Top infrastructure software stocks ahead of earnings: BofA Securities

BofA Securities has identified infrastructure software as an attractive sector heading into third-quarter earnings, highlighting two companies as top picks in the space.

The firm expects the third-quarter earnings cycle will demonstrate that infrastructure software remains more durable and shows greater artificial intelligence benefits compared to other software subsectors. After conducting industry checks and analyzing data signals, BofA Securities believes demand for infrastructure software is increasing, with AI becoming a higher contributor to growth and platform usage. Companies that can prove AI is a positive tailwind to growth are likely to see their stocks rerate, despite premium valuations. The firm raised price objectives for multiple companies in the sector, including AMPL, DDOG, DT, ESTC, FROG, GTLB, PD, and TEAM, while lowering its target for PATH.

Datadog (DDOG)

BofA Securities highlights Datadog as the best share gainer in a faster-growing total addressable market. The firm believes the observability market is growing faster than previously thought, with enterprise AI accelerating and consumer agents ramping quickly as primary drivers. The key metric to watch is total revenue growth, where BofA Securities and the Street model 28.7% and 29.1%, respectively. The firm notes that one underappreciated aspect of Datadog’s business is its security offerings, which crossed $100 million in annual recurring revenue in the second quarter of 2025. Security growth accelerated to the mid-50s percentage range from the mid-40s percentage range year-over-year. BofA Securities maintains a Buy rating and raised its price objective to $335 on improved demand expectations.

Atlassian (TEAM)

Despite the stock rising more than 280% from its April trough of around $57, BofA Securities believes there is still room for the stock to rerate if results continue to support its view that Atlassian is a long-term AI beneficiary. The key metric to watch is Cloud revenue growth, where the firm and the Street model 28.5% and 28.9%, respectively. BofA Securities believes the Street may be underappreciating Atlassian’s two decades of work context, which is important for driving more efficient and lower-cost AI. The firm reiterates its Buy rating and raised its price objective to $252 from $210.