Surging OpenAI usage brings a potential positive, but is not yet enough to change the investment view on Datadog

Overview

The report assesses whether OpenAI's recent sharp price cut and usage growth could become a new catalyst for Datadog. OpenRouter data show that OpenAI consumption increased significantly after the price cut, which may raise excess consumption under its newly signed nine-figure contract with Datadog. However, Anthropic usage declined over the same period, and OpenRouter only covers traffic routed through its platform. Bernstein believes the current evidence is not yet sufficient to confirm an acceleration in total artificial intelligence market usage, and therefore maintains its existing forecasts, USD 237 target price, and Market-Perform rating.

Core views

The key for Datadog in benefiting from the artificial intelligence industry is not a single model provider gaining share, but sustained growth in total token consumption by the customers it covers. Strong usage after OpenAI's price cut provides the possibility of short-term revenue upside, but Anthropic weakness, diversion to open-weight models, and potential price wars could all offset this benefit. Given that OpenRouter users may be more price-sensitive, smaller in scale, and more likely to switch models, the data cannot directly represent large enterprises or the overall market. The current share price is above the target price, and valuation is also at a relatively high level, leaving the risk-reward still broadly neutral.

Analysis framework

The report combines OpenRouter token usage trends, other model usage signals, share changes among artificial intelligence labs, and Datadog customer contract mechanisms to determine whether consumption growth can translate into revenue upside; valuation uses the average of DCF and comparable P/Sales multiples for the next 5 to 8 quarters.

Methodology notes

• Alternative Data AnalysisOpenRouter Token Usage Tracking

  Observing artificial intelligence demand and the competitive landscape through changes in token consumption on a model routing platform.

  This metric can quickly reflect major model releases, price cuts, and competitive moves, but it only covers traffic routed through OpenRouter and has sample biases related to user structure, price sensitivity, and task complexity.

• Valuation methodsDCF

  Estimating enterprise value by discounting future cash flows.

  The report uses an 11% weighted average cost of capital and a 3% perpetual growth rate, and averages the DCF result with the relative valuation result to derive the target price.

• Relative ValuationP/Sales Comparable Valuation

  Determining valuation based on revenue multiples of cloud SaaS peers.

  The report applies a 16x P/Sales multiple to revenue over the next 5 to 8 quarters. The multiple is derived from regression analysis of cloud SaaS companies with operating margins above 10%, assuming the current regression relationship remains stable for more than one year.

• Growth Quality AssessmentRule-of-40

  A comprehensive measure of a software company's growth rate and profitability.

  The report uses a cloud SaaS valuation framework based on the Rule-of-40 to screen comparable companies and support the 16x P/Sales assumption.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Datadog Inc (DDOG.US)

  The core covered company in the report; its cloud observability platform serves all of the top ten artificial intelligence labs.

  Strengths

  Broad coverage of artificial intelligence customers, a newly signed nine-figure OpenAI contract, potential excess-usage revenue from growth in total token consumption, and revenue and free cash flow expected to maintain relatively rapid growth.

  Weaknesses

  Limited visibility into the usage mix of artificial intelligence customers and overall market growth, relatively high current valuation, and the share price already above the target price.

  Comparison

  The divergence in usage trends between OpenAI and Anthropic indicates that growth from a single customer may simply be share migration among model providers and cannot be equated with growth in total demand in Datadog's relevant market.

  Risks

  Intensifying competition, margin expansion slower than expected, execution or results falling short of expectations, artificial intelligence price wars, diversion by open-weight models, and valuation-driven pullback.

Key data

• Target Price237.00 USDMaintained unchanged.
• Closing Price260.78 USDAs of 2026-08-10.
• Implied Upside to Target Price-9%The target price is below the closing price listed in the report.
• Change in OpenAI Usage After Price CutAbout 2xOpenRouter data show consumption for about two weeks after the price cut increased versus the prior level.
• OpenAI Quarter-over-quarter Growth AssumptionAbout 50%Already included in Bernstein's existing model.
• Anthropic Quarter-over-quarter Growth AssumptionAbout 10%Existing usage signals this quarter are relatively weak.
• Revenue Forecast2025A USD 3.427 billion; 2026E USD 4.577 billion; 2027E USD 5.896 billionThe table-listed compound growth rate from 2025 to 2027 is 31.2%.
• Adjusted Earnings per Share2025A USD 2.05; 2026E USD 2.70; 2027E USD 3.45Bernstein forecast.
• Valuation Parameters11% WACC; 3% perpetual growth rate; 16x P/SalesThe target price is the average of the DCF and P/Sales comparable valuation results for the next 5 to 8 quarters.

Impact & implications

If OpenAI's price cut truly expands market-wide token consumption, rather than merely shifting share from competitors such as Anthropic, Datadog may gain revenue upside through excess usage under large artificial intelligence customer contracts. If the industry evolves into a price war, total usage growth is limited, or open-weight models continue to divert demand, then strong data from a single provider would have weaker read-through for Datadog's overall revenue. Since the current share price is above the target price, investors need clearer evidence of aggregate growth and contract monetization to support an upgrade to the rating or earnings forecasts.

Risks

• OpenRouter data only cover traffic routed through its platform and may not represent actual usage of OpenAI's own API, hyperscale cloud platforms, and large enterprises.
• OpenAI usage growth may mainly come from share shifts from competitors such as Anthropic rather than an increase in total market token consumption.
• Price wars among artificial intelligence models may depress industry value and make supplier usage changes more volatile.
• Open-weight models may continue to divert usage demand from major artificial intelligence labs.
• Industry competitors are well-funded, and Datadog faces product and pricing competition.
• Operating cost scale effects weaker than expected may slow margin expansion.
• Execution missteps or earnings falling short of expectations could lead to significant downside under the current high valuation.

What to watch

• Whether combined token consumption by OpenAI and Anthropic continues to grow, rather than merely reflecting share rotation.
• Whether OpenAI's nine-figure contract generates identifiable excess-usage revenue in the third quarter.
• The impact of Deepseek, KIMI, and other open-weight models on the share of major artificial intelligence labs.
• Whether data sources outside OpenRouter validate the acceleration in usage after OpenAI's price cut.
• Datadog's growth in artificial intelligence-native customers, addition of large customers, and pace of cloud workload production deployment.
• Whether 2026 revenue, free cash flow, and non-GAAP operating margin meet existing forecasts.