Datadog (DDOG) is expected to deliver Q3 upside to Street estimates thanks to demand for its platform of observability and security tools, BofA Securities said in a preview note Wednesday.

"We think Datadog is squarely becoming an AI-beneficiary," BofA analysts Koji Ikeda and George McGreehan said.

"As more AI experiences become available, it's likely going to be a share gainer," the analysts said. The Q3 results are due Nov. 6.

They raised their Q3 total revenue estimate 15 basis points above consensus and non-GAAP operating income 34bps above.

"Quality comes at a price," the analysts said, pointing to the stock trading at a premium to its infrastructure software peers.

BofA kept its buy rating while raising its price objective to $180 from $175, citing rising confidence in its execution potential.

Price: 156.09, Change: -1.18, Percent Change: -0.75