Citizens JMP Securities moved to a more positive stance on Datadog following the company's stronger-than-expected results for the first quarter of 2026. The brokerage upgraded Datadog to "Market Outperform" and increased its price target to $225 after the cloud monitoring firm reported revenue, earnings and contract metrics that exceeded analyst forecasts.
The earnings beat produced a dramatic market reaction. Datadog shares jumped nearly 29% intraday and the stock is now up about 39% year-to-date, materially outpacing the broader Russell 3000 Index.
At the center of the report was artificial intelligence and its effect on Datadog's addressable market. While some investors had raised the possibility that AI coding tools could reduce the need for observability software, analysts at Citizens JMP argued the opposite. Their assessment, as reflected in their research note, is that the adoption of AI is increasing the complexity of software environments and raising infrastructure workloads, which in turn drives demand for monitoring, identity management and data visibility tools.
On the top line, Datadog reported quarterly revenue of $1.006 billion, representing 32% year-over-year growth and outperforming the consensus revenue estimate of $960 million. Adjusted earnings per share were $0.60, above the consensus estimate of $0.51. The company also posted billings growth of 37% and remaining performance obligations, or RPO, growth of 51%, metrics the firm cited as evidence of sustained demand for its cloud observability platform.
Datadog's management highlighted broad-based acceleration in customer cohorts. CEO Olivier Pomel said the company saw acceleration of revenue growth across both AI and non-AI customers. The company also disclosed significant new customer wins with two of the world’s largest AI research teams. Those contracts include seven-figure and eight-figure annualized deals tied to AI training workloads and GPU optimization.
Following the quarter, Datadog raised its guidance for the current quarter and for the full fiscal year. The company now expects 2026 revenue in a range of $4.30 billion to $4.34 billion, implying roughly 26% year-over-year growth, and projects adjusted EPS between $2.36 and $2.44.
Analysts underscored other indicators of product adoption: the portion of customers using eight or more Datadog products rose to 20% in the first quarter, up from 10% two years earlier. Citizens JMP noted Datadog’s positioning to benefit from increasingly complex cloud and AI infrastructure, an expanding total addressable market and leadership continuity with CEO Olivier Pomel and CFO David Obstler.
Sector implications - The results and analyst upgrade touch on cloud infrastructure, enterprise software and AI-related infrastructure markets, highlighting demand drivers that could influence spending patterns across these technology segments.