Track market-moving stories before they get noisy

Key Takeaways Datadog ended Q1 2026 with about 4,550 customers generating more than $100,000 in ARR.56% of customers use four or more products, while 20% use eight or more, boosting lifetime value.More than 6,500 customers use AI integrations, representing roughly 80% of Datadog's ARR. Datadog’s (DDOG - Free Report) enterprise customer base is strengthening its long-term growth trajectory by driving higher recurring revenues and deeper platform adoption. The company ended the first quarter of 2026 with approximately 4,550 customers generating more than $100,000 in annual recurring revenues (ARR), up from 3,770 a year ago. These large customers now account for nearly 90% of total ARR, highlighting the growing contribution of enterprise clients to Datadog's business.

Management also noted several seven-figure and eight-figure customer wins across industries, with many organizations replacing multiple legacy monitoring tools and expanding deployments to 10-16 Datadog products. This trend is reflected in the company's strong cross-selling performance, as 56% of customers now use four or more products, while 20% use eight or more, supporting higher customer lifetime value and durable subscription revenues.

The rapid adoption of AI is creating another growth path, with more than 6,500 customers using one or more AI integrations, representing roughly 80% of ARR. Datadog further strengthened its enterprise proposition at DASH 2026 by introducing more than 100 new AI, observability and security capabilities, including expanded Bits AI functionality and Agent Observability, which should further deepen enterprise adoption and increase wallet share.

However, the company remains dependent on continued enterprise expansion and IT spending. A slowdown in customer spending, weaker macroeconomic conditions or intensifying competition could moderate ARR growth and limit future revenue expansion. Nevertheless, Datadog's expanding enterprise footprint, strong customer retention, continuous platform innovation and the Zacks Consensus Estimate for 26.62% revenue growth in 2026 indicate that its enterprise-led growth story remains firmly intact.

How Are Competitors Faring?Dynatrace (DT - Free Report) and Elastic (ESTC - Free Report) compete with Datadog in enterprise observability, where platform breadth, enterprise expansion and customer retention drive long-term growth.

Dynatrace challenges Datadog through unified AI-powered observability, deterministic AI and its DPS licensing model that drives broader adoption and consumption. The company reported a fourth-quarter fiscal 2026 NRR of 110%, with more than 75% of ARR on its DPS licensing model and strong cross-sell potential. Dynatrace targets enterprise consolidation, autonomous operations and cloud expansion, while Datadog currently outpaces it in enterprise customer growth and retention.

Elastic competes with Datadog by combining observability, security and AI on a unified platform emphasizing consolidation and context-aware AI. The company is expanding enterprise relationships through larger multiyear commitments, $1 million-plus deals and AI-driven observability. Elastic leverages search expertise and platform consolidation to win upsell opportunities, though Datadog maintains stronger enterprise expansion and higher retention metrics.

DDOG’s Share Price Performance, Valuation & EstimatesShares of DDOG have rallied 79.9% over the past six-month period, outperforming the Zacks Internet - Software industry’s decline of 4.8% and the Zacks broader Computer and Technology sector's growth of 12%.

DDOG’s Six-Month Price Performance
Image Source: Zacks Investment Research

From a valuation standpoint, DDOG stock is currently trading at a forward 12-month Price/Sales ratio of 18.16X compared with the industry’s 3.96X. DDOG has a Value Score of F.

DDOG’s Valuation
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2026 earnings is pegged at $2.41 per share, unchanged over the past 30 days and indicating a 17.56% year-over-year increase.

Image Source: Zacks Investment Research

Datadog stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Takeaways Datadog topped $1 billion in quarterly revenues as first-quarter 2026 sales rose 32% year over year.DDOG unveiled 100 plus AI and security capabilities and acquired Adaptive ML to expand AI agents.Datadog forecasts 2026 revenues of $4.30-$4.34B despite margin, competition and macro risks. Datadog (DDOG - Free Report) shares have surged 88.7% year to date, comfortably outpacing the Zacks Computer and Technology sector's 14.8% growth and the Zacks Internet Software industry's 8% decline over the same stretch of trading.

The rally reflects growing investor confidence in Datadog's role as a core observability and security platform for enterprises navigating increasingly complex, AI-driven infrastructure. With first-quarter 2026 results confirming accelerating growth and management issuing upbeat forward guidance, the near-term setup still looks favorable for investors willing to ride out some volatility, even as rising costs and intensifying competition warrant a genuinely watchful eye.

DDOG Outperforms Sector, Peers YTD
Image Source: Zacks Investment Research

Catalysts Fuelling DDOG’s RallyDatadog's first-quarter 2026 results showed revenues climbing 32% year over year to $1,006 million, marking the company's first quarter above $1 billion and a sequential acceleration from 29% growth in the prior period. Customers with annual recurring revenues of $100,000 or more grew 21% year over year to about 4,550. Non-GAAP operating margin held at 22%, while free cash flow reached $289 million.

Momentum has continued into the current quarter. Last month, Datadog hosted its DASH 2026 conference, unveiling more than 100 new capabilities to help customers manage growing AI and security complexity, including expanded agentic tooling. On June 30, the company announced its acquisition of Adaptive ML, a startup building a Reinforcement Learning Operations platform, which will join Datadog AI Research to accelerate work on specialized AI agents trained on real-world observability signals. The company also achieved FedRAMP High certification during the quarter and launched GPU Monitoring to help customers better manage AI infrastructure spend.

Forward-Looking Guidance by DDOG Holds PromiseFor the second quarter of 2026, Datadog guided revenues between $1.07 billion and $1.08 billion, non-GAAP operating income to be $225-$235 million, and non-GAAP earnings per share between 57 cents and 59 cents.

The Zacks Consensus Estimate calls for 2026 revenues of $4.34 billion, up 26.62% year over year, with earnings pegged at $2.41 per share, up 17.56%, suggesting the current valuation gap is arguably well justified by Datadog's faster, AI-driven observability growth trajectory relative to the broader field.

For full-year 2026, management projected revenues between $4.30 billion and $4.34 billion, non-GAAP operating income to be $940-$980 million, and non-GAAP earnings per share between $2.36 and $2.44, underscoring continued confidence in sustained double-digit growth.

Headwinds Worth MonitoringDespite the strong trajectory, risks remain. GAAP operating margin was just 1% in the quarter, reflecting heavy stock-based compensation and continued R&D investment, including newly absorbed costs tied to the Adaptive ML deal. Continued reliance on large enterprise deals also introduces some lumpiness to quarterly bookings, and management has flagged macro uncertainty tied to trade policy and IT spending as ongoing watch items.

Valuation and Competitive LandscapeDatadog carries a Zacks Value Score of F, trading at a forward 12-month price-to-sales ratio of 19.2X, well above the industry median of 4.78X. That steep premium reflects Datadog's notably stronger growth profile relative to slower-growing peers, whose more modest multiples mirror decelerating or largely flat expansion.

DDOG’s P/S Valuation
Image Source: Zacks Investment Research

DDOG faces significant competition from the likes of International Business Machines (IBM - Free Report) , Cisco Systems (CSCO - Free Report) and Dynatrace Software (DT - Free Report) , among others. Cisco Systems has advanced 45.2%, while Dynatrace has gained 4.1% and International Business Machines has returned 3.4%, highlighting Datadog's clear outperformance against all three legacy and pure-play rivals alike.

Cisco Systems leans on its deep network-layer footprint and hardware relationships to push observability bundles into existing accounts, while Dynatrace differentiates through AI-driven causal analytics aimed squarely at large enterprise customers. International Business Machines folds observability into its broader hybrid-cloud and consulting stack, giving it reach but comparatively less focus. Datadog's unified platform keeps winning share, though Cisco Systems, Dynatrace, and International Business Machines each retain entrenched enterprise relationships that keep the observability and security market intensely contested heading into the second half of 2026.

ConclusionWith accelerating revenue growth, robust guidance and steady AI-driven innovation spanning GPU monitoring, agentic security tooling and the Adaptive ML acquisition, Datadog's growth story remains firmly intact. Despite thin GAAP margins and a crowded competitive field, the near-term outlook still tilts favorably enough for patient, growth-oriented investors to consider Datadog.

DDOG currently carries a Zacks Rank #2 (Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity per the Zacks proprietary methodology. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.