Key points
- Datadog (DDOG) beat Q2 estimates on revenue ($1.12 billion, up 36%) and adjusted profit ($0.65 a share versus roughly $0.58 expected).
- Shares opened down about 17% Thursday, after falling as much as 19.5% in premarket trading, one of the stock's steepest earnings-day drops.
- Datadog raised full-year revenue guidance to $4.45-$4.47 billion and lifted adjusted EPS guidance 5%, to $2.52 at the midpoint.
- The stock had run from about $98 in late February to a fresh high of $292.72 the day before the report, up almost 200% in five months.
Datadog (DDOG) reported second-quarter results before the opening bell Thursday that beat Wall Street's estimates on nearly every line. Revenue came in at $1.12 billion, up 36% from a year earlier and above the roughly $1.08 billion analysts expected. Adjusted earnings were $0.65 a share, ahead of estimates near $0.58 and up from $0.46 a year ago.
Olivier Pomel, Datadog's co-founder and chief executive, put it plainly in the earnings release: "Datadog delivered a strong quarter, with 36% year-over-year revenue growth, $316 million in operating cash flow, and $279 million in free cash flow."
The stock didn't go up. Shares had hit a fresh high of $292.72 on Wednesday before closing at $283.17. DDOG fell as much as 19.5% in premarket trading Thursday, then opened regular trading at $235.83, down about 17%.
| Metric | Q2 2026 | vs. estimate/prior |
|---|---|---|
| Revenue | $1.12B | Est. $1.08B |
| Adjusted EPS | $0.65 | Est. $0.58 |
| Billings | $1.18B | +38% YoY |
| FY revenue guide | $4.45B-$4.47B | Prior ~$4.32B |
| FY adjusted EPS guide | $2.52 (mid) | +5% |
Billings, a forward-looking measure of contracted business (see our guide to reading an earnings report for what these terms mean), rose 38% to $1.18 billion. Datadog generated $279 million of free cash flow in the quarter, a 24.9% free cash flow margin, and $316 million of operating cash flow.
Datadog ended the quarter with about 4,720 customers paying it more than $100,000 a year, up 23% from a year earlier. Net additions to that group slowed from recent quarters, and StockStory's breakdown of the print pointed to that deceleration as the number investors focused on instead of the headline beat.
Datadog also raised its full-year revenue and profit guidance, both listed in the table above. For the current quarter, management guided to revenue near $1.14 billion, about 2.9% above what analysts had modeled.
Pomel pointed to where the growth is coming from: "Our customers are building and deploying with AI, and they are using the Datadog platform to observe, secure, and act on their AI-enabled solutions." That AI exposure cuts both ways. Morgan Stanley had already flagged Datadog before the report as one of four software companies at risk from conservative 2026 guidance tied to OpenAI, one of its larger customers, and had trimmed its own price target to $230. Rosenblatt was on the other side, raising its target to $305 in the weeks before earnings. So were Cantor Fitzgerald, at $327, and Citigroup, at $300.
A good quarter not moving a software stock is common at this kind of valuation. One valuation estimate put Datadog near 109 times forward earnings heading into the report, a multiple that already assumes years of the growth it just delivered. Matching a typical beat isn't enough at that price. The slower large-customer growth counted for more with investors Thursday than the headline numbers.
DDOG had climbed from about $98 in late February to Wednesday's $292.72 high, a run of almost 200% in five months that tracked the same AI-trade rally that hit a wall across the market last month. Company insiders sold about $220 million of stock over the same three-month stretch. Datadog was also Claude's contrarian pick, over Nvidia, in our five-AI stock-picking contest, and this is the first earnings report to test that call.
This is not investment advice. Do your own research before buying or selling any stock.
