Wall Street just turned bullish on Datadog again — Here’s why
Investing.com — Cloud monitoring company Datadog received a major vote of confidence from analysts at Citizens JMP Securities, who upgraded the stock to “Market Outperform” and raised their price target to $225 following stronger-than-expected first-quarter 2026 results.
The earnings surprise triggered a sharp rally in Datadog shares, which climbed nearly 29% intraday and are now up roughly 39% year-to-date, significantly outperforming the broader Russell 3000 Index.
A key theme in the earnings report was the impact of artificial intelligence on Datadog’s business. While investors had questioned whether AI coding tools could reduce the need for observability software, Citizens analysts argued the opposite is occurring. According to the report, AI adoption is increasing software complexity and infrastructure workloads, driving greater need for monitoring, identity management, and data visibility tools.
Datadog reported quarterly revenue of $1.006 billion, up 32% year-over-year and ahead of analyst expectations of $960 million. Adjusted earnings per share came in at $0.60, beating consensus estimates of $0.51. The company also posted billings growth of 37% and remaining performance obligations (RPO) growth of 51%, signaling sustained demand for its cloud observability platform.
CEO Olivier Pomel said Datadog saw “broad based acceleration of revenue growth across cohorts, including both AI and non-AI customers.” The company also disclosed major new contracts with two of the world’s largest AI research teams, including seven-figure and eight-figure annualized deals tied to AI training workloads and GPU optimization.
The company raised its outlook for both the current quarter and full year. Datadog said it expects 2026 revenue between $4.30 billion and $4.34 billion, representing approximately 26% annual growth, while projecting adjusted EPS of $2.36 to $2.44.
Analysts also highlighted Datadog’s expanding product portfolio and growing customer adoption. The percentage of customers using eight or more Datadog products rose to 20% in the first quarter, compared with 10% two years earlier.
Citizens JMP analysts said Datadog’s long-term positioning remains strong due to its role in managing increasingly complex cloud and AI infrastructure, its expanding total addressable market, and leadership under CEO Olivier Pomel and CFO David Obstler.
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