Datadog

Revenue jumped 32% year over year to over 1 billion dollars in the first quarter of 2026, an acceleration from the 28% pace last year. Big customers paying 100,000 dollars or more in annual recurring revenue grew 21% to about 4,550. Datadog also just launched GPU Monitoring, an AI security agent, and an MCP server that plugs directly into AI coding tools, so usage scales as customers ship more AI workloads.

Datadog generated 335 million dollars in operating cash and 289 million dollars in free cash flow in a single quarter, with 4.8 billion dollars sitting on the balance sheet. Non-GAAP operating margin came in at 22%, and full year guidance calls for up to 4.34 billion dollars in revenue and 980 million dollars in non-GAAP operating income. They can keep funding new AI products without leaning on debt.

GAAP operating margin was just 1% in the quarter, because heavy stock based pay and AI investment keep reported profits thin. The stock still trades at a steep multiple to slower software peers, so any slip in growth or AI spending could sting. Full year guidance implies the second half slows back toward the mid 20s percentage range after this quarter's 32% pop.

AWS, Azure, and Google all sell their own monitoring tools bundled into cloud bills, and they can discount aggressively. Datadog has to keep proving it is worth a separate line item, especially as 87% of organizations already run software with known vulnerabilities and CFOs scrutinize every software bill. New entrants in AI observability are also racing for the same budget.