Datadog, Inc. Q1 FY2026 earnings

Datadog reported first quarter fiscal 2026 revenue of $1.01 billion, up 32.2% from $761.55 million in the prior-year quarter. Management said about 75% of the increase came from existing customers and the remaining 25% from new customers. The customer base kept widening. Datadog ended the quarter with roughly 33,200 customers, compared with about 30,500 a year earlier, and about 4,550 customers spending $100,000 or more in ARR, up from about 3,770. Those larger accounts now make up 90% of ARR, up from 88% a year ago. The trailing 12-month dollar-based net retention rate rose to the low-120%'s from the high-110%'s, which management tied to stronger usage growth from existing customers.

Product adoption is broadening inside those accounts. About 85% of customers used two or more products, up from about 83% a year earlier. Roughly 56% used four or more, up from about 51%. About 35% used six or more, up from 28%. About 20% used eight or more, up from 13%, and about 11% used ten or more, up from 6%. The backlog tells a similar story. Remaining performance obligations were $3.48 billion, up 50.9% from $2.31 billion. Current deferred revenue was $1.23 billion, up 29.7% from $949.14 million.

The profit picture changed shape this quarter. GAAP operating income was $7.33 million against a prior-year quarter operating loss of $12.42 million, and the operating margin moved to 0.7% from -1.6%. Gross margin was flat at 79.2% versus 79.3%, with gross profit up 32.0% to $797.20 million. Net income rose 113.4% to $52.57 million, and diluted EPS was $0.15 versus $0.07. On a non-GAAP basis, the release showed operating income of $223 million and a 22% operating margin, plus non-GAAP diluted EPS of $0.60. Operating cash flow was $334.62 million, up 23.2% from $271.54 million. Free cash flow, a separate measure that also deducts capitalized software and property purchases, was $289 million. Capital expenditures were $11.36 million, up 29.8%. The quarter closed with $4.8 billion in cash, cash equivalents and marketable securities.

Datadog shipped a heavy product slate. General availability launches included GPU Monitoring, Datadog Experiments, the MCP Server, and the Bits AI Security Analyst inside Cloud SIEM, which the company says can cut threat investigation time by up to 98%. The company also achieved FedRAMP High certification for Datadog for Government and signed a strategic partnership with Sakana AI centered on enterprise AI adoption, starting with large customers in Japan. Its State of AI Engineering 2026 Report found nearly 5% of AI model requests fail in production and close to 60% of those failures stem from capacity limits. The 2026 State of DevSecOps Report found 87% of organizations run software with known, exploitable vulnerabilities. Dominic Phillips joined the board, and registration opened for DASH 2026 on June 9-10 in New York City.

Guidance for the second quarter of 2026 sets non-GAAP operating income between $225 million and $235 million and non-GAAP net income per share between $0.57 and $0.59 on roughly 369 million weighted average diluted shares. For the full fiscal year 2026, management guided non-GAAP operating income to $940 million to $980 million and non-GAAP net income per share to $2.36 to $2.44 on about 372 million weighted average diluted shares. Datadog did not reconcile those non-GAAP expectations to GAAP, citing uncertainty around stock-based compensation and employer payroll taxes on equity incentive plans. The risk list is long and familiar: reliance on existing customers buying more and renewing, new customer acquisition, competition, security breaches, service interruptions, managing rapid growth, data privacy and security regulation, and general market and economic conditions including trade policy, tariffs and reduced information technology spending. Two structural points matter for the forward view. Revenue outside North America was about 28% of total revenue for the quarter, compared with about 30% a year earlier. And because revenue is recognized over subscription terms, any slowdown in new bookings would take time to show up in reported results.