NEW YORK, May 7, 2026, 08:02 (EDT)
- Datadog shares jumped ahead of the open as first-quarter revenue blew past $1 billion, pushing the company to bump up its 2026 outlook.
- Investors zeroed in on software companies with tangible demand from AI workloads—mere AI branding didn’t cut it this time, so the beat stood out.
- Analysts were mostly upbeat ahead of the report. Still, ongoing concerns about competition and the risk to IT budgets haven’t gone away.
Datadog surged more than 20% ahead of the bell Thursday, after the cloud software player topped first-quarter Street forecasts and lifted its outlook for the year. The stock looked set for a standout session, with MarketBeat quoting $177.51 in extended trade—up 23.5% from its prior close. Barron’s cited a premarket move to $175.99.
This time, the distinction is clear: investors are drawing a line between enterprise software firms benefitting from real AI-driven demand and those just pitching the idea. Datadog, for its part, offers observability software—think products that let clients keep an eye on their apps, infrastructure, logs, and security setups as cloud operations get increasingly tangled.
Revenue climbed 32% year over year, reaching $1.006 billion and beating analyst forecasts, which had hovered near $960 million. Adjusted earnings—stripping out stock-based pay and certain acquisition expenses—landed at 60 cents a share. That’s well above the projected 51 cents.
Datadog is projecting second-quarter revenue between $1.07 billion and $1.08 billion, with adjusted EPS coming in at 57 to 59 cents—both figures ahead of analyst expectations, according to Investing.com. Looking out to 2026, the company lifted its forecast: revenue is now pegged at $4.30 billion to $4.34 billion, and adjusted earnings per share at $2.36 to $2.44, all higher than what it had guided previously.
Datadog reported a jump in large customers, counting roughly 4,550 with annual recurring revenue of $100,000 or more—up from about 3,770 a year ago. The company flagged several new offerings tied to AI and security: GPU Monitoring, Bits AI Security Agent, MCP Server and Datadog Experiments.
Chief Executive Olivier Pomel pointed out that customers are adopting “modern, cloud-based, AI-enabled solutions,” also noting that Datadog uses AI itself to “build rapidly across the Datadog platform.” For investors, the takeaway is clear: Datadog is betting that all this AI complexity will translate into more demand—and more billable business—for its monitoring and security services. GlobeNewswire
Just ahead of its earnings report, Datadog announced that its government product secured FedRAMP High certification, meeting a key U.S. federal standard for handling sensitive but unclassified data. Emilio Escobar, the company’s Chief Information Security Officer, said the nod allows agencies to run “secure workloads” in areas that were off-limits before. GlobeNewswire
Before the numbers hit, analysts generally leaned bullish. Jefferies bumped its Datadog price target up to $170 from $160, sticking with its buy call. MarketBeat tagged the shares with a Moderate Buy consensus right ahead of the post-earnings rally. Over on Yahoo, a Zacks piece pointed to Datadog’s average brokerage recommendation at 1.29—just shy of a strong buy—though it flagged that metric as only part of the picture.
Not every recent call was a straight upgrade. DA Davidson’s Gil Luria stuck with a Buy and a $225 target, while Blair Abernethy at Rosenblatt, Raimo Lenschow over at Barclays, and CIBC’s Todd Coupland all kept their bullish ratings but cut their targets ahead of the print, Benzinga reported.
It’s a packed landscape. Datadog has flagged Cisco and Dynatrace as competitors in application performance monitoring, and pointed to Elastic when it comes to log management. Native tools from big cloud vendors are in the mix too. The company cautioned that certain competitors have more firepower and could squeeze prices.
Thursday’s surge in Datadog shares assumes smooth sailing ahead. But any chill in AI demand, tighter IT budgets, or competitors packing cheaper monitoring features into bigger packages could put pressure on that upgraded forecast. Datadog’s filings themselves flag competition, tech shifts and weaker IT spending as threats to growth.
