Datadog Soars, Dynatrace Slumps: Gap Widens in AI Agent Stocks

Summary

Artificial intelligence (AI) agents are becoming an increasingly important talking point in the tech world. Using AI agents, enterprises have the opportunity to automate repetitive and lower-value-add workflows. The presumed benefits of this are twofold: lowering costs and spending more time on higher-value tasks. However, AI agents are unlikely to see huge adoption overnight. Rather, organizations will look to install them carefully over time, prioritizing the need to effectively monitor and correct their performance. That is where two key stocks come in: Datadog NASDAQ: DDOG and Dynatrace NYSE: DT. Their observability platforms provide the necessary tools to implement AI agents at scale. Notably, both of these software stocks faced considerable pressure in late 2025 to early 2026, getting caught up in the general software sell-off. However, more recently, Datadog has taken off, while Dynatrace sits near its 52-week low.Get Dynatrace alerts:Sign Up Given this, does one name clearly represent a better opportunity than the other? Let’s examine both companies' most recent earnings reports, valuations, and analyst takes to assess this question. Datadog Soars After Highly Impressive Q1 ReportIn May, Datadog has gone from beaten down to hitting all-time highs. In early April, Datadog had fallen as much as 47% from its past 52-week high. Shares are now up over 50% in May, closing at never-before-seen levels above $200 per share. The big contributor to this was Datadog’s blockbuster Q1 2026 earnings report. Datadog Today$207.98 0.00 (0.00%) As of 05/15/2026 04:00 PM Eastern52-Week Range$98.01▼$211.28P/E Ratio547.33Price Target$213.38 The firm saw revenue growth of 32.1% year over year (YOY) to just over $1 billion. Growth accelerated meaningfully from 29% YOY last quarter and 25% YOY a year ago. Adjusted earnings per share rose by 30% to 60 cents. Both figures walloped analysts’ expectations of $960 million and 51 cents, respectively. Adjusted operating margin remained sta...