Datadog Pressure Rises: Snowflake Eyes Observe Now

Introduction

Datadog (NASDAQ: DDOG) saw a flurry of material headlines over the past week that directly affect its competitive stance and investor sentiment. A potential acquisition by Snowflake of the observability startup Observe, a notable analyst price-target reduction, sizable insider and institutional selling, and a security integration win for Datadog combined to create a nuanced story: intensifying competitive pressure on one hand, and product-driven revenue momentum on the other.

Recent events that matter

Snowflake’s reported talks to buy Observe

Late last week, reports indicated Snowflake entered discussions to acquire Observe, an AI-enabled observability vendor, in a deal reportedly near $1 billion. If completed, this move would give Snowflake a more direct foothold in observability and real-time analytics—areas that overlap with Datadog’s core capabilities. Snowflake’s cloud data-platform scale and go-to-market strength mean any acquisition of Observe could accelerate feature parity and bundling offers against standalone observability vendors.

Analyst and institutional signals

Wolfe Research lowered its Datadog price target from $240 to $185 while keeping an Outperform rating, signaling more cautious near-term expectations even as other firms maintain bullish stances. At the same time, filings show meaningful selling: the National Pension Service trimmed its stake and insiders have disposed of a substantial number of shares over recent months. Collectively, insider and institutional moves totaling roughly two million shares—valued in the low hundreds of millions—heighten short-term scrutiny on management’s outlook and the stock’s valuation.

Product and revenue developments

Contrast Security integration into Cloud SIEM

Datadog announced an integration that embeds Contrast Security’s runtime sensors into Datadog’s Cloud SIEM. This tight integration improves application-layer detection and reduces false positives by surfacing actual runtime exploits to the SIEM workflow, rather than noisy telemetry. From a product perspective, this strengthens Datadog’s pitch as a unified observability-plus-security platform—making it harder for customers to split observability and security tooling across vendors.

Security ARR momentum

Datadog’s security annual recurring revenue has been expanding materially, with recent quarterly disclosures showing meaningful sequential growth. The acceleration of security ARR supports a strategic narrative: beyond monitoring and traces, Datadog is monetizing more deeply into threat detection, Cloud SIEM, and application runtime protection—areas that drive higher retention and larger per-customer spend.

Why these developments affect DDOG stock

The combination of competitive moves and internal execution factors creates a two-fold dynamic for DDOG shares. First, Snowflake potentially building or buying observability capabilities increases competitive intensity—raising questions about pricing pressure and customer churn if Snowflake bundles new features into its data-cloud offerings. Second, Datadog’s deepening security integrations and accelerating security ARR provide tangible growth engines and product differentiation that can support valuation.

Short-term sentiment vs. long-term positioning

In the near term, analyst target adjustments and material selling by insiders or institutions can create volatility. Wolfe’s lower target is a cautionary datapoint for investors weighing upside from recent price gains. Over the longer horizon, product integrations that increase stickiness—like the Contrast Security embedding—are durable positives: they broaden use cases and raise switching costs for enterprise customers.

Key indicators for investors

• Progress or completion of any Snowflake-Observe transaction and announced roadmap integrations that might compete with Datadog features.
• Sequential trends in Datadog’s security ARR and overall ARR growth on upcoming quarterly reports.
• Insider filing activity and institutional flows that could affect supply pressure in the stock.
• Analyst revisions and commentary—watch whether peers converge or diverge further on price targets.

Conclusion

The past week delivered concrete developments that shift the balance of risk and opportunity for Datadog. Snowflake’s potential move into observability heightens competitive risk, while the Contrast Security integration and robust security ARR growth reinforce Datadog’s value proposition. For investors and stakeholders, the near-term picture may be choppy as sentiment reacts to analyst notes and selling activity, but product-led momentum in security provides a credible path for sustaining ARR expansion and customer retention over time.