Piper Sandler has provided insights into the current market landscape of security and infrastructure software in a recent note to clients. The firm noted a stable demand environment, indicating positive trends for certain companies as they head towards 2026.
In a comprehensive analysis, analyst Rob Owens reported findings from quarterly channel checks that revealed a slight softening compared to late 2025. However, he characterized this trend as typical seasonal behavior, suggesting that the overall market remains robust. Year-over-year results are aligning closely with those of 2025, which Owens interprets as a sign of a stable operating environment that allows for consistent performance in upcoming quarters.
Notably, around 70% of industry respondents indicated that artificial intelligence (AI) projects are impacting spending on non-AI software. Owens reassured that this fluctuation remains within normal parameters and does not constitute a fundamental shift in prioritization. He highlighted that security software continues to dominate market share, with demand particularly strong in the U.S. market.
Given these positive indicators, Piper Sandler expressed strong confidence in two companies, Datadog (DDOG) and Varonis (VRNS), as they approach their upcoming earnings announcements. The firm cited several factors contributing to Datadog’s promising outlook, including de-risked guidance, competitive advantages, and positive usage trends. Owens emphasized the significance of Datadog Experiments, which was introduced in April, as a critical enhancement for product analytics that is expected to lead to a strong performance in the first quarter.
Similarly, Varonis is positioned well, thanks to the launch of its Atlas AI security platform. The firm also noted the conservative assumptions incorporated into Varonis’s 2026 revenue guidance, which Owens described as a de-risked setup. Piper Sandler anticipates that Varonis will surpass expectations in its first-quarter results and is likely to raise its full-year guidance as a result.
In conclusion, both Datadog and Varonis appear well-positioned to navigate the evolving landscape of the software industry, benefiting from stable demand and strategic initiatives that enhance their competitive edge as they move towards 2026.
