DDOG Q2 Earnings Call Highlights Broad Growth Amid Customer Usage Drop

DDOG Sees Broad-Based Growth Acceleration

Revenues rose 36% year over year to $1.12 billion, while non-GAAP earnings were 65 cents per share. Revenues and earnings exceeded the Zacks Consensus Estimate of $1.08 billion and 58 cents, respectively.

CFO David Obstler said sequential revenue growth of 11% was the strongest since the second quarter of 2022, with a record $115 million added from the first quarter. Non-AI customer revenue growth accelerated to the high-20% range.

Datadog ended the second quarter with about 4,720 customers generating at least $100,000 in ARR, up from about 3,850 a year earlier.

Datadog Builds Around AI-Native Demand

Pomel said more than 750 AI customers use Datadog, including all 10 companies management identifies as leading AI players. Obstler added that 31 AI customers spend more than $1 million annually, including eight above $10 million.

Pomel said MCP tool calls quadrupled again sequentially and rose more than 22 times versus Q4 2025. He described observability opportunities across GPUs, models, agents and the applications those agents call.

Obstler said enterprise new-logo annualized bookings more than doubled year over year. New customers accounted for about 30% of year-over-year revenue growth, up from 25% in the first quarter.

DDOG Pushes Bits AI Deeper Into Operations

Pomel said Bits AI has expanded beyond alert investigation into chat, monitoring management, coding, testing and release validation. Datadog is also rolling out AI-credit packaging as its use cases broaden.

A Bank of America analyst asked whether automation could reduce traditional observability activity. Pomel said Bits AI users are deploying more of the platform, creating more dashboards and alerts, and bringing more users into Datadog.

Pomel also said Bits Security Analyst is being separated from Datadog's SIEM so it can work with other SIEMs, widening the market for AI-driven security operations.

Datadog Derisks Largest-Customer Usage

Management disclosed a nine-figure renewal with its largest customer, but said usage will decline beginning in the third quarter. Pomel said Datadog fully derisked guidance for that customer so the account would not overshadow broader business trends.

For the third quarter, revenues are expected to be $1.135 billion to $1.145 billion, representing 28% to 29% growth, with non-GAAP earnings estimated to be 63 to 65 cents per share. Full-year revenue guidance is $4.45 billion to $4.47 billion.

A Morgan Stanley analyst pressed for renewal details and the lower usage. Pomel declined to discuss customer-specific economics, while stressing that growth excluding the largest customer has continued to accelerate.

DDOG Q&A Tests Sustainability and Spend

A Goldman Sachs analyst raised customer concerns about Datadog bills. Pomel said the company must show its software saves customers money or helps them make money, and highlighted AI cost control as a growing priority.

Pomel said Infinite Cardinality Metrics is designed to reduce billing unpredictability when customers send more granular data. He tied the product to rising data volumes and more complex questions from AI applications.

A JPMorgan analyst asked whether non-AI acceleration is sustainable. Pomel said growth is largely coming from existing customers through higher volumes, cloud migration and broader product adoption. Obstler also cited expanded go-to-market capacity.

Datadog Keeps Investing Into Scale

Pomel closed with confidence on product development and go-to-market execution, saying Datadog has more products planned for the remainder of the year and large sales pipelines to pursue.

Obstler said R&D and go-to-market investments are producing results and positioning the company for continued execution.

DDOG's Zacks Signals Stay Mixed

DDOG carries a Zacks Rank #2 (Buy), alongside a Growth Score of A, Momentum Score of A and a VGM Score of B. Under the Zacks Style Scores framework, A and B are the more favorable grades, especially when paired with a Zacks Rank #1 (Strong Buy) or #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Value Score of F tempers that profile because the framework gives its strongest preference to top-ranked stocks with A or B individual Style Scores. The Zacks Rank can change as earnings estimates are revised after the reported results.

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