Waiting For The NNARRative To Catch Up

Research evidence excerpt

Waiting For The NNARRative To Catch Up

1.93

quarter. F4Q NNARR did not match the strength of the FY27 narrative. FY27 guide requires better

conversion and productivity, and investors may cap the multiple until DT shows cleaner evidence

of NNARR acceleration. Sales rep productivity is taking longer than expected to show in results. Chart 1 - DT Execution Issues Have Resulted in

Steady Share Loss to DDOG

Mgmt said GTM changes made over the last two years are “starting to take root,” with FY27 more

38% 37% 37% 37% 36% 35% 35%of a continuation than a new playbook. 38%

Our view. We acknowledge enterprise AI adoption remains slower, and DT will likely feel this later DTDDOG 62% 62% 63% 63% 63% 64% 65% 65%

than DDOG given its large-enterprise bias and longer adoption curves. The bear case centers

around: despite ~2 years post-GTM overhaul, sales productivity gains remain hard to prove, and . CY2Q24 CY3Q24 CY4Q24 CY1Q25 CY2Q25 CY3Q25 CY4Q25 CY1Q26

DT has continued to lose share to DDOG. That said, we believe the opportunity is still ahead as AI Source: Jefferies, Company Data

workloads move from pre-prod into production, driving higher observability demand. Valuation is Chart 2 - NNARR Is Improving; FY27 Guide

near trough levels at 13x CY27 FCF, with the Street embedding no FY28 growth acceleration and Implies Acceleration But Execution Needs to

little to no credit for AI-native traction, and the stock appears to be pricing in stabilization instead of Step Up

acceleration which should limit further downside risk. We expect the FY27 guide to face scrutiny, but $277 ~$330~22%

see the F1H27 setup as achievable, supported by improved 3-6 month pipeline visibility and NNARR $248

weighted modestly more to F1H vs. historical seasonality, which should help underpin the stock