3 of the Market's Most-Upgraded Tech Stocks Right Now

Key Points

• Datadog, CrowdStrike, and Palo Alto Networks stand out on MarketBeat's most-upgraded stocks list despite broader pressure on the AI trade.
• Datadog shares fell almost 19% after beating earnings estimates, showing that stretched valuations leave little room for anything short of perfection.
• CrowdStrike and Palo Alto Networks have surged year-to-date on cybersecurity strength, but upcoming earnings reports will test whether their premium valuations are justified.

Even as the AI trade has come under pressure, analysts have kept raising their targets on a select group of technology names.

Three in particular stand out on MarketBeat's most-upgraded stocks list right now: Datadog, CrowdStrike, and Palo Alto Networks. All three are software leaders, two sit in the red-hot cybersecurity space, and all three have drawn steady analyst upgrades. But recent price action has told three very different stories.

Datadog: Relative Strength, Until Earnings Changed the Story

Datadog NASDAQ: DDOG was a textbook example of relative strength heading into its last earnings report. While much of the AI complex sold off through July, the observability leader held its ground and traded near its highs, outperforming the broader tech space in weathering the pullback. Then earnings arrived, and the picture shifted abruptly.

On Aug. 6, Datadog reported second-quarter results that actually beat on both revenue and earnings, with revenue climbing 36% year over year, and management raised its full-year outlook. Yet the stock fell by almost 19% in a single session, closing at $229.29 that day.

The culprit was expectations. After a huge run that left shares up over 100% on the year, the bar was set extremely high, and signs of cooling bookings growth were enough to trigger aggressive profit-taking. It was a stark reminder that a great quarter and a rising stock are not always the same thing when valuation is stretched.

Even so, analysts remain constructive and bullish, with a Moderate Buy consensus across 45 analysts, a $274.05 average target implying about 15% upside, and projected earnings growth above 64%. From a technical perspective, DDOG will now need to digest its recent earnings sell-off, build out a fresh base, and develop newfound support.

CrowdStrike: Cybersecurity Strength With Earnings Still Ahead

CrowdStrike NASDAQ: CRWD has been one of the clearest beneficiaries of the rotation into cybersecurity, a group that has notably outperformed while the broader AI trade has cracked. The stock is up close to 77% year-to-date, and it sits only about 5% below its 52-week high of $219.35, a level of resilience most tech names would envy right now.

The business momentum has been backed by real developments, including a new partnership with Cerebras Systems NASDAQ: CBRS to accelerate its Falcon AI security inference and a recently announced $100,000 international AI security challenge in partnership with Amazon’s NASDAQ: AMZN AWS.

But the key event now is earnings, scheduled for Aug. 26.

One important statistic worth noting: Even though the stock has enjoyed a flurry of recent upgrades and a consensus Moderate Buy rating, after its powerful run, including an almost 65% surge this quarter alone, the consensus price target of $185.78 is now below the current share price. That’s a sign that the stock has largely outpaced where analysts' models are currently set, even as upgrades continue to roll in. This makes the upcoming earnings report all the more important, as the market will require it to justify the premium and stellar performance.

Palo Alto Networks: The Heavyweight Near Its Highs

Palo Alto Networks NASDAQ: PANW rounds out the trio of the three most-upgraded stocks right now, as the largest pure-play cybersecurity name, with a market cap quickly approaching $300 billion. The stock has been a standout performer, up more than 95% year to date. Its platformization strategy, consolidating firewalls, cloud security, and AI-driven security operations into a single stack, has helped it become a leading enterprise choice as companies race to secure their AI deployments.

The one fresh headline and potential catalyst to watch is geopolitical. China recently launched a cybersecurity review into Palo Alto's products, a development worth monitoring given the company's global footprint.

Even so, sentiment remains strong, with a Green Zone health reading for over three months and one of the more positive news sentiment scores in large-cap tech. Earnings are estimated for Aug. 17. As with its cybersecurity peers, the valuation is rich, and the consensus target of $333.76 sits modestly below the current price.

Still, leadership names in a hot sector rarely screen as cheap. Similar to CRWD, PANW has seen a host of positive analyst actions over the prior month and holds a consensus Moderate Buy rating.

The Common Thread

These three names share analyst enthusiasm, but they highlight an important lesson for this stage of the cycle. Upgrades and momentum are powerful tailwinds, yet as Datadog's almost 19% drop showed, richly valued software stocks leave little room for anything less than perfection.

CrowdStrike and Palo Alto, both riding the cybersecurity wave that has led the market through the AI correction, now face their own tests with their respective earnings releases. How they navigate those reports will reveal whether the sector's leadership can hold.

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