Datadog and MongoDB lead AI software surge as Arm Holdings slides on earnings, SOXX -2.86%

Datadog Inc. surged 31.3% on Thursday after the observability platform reported first-quarter 2026 revenue above $1 billion for the first time, triggering a broad rally in cloud software and AI data infrastructure stocks even as semiconductor names retreated. The S&P 500 closed at 7,337.11, down 0.38%, and the Nasdaq Composite ended at 25,806.20, off 0.13%; the Philadelphia Semiconductor ETF (SOXX) fell 2.9% as Arm Holdings reversed sharply on post-earnings selling and chip-equipment names gave back recent gains, with U.S.-Iran tensions adding a risk premium after strikes on Qeshm Port rattled markets.

Today's biggest movers

Datadog posts first billion-dollar quarter, raises 2026 outlook

Datadog Inc. (NASDAQ: DDOG) closed at $188.73, up 31.3%, after the company reported Q1 2026 revenue of $1.006 billion, a 32.2% increase year-over-year that topped the Wall Street consensus of $959.6 million. Adjusted earnings per share of $0.60 exceeded estimates of $0.51 by 17.6%.

The company raised its full-year 2026 revenue guidance to $4.32 billion at the midpoint, up from a prior forecast of $4.08 billion, and lifted its adjusted EPS forecast to $2.40. The number of customers spending at least $100,000 annually expanded to approximately 4,550, up from 3,770 a year ago, as enterprises deepened investment in AI workload monitoring. Management cited the growing importance of AI observability as the primary growth driver, noting that enterprises running large language model workloads increasingly require dedicated infrastructure to monitor inference costs, latency, and model behavior. Guggenheim raised its price target on DDOG to $225 following the report.

Arm Holdings slides 10% despite a record quarter

Arm Holdings plc (NASDAQ: ARM) fell 10.1% to $213.31, reversing gains from the prior session, despite reporting Q4 fiscal 2026 results that beat analyst estimates on every key metric. Revenue was $1.49 billion, up 20% year-over-year and a quarterly record, while adjusted EPS of $0.60 exceeded the $0.54 consensus. Licensing revenue of $819 million, up 29%, reflected demand for Arm's next-generation compute platform; royalty revenue of $671 million, up 11%, was led by cloud AI, edge AI, and physical AI segments, with data center royalty revenue more than doubling year-over-year.

Full-year fiscal 2026 revenue reached $4.92 billion, up 23%, marking the third consecutive year of greater-than-20% growth since the company's 2023 listing. Investors nevertheless sold into the strength, with the stock giving back a roughly equivalent gain from the prior day; concerns over smartphone market weakness weighed on the outlook for royalty volumes in the near term, even as cloud and AI royalties continue to expand.

MongoDB and Snowflake rally on cloud-spending read-through

MongoDB Inc. (NASDAQ: MDB) gained 10.6% to $293.42 without a company-specific catalyst; investors interpreted Datadog's revenue acceleration as validation that enterprise AI infrastructure budgets remain intact, lifting cloud-data peers in sympathy. MongoDB is next scheduled to report its fiscal first-quarter 2027 results on May 28. Its most recent quarterly report showed revenue of $695.1 million, up 27% year-over-year, with Atlas cloud revenue up 29%.

Snowflake Inc. (NYSE: SNOW) added 10.0% to $153.72. Chief Executive Sridhar Ramaswamy has repositioned the data cloud platform around AI, with more than 9,100 customer accounts now using Snowflake AI features. Snowflake Intelligence reached approximately 2,500 accounts within three months of its launch, according to company disclosures. UBS carries a Buy rating on SNOW with a $210 price target.

CrowdStrike and Palo Alto rally on Anthropic's Project Glasswing

CrowdStrike Holdings Inc. (NASDAQ: CRWD) rose 8.0% to $505.72 and Palo Alto Networks Inc. (NASDAQ: PANW) gained 7.0% to $196.53 as investors rotated back into AI-native cybersecurity. Both companies are launch partners in Anthropic's Project Glasswing, a coalition to harden critical AI-era software infrastructure. Announced in April, the initiative pairs the Claude Mythos Preview model - which Anthropic says has already identified thousands of high-severity vulnerabilities across major operating systems and browsers - with security teams from roughly 50 leading technology companies. CrowdStrike is a founding member of the coalition. Anthropic is committing up to $100 million in usage credits to support the effort, alongside $4 million in donations to open-source security organizations.

Morgan Stanley raised its price target on PANW to $245 from $228, maintaining an Overweight rating and citing upside of approximately 32.8% from current levels.

Notable but quieter

ServiceNow Inc. (NYSE: NOW) rose 5.1% to $93.59, carried by the cloud software bid. Cloudflare Inc. (NYSE: NET) gained 3.3% to $256.79; NET has climbed 33% over the past month on strong enterprise zero-trust pipeline demand. Tesla Inc. (NYSE: TSLA) added 3.3% to $411.79. Salesforce Inc. (NYSE: CRM) advanced 2.8% to $186.34. NVIDIA Corp. (NASDAQ: NVDA) edged up 1.8% to $211.50, leading dollar volume across the AI universe at approximately $35 billion for the session.

On the downside, semiconductor equipment names bore the brunt of the SOXX weakness. Applied Materials Inc. (NASDAQ: AMAT) fell 4.2% to $410.64. Lam Research Corp. (NASDAQ: LRCX) dropped 3.6% to $286.52. Dell Technologies Inc. (NYSE: DELL) slid 3.6% to $230.27. Advanced Micro Devices Inc. (NASDAQ: AMD) fell 3.1% to $408.46, partially reversing gains from Wednesday's blowout earnings session, and Broadcom Inc. (NASDAQ: AVGO) declined 3.0% to $412.56.

What to watch tomorrow

No major AI names in this universe are scheduled to report on Friday, May 8. The next closely watched reports are MongoDB on May 28 and CrowdStrike at its upcoming fiscal quarter end. Investors will monitor developments in the Iran-U.S. situation after Thursday's strikes on Qeshm Port contributed to the equity pullback; any escalation could add volatility to AI infrastructure stocks exposed to global supply chains. The chip-equipment pullback follows the Intel and Cloudflare rally earlier this week, which helped push SOXX up more than 30% month-to-date before Thursday's consolidation. Longer term, the more than $700 billion in hyperscaler AI capex committed for 2026 - spanning Microsoft, Google, Amazon, and Meta - continues to underpin the bull case for AI software and observability platforms. Datadog's results on Thursday provided the most concrete data point yet that the investment cycle is translating into accelerating revenue at the infrastructure layer.

Not investment advice.