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Investing.com -- In a note to clients on Wednesday, Piper Sandler pointed to a stable demand backdrop across security and infrastructure software, with the firm highlighting two stocks best positioned for 2026.
Datadog (NASDAQ: DDOG) and Varonis Systems (NASDAQ: VRNS) are the companies in question.
Analyst Rob Owens says quarterly channel checks showed a modest softening relative to late 2025, but stresses this is “relatively par for the course” given typical seasonality.
Year over year, results were in line with what was seen in 2025, which the analyst interprets as evidence of a “stable operating environment that is conducive to solid quarters.”
While roughly 70% of respondents reported that AI projects are affecting non-AI software spending, Owens says this remains within normal ranges and does not signal a “step function change” in prioritization. Security continues to gain wallet share, and demand remains strongest in the U.S.
Against that backdrop, Piper Sandler has “the most confidence in DDOG and VRNS” heading into upcoming earnings.
For Datadog, the firm cites derisked guidance, favorable competition and strong usage trends. Owens notes that Datadog Experiments, which was launched in April, marks “an important step” in expanding product analytics and supports expectations for a first-quarter beat-and-raise.
For Varonis, the launch of its Atlas AI security platform and conservative assumptions embedded in its 2026 revenue guide create what Owens calls a de-risked setup. Piper Sandler expects first-quarter results to come in ahead of expectations, with a full-year guidance raise likely.