Shares of Datadog (DDOG) are up over 30% at the time of writing after the cybersecurity firm reported stronger-than-expected first-quarter results and raised its full-year outlook. For Q1, non-GAAP EPS rose by about 30% year-over-year to $0.60, while revenue increased by roughly 32% to about $1 billion, beating estimates on both the top and bottom lines.
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CEO Olivier Pomel said that Datadog delivered a strong quarter with $335 million in operating cash flow and $289 million in free cash flow. The company also ended the quarter with $4.8 billion in cash, cash equivalents, and marketable securities. In addition, it had about 4,550 customers generating at least $100,000 in annual recurring revenue, up 21% from about 3,770 a year earlier, as shown in the image below.
Datadog’s Q2 Outlook
For Q2, Datadog expects revenue of $1.07 billion to $1.08 billion, which is well above the $994.47 million consensus estimate, along with non-GAAP EPS of $0.57 to $0.59 versus the $0.50 expected. For full-year 2026, management raised revenue guidance to $4.30 billion to $4.34 billion from $4.06 billion to $4.10 billion, while lifting its non-GAAP EPS outlook to $2.36 to $2.44 from $2.08 to $2.16.
Wedbush Maintains Buy Rating on DDOG Stock
Analysts at Wedbush, led by five-star analyst Dan Ives, said that the results and guidance were much stronger than expected due to demand from Datadog’s AI-native customer base. As a result, Wedbush maintained its Buy rating and $190 price target. The investment firm noted that about 6,500 customers use at least one Datadog AI integration, representing around 20% of total customers but roughly 80% of total ARR.
Wedbush also pointed to strong growth in AI-related usage, with agent investigations more than doubling quarter-over-quarter, observability activity tripling, and MCP server tool usage rising nearly fourfold. In addition, Datadog signed new deals with two major AI research teams to improve training and inference workflows, which Wedbush viewed as validation that software companies can benefit meaningfully from AI spending.
Is DDOG Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DDOG stock based on 35 Buys, one Hold, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average DDOG price target of $176.39 per share implies 5.3% downside risk. However, it’s worth noting that estimates will likely change following today’s earnings report.
