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The software landscape is shifting beneath our feet. We have moved past the initial hype cycle of generative AI and entered a phase of critical infrastructure build-out. Investors are no longer just looking for the companies building the flashy chatbots; they are hunting for the foundational players that keep the digital economy running.
For 2026, the smart money is flowing toward resilience, visibility, and security. As enterprises scale their AI workloads and cloud environments, two distinct needs have emerged: the ability to see everything happening inside complex systems and the ability to verify human identity in a world of deepfakes.
This analysis dives into two companies that perfectly address these needs: Datadog (DDOG) and Intellicheck (IDN). Both represent compelling opportunities for investors looking for the top software stocks 2026 has to offer. While one is a large-cap leader in cloud observability, the other is a high-margin specialist fighting the front lines of identity fraud.
Let’s break down why these two stocks belong on your watchlist this year.
The Shift to Essential Infrastructure
Before we analyze individual tickers, it is crucial to understand the macro environment driving these choices. The "growth at all costs" mantra of the early 2020s has been replaced by a focus on efficiency and security.
Companies are not just buying software; they are buying outcomes. They need tools that prevent downtime, stop fraud, and optimize cloud spending. This shift favors companies with "sticky" products—platforms that become so integral to a business's daily operations that removing them would be nearly impossible.
This is where our two picks for best stocks for AI and cloud shine. They provide the "plumbing" and "security systems" for the modern digital house.
Datadog (DDOG): The Nervous System of the Cloud
If you want to understand why Datadog stock analysis is so bullish right now, you have to look at the problem they solve. Modern cloud environments are incredibly complex. A single transaction might pass through dozens of different servers, databases, and microservices. When something breaks, finding the needle in the haystack can take hours.
Datadog solves this by providing a "single pane of glass" that allows IT teams to monitor their entire stack in real-time.
Financial Performance and Growth
Datadog has transitioned from a high-growth disruptor to an institutional staple. Their recent inclusion in the S&P 500 signals their maturity, but their numbers show they haven't lost their growth engine.
Revenue Growth: The company consistently posts double-digit revenue growth, driven by a massive shift toward cloud migration.
Rule of 40: Datadog is a rare "Rule of 40" company, meaning its combined revenue growth rate and profit margin exceed 40%. This is the gold standard for software efficiency.
Free Cash Flow: They are generating significant cash, providing a fortress balance sheet that protects them against market volatility.
The AI Catalyst
Datadog isn't just watching the AI revolution; they are securing it. As companies build their own Large Language Models (LLMs) and AI applications, they need new tools to monitor them.
Datadog has aggressively rolled out AI-native products, including LLM Observability. This allows engineers to troubleshoot AI models just like they troubleshoot servers. This positions them as a primary beneficiary of AI and cloud infrastructure stocks spending.
Valuation Perspective
Trading at a premium, Datadog is rarely "cheap" by traditional value investing standards. However, quality commands a price. With high net revenue retention—meaning existing customers keep spending more each year—Datadog compounds value over time. For investors with a long-term horizon, the current valuation reflects its dominance in a market that is still in the early innings of growth.
Intellicheck (IDN): The Identity Gatekeeper
While Datadog secures the servers, Intellicheck secures the front door.
Identity fraud has exploded. The rise of generative AI has made it terrifyingly easy to create synthetic identities and fake documents that pass traditional checks. This is the tailwind driving the Intellicheck stock forecast.
A Profitable Pivot
Intellicheck (IDN) is a fascinating story of a business transformation. They successfully pivoted from selling low-margin hardware to a high-margin Software-as-a-Service (SaaS) model.
SaaS Economics: Over 90% of their revenue now comes from recurring SaaS subscriptions or transaction fees.
Gross Margins: Their software focus has pushed gross margins above 90%, a figure that is elite even among top-tier tech companies.
Profitability: Unlike many micro-cap tech stocks that burn cash, Intellicheck has turned the corner into profitability.
Fighting the "Deepfake" Era
Traditional barcode scanners are no longer enough. Criminals can print barcodes that scan perfectly but are attached to fake IDs. Intellicheck’s proprietary technology doesn’t just scan the barcode; it analyzes the hidden security features of the ID format itself.
This level of precision is becoming mandatory for banks, auto dealers, and high-value retailers. A single instance of fraud can cost a bank tens of thousands of dollars. Paying a small fee to Intellicheck to prevent that loss provides an immediate Return on Investment (ROI).
Market Expansion
Initially focused on retail, Intellicheck has successfully expanded into banking and title insurance. These sectors have much higher average transaction values and deeper pockets. The company’s recent wins with major regional banks validate their technology is enterprise-ready.
For investors, IDN offers a different risk/reward profile than DDOG. It is a smaller company with higher volatility, but the potential upside from widespread adoption in the banking sector is significant.
Comparing the Opportunities
How do these two fit into a portfolio?
Feature
Datadog (DDOG)
Intellicheck (IDN)
Market Cap | Large Cap ($40B+) | Micro Cap (<$200M) |
Primary Focus | Cloud Observability & Security | Identity Verification & Fraud Prevention |
Growth Driver | AI adoption & Cloud Migration | Rising Fraud Rates & Banking Adoption |
Risk Profile | Moderate (Blue Chip Tech) | High (Small Cap Growth) |
Best For | Core Portfolio Holding | Aggressive Growth Satellite |
The "Barbell" Strategy
A smart way to approach top software stocks 2026 is a "barbell" strategy. You anchor your portfolio with a stable, dominant compounder like Datadog that gives you exposure to the broad theme of cloud computing. Then, you allocate a smaller portion to a high-upside specialist like Intellicheck that targets a specific, urgent problem like identity fraud.
Why 2026 is the Year of "Invisible" Software
Both Datadog and Intellicheck operate in the background. You don't see Datadog when you use a streaming service, but it ensures the video doesn't buffer. You don't see Intellicheck when you open a bank account, but it ensures your identity isn't stolen.
This "invisibility" is their strength. These aren't consumer fads that can be replaced by the next cool app. They are infrastructure.
As we move through 2026, the market will likely continue to reward companies that demonstrate operating leverage—the ability to grow revenue faster than expenses. Both DDOG and IDN have proven they can do this. Datadog does it through scale and upsell; Intellicheck does it through high-margin transaction volume.
Conclusion: Visibility and Trust
The digital economy runs on two currencies: visibility and trust.
Datadog provides the visibility required to manage complex global systems. It is the eyes and ears of the modern enterprise. As long as companies continue to migrate to the cloud and experiment with AI, Datadog remains essential.
Intellicheck provides the trust required to transact with confidence. It is the gatekeeper that separates real customers from synthetic fraudsters. As long as fraud becomes more sophisticated, Intellicheck’s technology becomes more valuable.
For investors analyzing top software stocks 2026, looking beyond the hype is key. Focus on the utilities of the digital age. Focus on the companies that solve expensive problems with scalable software. Both Datadog and Intellicheck fit that description perfectly.
Next Steps for Investors
Deep Dive: Use Snowball Analytics to review the financial health and dividend history (if applicable) of these tickers.
Monitor Earnings: Watch the next quarterly reports for Datadog's net revenue retention and Intellicheck's transaction volume growth.
Assess Risk: Determine how these stocks fit into your overall diversification strategy.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.
