Datadog Inc (NASDAQ:DDOG) shares are trading lower Tuesday after analysts at Guggenheim downgraded the stock from Neutral to Sell, setting a new price target of $105.

What To Know: Guggenheim expects OpenAI to scale back its usage of Datadog's services in favor of more cost-efficient, internally managed observability tools. The analysts project a step-down in revenue contribution from OpenAI, with annual recurring revenue (ARR) potentially falling from an estimated $240 million at the end of the second quarter to $160 million in the third quarter and $80 million in the fourth. If this scenario plays out, Datadog's AI-native cohort would represent less than 7% of total ARR exiting 2025, a meaningful decline from current levels.

Guggenheim acknowledged Datadog may still report strong second-quarter results, with projected revenue growth near 25%, slightly above consensus. However, the firm believes this momentum could fade in the back half of the year as the OpenAI optimizations take effect.

Looking ahead to 2026, analysts see further challenges. Even after assuming growth from other AI-native customers and a rebound in spending by core clients, Guggenheim estimates only 15% revenue growth for the year, well below the current consensus of 19%. The downgrade reflects concern that these headwinds will outweigh near-term gains and lead to earnings and revenue misses in the coming quarters.

DDOG Price Action: Datadog shares were down 4.14% at $146.10 at the time of writing, according to Benzinga Pro.

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