Datadog Q1 FY26 earnings call DDOG

Q1 revenue grew 32% YoY to $1.01B, accelerating from 29% last quarter and 25% a year ago, with acceleration seen across cohorts. Non-AI customer revenue growth accelerated to mid-20s% YoY (from 23% last quarter, 19% a year ago), which management attributes to continued cloud migration, deeper product adoption, and customers of all kinds accelerating AI use. AI-native customer revenue continued to significantly outpace the rest of the business. QoQ revenue growth of 6% was the highest for a Q1 since 2022, and the $53M sequential add was the highest ever for a Q1, driven by the strongest sequential usage growth from existing customers since Q1 2022.

Management framed AI as an additional secular driver on top of digital transformation and cloud migration. Over 6,500 customers now send data for one or more AI integrations — 20% of customers but ~80% of ARR. Usage of AI within the platform is inflecting: Bits AI SRE agent investigations more than doubled Dec-to-March, LLM observability spans nearly tripled QoQ, MCP server tool calls quadrupled QoQ, and Bits Assistant messages rose 12x. Notably, Datadog is newly entering AI training workloads (previously it saw only inference as a market), landing hyperscaler super-intelligence labs using GPU monitoring on large parallel GPU grids.

Platform adoption continued to broaden: 56% of customers use 4+ products (up from 51% a year ago), 35% use 6+ (up from 28%), and 20% use 8+ (up from 13%). Total ARR now exceeds $4B. Of 26 products, 5 exceed $100M ARR and 3 are between $50M-$100M, leaving 18 earlier-stage products each with $100M+ potential. Management emphasized customers consolidating fragmented open-source and point tools onto Datadog for unified data, end-to-end workflows, and cost savings — including hyperscalers who could build in-house but choose Datadog for non-core, high-stakes, high-complexity work.

New logo annualized bookings set a new all-time record by a significant margin and more than doubled YoY, and new logo average land size also set a record and more than doubled YoY. Billings were $1.03B (+37% YoY) and RPO was $3.48B (+51% YoY), with current RPO growing in the mid-40s% YoY. RPO duration increased YoY on a higher mix of multiyear deals. Management reiterated it views revenue as a better indicator than billings and RPO given their variability. Record sequential ARR was added, with ARR growth accelerating in each month of Q1 and continuing into April.

Non-GAAP gross margin was 80.2% (vs 81.4% last quarter, 80.3% a year ago), varying quarter-to-quarter with innovation investment offset by efficiency. Opex grew 31% YoY (vs 29% prior periods) reflecting execution of hiring plans, and operating income was $223M for a 22% operating margin (vs 24% last quarter). The company generated $335M operating cash flow and $289M free cash flow (29% FCF margin), ending with $4.8B in cash, equivalents and marketable securities. Capex remains low as most workloads run on cloud (opex), with capex + capitalized software guided to 4%-5% of revenue.

AI-for-Datadog launches included the MCP server going GA (March), the Bits AI Security Agent (autonomous Cloud SIEM triage, cutting investigations from hours to ~30 seconds), and Bits Assistant (preview). Datadog-for-AI launches included GPU monitoring for fleet utilization, workload efficiency and thermal/power/interconnect performance. Other launches: Experiments GA and APM recommendations. The company announced plans for a new UK data center to serve regulated industries and received FedRAMP High certification, enabling sensitive federal workloads. It is also investing in bring-your-own-cloud ('cloud prem') offerings for data-residency-sensitive and very-large-scale customers. DASH is June 9-10 in NYC.