Datadog drops as Guggenheim downgrades to 'sell' on OpenAI optimization risk

Datadog's DDOG.O shares down 2.5% premarket to $148.65 as Guggenheim downgrades cloud security firm to 'sell' from 'neutral', citing near-term OpenAI optimization risk

Downgrade comes as New York City-based DDOG set to join S&P 500 .SPX before the bell on Weds in wake of Juniper Networks acquisition by Hewlett Packard Enterprise HPE.N

Brokerage assigns Street-low PT of $105, per LSEG data, 31% below stock's last close

Guggenheim analyst Howard Ma says OpenAI, which he believes is DDOG's largest customer, is shifting toward more cost efficient, in-house managed technologies

OpenAI may have already started to move off DDOG for log management onto its internally built solution, followed by "planned deprecation" of other DDOG functionalities, which could result in second half rev risk, especially in Q4, Ma says in note

While Ma believes Q2 will be "another strong OpenAI-driven quarter", he says OpenAI's optimizations could create a $150 mln or greater (5 points of growth) hole to fill in 2026 where he sees rev growth of 15% vs consensus at +19%

Avg rating among 44 analysts covering DDOG is "buy" and median PT is $136, per LSEG

Through Mon close, stock up 6.7% YTD vs Nasdaq's .IXIC 5.7% advance