution trend will continue driving potential upside to our/Street forecasts,” BofA concluded, reinforcing Datadog’s standing as one of its highest-conviction ideas for 2H25.

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