Datadog's (DDOG) strong fundamentals and expected Q2 growth acceleration should keep investors willing to buy the stock despite its valuation and recent run-up, UBS Securities said Wednesday in a report.

After speaking with customers and partners, UBS said companies are prioritizing spending on infrastructure and application monitoring, while spending on software-as-a-service subscriptions and IT services is being trimmed. Several customers also told UBS the company is gaining share as enterprises consolidate monitoring tools.

UBS expects Datadog's growth to re-accelerate in Q2, even as many software-as-a-service and application software firms report weaker June and July results. Sentiment on Datadog remains "very positive," though expectations for OpenAI-related spending upside have moderated, the report said.

Q2 results are expected Aug. 6.

UBS increased its price target on Datadog stock to $315 from $220 and maintained its buy rating.

Price: 261.35, Change: -3.11, Percent Change: -1.18