Datadog posts 36% revenue jump but shares tumble 22% after earnings

Datadog Inc. reported second‑quarter 2026 revenue of $1.12 billion, a 36 % year‑over‑year increase that topped the high end of its guidance. The company said growth was driven by both AI‑focused and non‑AI customers, with AI users now representing about 20 % of its base but 80 % of recurring revenue. Non‑GAAP operating income rose to $257 million on a 23 % margin, cash flow from operations was $316 million and free cash flow $279 million. The results lifted analyst sentiment: Cantor Fitzgerald raised its price target to $327, while Canaccord Genuity lifted its target to $295 and kept a “buy” rating. Despite the strong numbers, the stock fell sharply in Europe, dropping 21.9 % to €193.20 in the German market, and the share price in the U.S. hovered near a 52‑week high of $292.72 before the pull‑back. Insider Amit Agarwal sold 20,000 shares under a Rule 10b5‑1 plan. Overall, the earnings beat reinforced Datadog’s position in the AI‑driven observability and security market, but market expectations remain high.