Morgan Stanley indicated that several companies, including Datadog (DDOG.US), JFrog (FROG.US), Palantir Technologies (PLTR.US), Atlassian (TEAM.US), and Dynatrace (DT.US), possess the potential for modest growth acceleration and potential upward revisions to full-year guidance ahead of quarterly software earnings reports. The firm noted that despite these stocks having significantly underperformed, the underlying demand environment remains healthy.

Analysts led by Sanjit Singh stated that over the past month, infrastructure software stocks (excluding next-generation cloud providers) have declined approximately 15%, underperforming both the IGV index (-13%) and the Nasdaq Composite (+1%), primarily due to renewed concerns about intensifying AI-native competition. "Nevertheless, our intra-quarter industry checks suggest a solid Q1 demand environment and cautious optimism for 2026, reflecting strong public cloud spending, resilient cloud migration trends, a notable increase in new AI-related software development initiatives, and a corporate preference for consolidating spending with platform vendors rather than narrow point-solution providers," Singh and his team stated.

The analysts noted they have not observed negative impacts on Q1 deal closures from heightened geopolitical tensions or rising energy costs, though they cautioned that if current conditions persist, this could become a risk factor later in the year. "From a vendor perspective, among companies reporting in the coming weeks, our channel checks for Datadog indicate the strongest fundamental setup, followed by Palantir and JFrog. Feedback for Dynatrace is also positive, while results for Appian and Atlassian are mixed. Our constructive view from partner conversations is supported by the latest CIO survey, which showed an improvement in 2026 software budget growth expectations to 4.1%, up from 3.7% last quarter," Singh's team added.

The analysts further commented that, given the declines in these stocks ahead of Q1 earnings, they find Datadog, JFrog, and Palantir to be the most attractive investment opportunities. They noted that Atlassian (whose fiscal quarter ends in June) and Dynatrace (this quarter) still need to provide initial FY2027 guidance, which typically introduces an additional element of risk.

**Datadog** Morgan Stanley maintains an "Overweight" rating on Datadog with a $180 price target. "Datadog enters Q1 in a good position with clear fundamental growth momentum, slightly improved channel checks, and potential to re-accelerate to over 30% revenue growth, while also having room for upward revisions to Q2 and FY2026 estimates," the analysts said. Singh's team pointed out that while the stock's valuation multiples remain at a premium, the recent pullback and more cautious investor positioning create room for a positive stock reaction if the company meets or exceeds expectations.

**JFrog** Morgan Stanley maintains an "Overweight" rating on JFrog with a $70 price target. "JFrog enters Q1 from a position of strength, with recent results showing robust fundamental growth momentum, sequentially improved channel feedback, and our analysis pointing to re-acceleration in Q1 growth, alongside potential for upward revisions to Q2 and FY2026 guidance," Singh's team stated. The analysts added that despite the stock trading at a premium, the sell-off following February's announcement of Claude Code Security by Anthropic has created potential for share price appreciation.

**Palantir** Morgan Stanley rates the stock "Equal-Weight" with a $205 price target. Singh's team stated that Palantir enters Q1 well-positioned, as its exceptional fundamental momentum, positive channel checks, and potential for upward estimate revisions contrast with more cautious positioning following the recent stock decline. "Fundamentals remain exceptionally strong, with U.S.-led growth acceleration, expanding large customer adoption, and industry-leading margins making the path to a $10 billion revenue target increasingly credible," the analysts added.

**Atlassian** Morgan Stanley maintains an "Overweight" rating on Atlassian with a $120 price target. Analysts led by Keith Weiss noted that sentiment remains subdued around Atlassian's FQ3 earnings release, as the stock has underperformed the Nasdaq over the past month. "Consensus expects FQ3 Cloud/Total revenue growth of 23%/25% and FQ4 growth of 22.6%/19.5%, whereas we project Atlassian's FQ3 Cloud revenue to grow 27%-28% and Total revenue to grow 28%-29%, with FQ4 Cloud growth around 24% and Total revenue growth of 20%-21%, both above consensus," Weiss and his team stated. The analysts added that this should provide support for the stock, but they expect any rally may be difficult to sustain as broader AI-related skepticism towards the per-seat licensing model for software might persist. Furthermore, they indicated that concerns about next quarter's FY2027 guidance potentially falling short of consensus expectations will likely remain an overhang.

**Dynatrace** Morgan Stanley rates the stock "Equal-Weight" with a $43 price target. "Dynatrace enters FQ4 with recently improved positioning, stabilizing fundamentals, and positive channel checks. A setup for potential earnings beats and modest guidance increases could support a positive post-earnings reaction," the analysts said. However, they noted that the bar for a more meaningful valuation re-rating remains high, as investors will likely require more concrete evidence of a re-acceleration in Annual Recurring Revenue (ARR) growth beyond the current quarter.