Review|DDOG 1Q26: Big Guidance Upside Surprise, No Growth Cliff Concern anymore

DDOG’s 1Q26 results met expectations, but 2Q26 and FY26 guidance were even stronger than our higher-than-consensus estimates, signaling sustained revenue growth in the mid-30s YoY for 2Q and low-to-mid 30s for FY26. This mitigates prior concerns about a growth cliff in 2H26 tied to OpenAI’s migration. Both non-AI and AI-native cohort momentum drove strength, with two hyperscalers adopting DDOG for their AI training, highlighting DDOG’s technological edge. These results reinforce its premium valuation among SaaS peers, supporting our preference for infrastructure SaaS.

Result highlights: dual growth engine from both AI and non-AI customers.

• 1Q26 revenue grew 32% yoy, beat buyside expectation by 1ppt and in line with our higher-than-consensus estimate, representing a 3ppt acceleration from 4Q25.
  • The “core” non-AI customer cohort grew at a mid-20% year-over-year rate, up from 23% in 4Q25 and 19% in 3Q25.
  • This implies AI-native customer growth accelerated to 17% QoQ, after growth was impacted by OpenAI’s migration out in 4Q, demonstrating Anthropic and other AI native customers’ consumption picking up.
• 4Q adj OPM beat expectation by 1ppt, demonstrating strong operating leverage despite GPM being lower, likely due to the discount offered to large customers
• 2Q26 revenue guidance is set at 30% year-over-year growth, surpassing market expectations by 6-7 percentage points. Based on a normal beat cadence of 4-5 percentage points, actual growth could reach 35% year-over-year, the highest since 2022.