OpenAI Might Drop Datadog. Should You Worry About Datadog Stock (DDOG)?

Datadog is a cloud-native monitoring and security platform used by developers, IT teams, and businesses to keep an eye on their applications, servers, databases, and cloud infrastructure.

It helps companies spot issues fast, understand system behavior, and improve performance. Big names like Samsung, Peloton, and Nasdaq use Datadog to stay on top of their tech.

The company went public in 2019 and has been growing fast, riding the wave of cloud adoption, AI innovation, and increased demand for digital security and observability. But now, rumors are swirling that one of its high-profile customers—OpenAI—might be pulling away. So what does that mean for Datadog’s future?

The IDDA Analysis framework is used to analyze companies and determine which are right for you. There are five steps to the process:

1. Capital Analysis – Your personal risk tolerance.
2. Intentional Analysis – Your unique financial goals and timelines based on your age, health, and lifestyle.
3. Fundamental Analysis – The viability of the asset based on company performance, financial health, and market position.
4. Sentimental Analysis – The current emotions of Wall Street and other market participants.
5. Technical Analysis – Historical price action to identify key psychological levels and market patterns.

Let’s dive into the IDDA analysis to assess Datadog’s fundamental, sentimental, and technical outlook.

IDDA Point 1&2: Capital & Intentional 

The capital and intentional analysis need to be conducted by you.

Select your assets in alignment with your financial goals. Listen to your intuition about each asset, but remember to invest based on your own values, not just because of recommendations from others.

Don’t know your risk tolerance? Get Kiana Danial’s risk management toolkit for free here.

IDDA Point 3: Fundamental

🔷 Earnings and revenue growth
Datadog reported 25% year-over-year revenue growth in Q1 2024, hitting 611 million dollars. Earnings per share came in at $0.44, beating expectations. Net income jumped from 20 million to over 100 million in one year. This shows strong demand and efficient scaling.

🔷 OpenAI rumors and possible revenue hit
Guggenheim downgraded the stock, saying OpenAI might move away from Datadog’s logging tools. While Datadog hasn’t confirmed it, OpenAI currently makes up about 6 percent of Datadog’s total revenue. Analysts say that could drop to 3 percent if OpenAI fully leaves. That means a possible 150 million dollar hit over the next year or so. The market didn’t like the news.

🔷 Product expansion and innovation
Datadog keeps rolling out new tools, especially in AI monitoring. They now support NVIDIA’s GPU systems and large language model observability. This is key because companies building AI apps need to track tokens, latency, and performance. Datadog is one of the few that can do this well.

🔷 Global expansion and compliance edge
Datadog just launched a local data center in Australia. This helps them serve highly regulated markets and meet new laws like Europe’s DORA. Companies with global clients want tools that are both powerful and compliant. Datadog checks that box.

🔷 Industry growth and positioning
Cloud observability and cybersecurity are booming. More companies are moving to the cloud and adding AI tools. That means more stuff to monitor. Datadog is in a great spot to keep growing if it stays ahead on features and pricing.

Fundamental risk: Medium

Datadog is growing fast and expanding into new areas. But losing big customers like OpenAI or falling behind on innovation could hit hard. Keep an eye on competition and client retention.

IDDA Point 4: Sentimental

Overall sentiment is neutral to bullish for Datadog.

Strengths

✅ Analysts from Bank of America and Morgan Stanley are optimistic. Both raised their price targets and call Datadog a top pick due to strong customer feedback and new product rollouts.
✅ 75 percent of Datadog users surveyed said they plan to spend more on the platform this year. That’s a sign of trust and long-term stickiness.
✅ Investors like Datadog’s expansion into AI observability and security. These are hot areas with fast growth, and Datadog is moving quickly to stay ahead.
✅ The inclusion of GPU and LLM monitoring tools makes it more relevant to big players building AI apps. This adds to the FOMO for institutions who don’t want to miss the next big infrastructure stock.
✅ Recent earnings beat expectations, which helped build confidence despite the OpenAI rumor.

Risks

❌ The OpenAI rumor sparked fear. Guggenheim’s downgrade made headlines and triggered some selling. If OpenAI fully leaves, it could raise doubts about Datadog’s ability to retain high-profile clients.
❌ The stock price has surged recently, which could trigger some short-term profit taking or a pullback. Investors may wait for confirmation in the next earnings report before buying more.
❌ Competition is heating up. Companies like Dynatrace, New Relic, and even homegrown solutions at big tech firms could threaten Datadog’s growth if it doesn’t keep innovating.
❌ Macroeconomic fears, like budget tightening in the tech sector, could slow down cloud spending and hit Datadog’s sales growth.

Sentimental risk: Medium

There’s strong support from analysts and users, but fear around customer churn and high valuation is creeping in. The vibe is optimistic—but cautious.

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IDDA Point 5 – Technical

Weekly Chart

🟢 Price is making higher highs, showing a positive long-term trend
🔻 Ichimoku Cloud is red, which suggests bearish momentum is still present
🟢 The conversion line (Tenkan-sen) just crossed above the baseline (Kijun-sen), a potential early reversal signal
🔶 RSI is at 59, cooling off after reaching overbought levels above 70
🔻 The stock dropped after the OpenAI rumors and is now sitting near its 23 percent Fibonacci retracement level
🔶 After a strong bounce earlier this year, momentum paused due to broader tech weakness and news-driven fear

Datadog is in recovery mode after last year’s volatility. The chart shows early bullish signals, but the red cloud and falling RSI suggest caution in the short term. If the OpenAI exit is confirmed, the stock could dip further before resuming its upward trend.

Buy Limit (BL) levels:

📌 $127.84 – High Risk

📌 $119.26 – Moderate Risk

📌 $110.33 – Low Risk

This stock is suitable for both long-term investors and swing traders. If you are swing trading, here are some potential profit taking ideas:

Profit Taking (PT) levels:

📌 $169.29 – High Risk

📌 $183.94 – Moderate Risk

📌 $199.30 – Low Risk

Here are the Invest Diva ‘Confidence Compass’ questions to ask yourself before buying at each level:

1. If I buy at this price and the price drops by another 50%, how would I feel? Would I panic, or would I buy more to dollar-cost average at lower prices? (hint: this question also reveals your CONFIDENCE in the asset you’re planning to invest in).
   
2. If I don’t buy at this price and the stock suddenly turns around and starts going up again, will I beat myself up for not having bought at this level?
   

Remember: Investing is personal, and what is right for me might not be right for you. Always do your own due diligence. You should ONLY invest based on your own risk tolerance and your timeframe for reaching your portfolio goals

Technical risk: Medium

The overall trend is improving, with higher highs and early reversal signals. But price is still under the Ichimoku Cloud and momentum is slowing. If negative news continues, short-term drops are likely before the uptrend resumes.

Summary: Final Thoughts

Datadog is in a strong position overall. Revenue is growing, customers are spending more, and the company keeps rolling out new tools in hot areas like AI and cloud security. Its expansion into regulated markets and deeper integration with NVIDIA’s AI ecosystem adds to its long-term potential.

But the OpenAI rumor is hard to ignore. Losing one of its biggest clients could shake investor confidence, especially if it signals a broader trend of large firms building in-house tools. While OpenAI only makes up about 6 percent of revenue, the emotional weight of the news has already triggered pullbacks.

On the chart, we’re seeing early signs of a trend reversal—but the stock is still under pressure. A confirmed exit from OpenAI or more negative headlines could push the price lower in the short term.

Overall Stock risk: Medium

Datadog still has long-term strength, but this could be a bumpy ride until sentiment clears up. Investors may want to watch how the next earnings call plays out before jumping in.

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Disclosure: I am not a financial advisor, and this is not financial advice. This information is for educational purposes only. This post about Datadog stock (DDOG) may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please see the terms of service page for more information.