Shares of Datadog (DDOG) surged nearly 15% to $155.15 on July 3 after S&P Global said the monitoring software provider will be included in the S&P 500 U.S. stock index, effective before the market opens on July 9.
The move surprised some investors, who had expected names like Robinhood (HOOD) or AppLovin (APP) to be next in line.
Datadog will replace Juniper Networks (JNPR) , which was just acquired by Hewlett-Packard Enterprise Co. (HPE) .
The S&P 500 is a stock index that tracks the performance of 500 of the leading publicly traded companies in the U.S., serving as a key benchmark for the overall health of the U.S. economy. Tech firms now make up a major share of the index and have an important impact on its movements.
Stocks could likely rally after being added to a major index like the S&P 500 because of increased demand from institutional investors, especially passive index funds.
DoorDash (DASH) joined the index in March and has risen 20% since. Palantir (PLTR) , which was added last September, has jumped more than 250% since joining.
Datadog has lagged behind the broader tech sector this year, falling 5.5% through July 2, while the Nasdaq has gained 5.6%. The stock also underperformed the Nasdaq Composite Index in 2024.
Datadog thrives on strong AI demand
New York-based Datadog, founded in 2010, went public in 2019. It produces software that monitors and secures an enterprise's entire technology infrastructure — including servers, applications, databases, and security systems.
The company has benefited from expanding into AI. It offers tools such as LLM Observability to help businesses monitor machine learning models and AI-driven applications in production.
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In Q1 2025, Datadog generated $761.6 million in revenue, a 25% increase from a year earlier and ahead of the $741.5 million analysts were expecting. Adjusted earnings came in at 46 cents per share, beating estimates closer to 43 cents.
The company raised its full-year revenue forecast to between $3.22 billion and $3.24 billion, up from its previous range of $3.18 billion to $3.20 billion. Wall Street had been looking for around $3.20 billion, according to LSEG data pulled by Reuters.
Datadog also gave a second-quarter revenue outlook that topped expectations. Its next earnings report is expected in early August.
Analyst raises Datadog stock price target
Wedbush analyst Daniel Ives raised the firm's price target on Datadog to $170 from $140 and reiterated an outperform rating following the news, citing “incremental confidence in the company to capitalize on its observability initiatives over the coming years.”
Ives said Datadog's platform “continues to gain momentum within the observability space, especially with AI front and center.” He expects the company to gain more market share with elevated usage for its AI cohort across its enterprise customers.
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“Datadog’s new products and features look to complement agentic AI trends following the company’s recent partnership with OpenAI,” he wrote.
“On the software front, Datadog remains one of our favorite names to own, and our recent checks have been very strong as the AI Revolution takes hold.”
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According to TipRanks, the average 12-month price target for Datadog is $140.46, based on ratings from 37 Wall Street analysts. That implies a downside of about 9.5% from the July 3 closing price of $155.15.
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