Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 6, 2026 · Beat 7 of last 7 quarters
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Datadog's accelerating revenue growth, driven by both AI-native and non-AI customers, underscores the expanding observability and security requirements of the AI infrastructure buildout. The company's ability to land large deals with AI labs and hyperscalers, coupled with the explosion in agentic activity, positions it as a critical beneficiary of the shift toward inference and agent-based workloads. The derisking of guidance around a single large customer highlights the concentration risk inherent in the AI infrastructure supply chain, but the broad-based acceleration suggests the buildout is broadening beyond a few key players.
Datadog reported Q2 revenue of $1.12B, up 36% YoY, with record sequential revenue growth of $115M. AI-native customers grew to 750, including 31 spending >$1M and 8 spending >$10M annually. New logo annualized bookings more than doubled YoY, and new customers contributed 30% of YoY revenue growth, up from 25% last quarter. The company closed several large deals, including a 9-figure renewal with a leading AI company and a $30M+ TCV deal with a major online media company. Product adoption continued to expand, with 58% of customers using 4+ products and 13% using 10+ products.
Management raised full-year revenue guidance to $4.45B-$4.47B (30% YoY growth) and non-GAAP operating income to $1.01B-$1.03B (23% margin). Q3 revenue guidance of $1.135B-$1.145B (28-29% YoY) reflects a usage reduction at their largest customer, which they fully derisked. They emphasized that excluding this customer, the rest of the business is accelerating, with non-AI customer growth reaching high-20s% YoY. They see AI as a third secular growth driver, with agentic activity (MCP tool calls) quadrupling QoQ and growing 22x vs Q4 2025. They plan to accelerate AI research with the Adaptive ML acquisition and continue investing in go-to-market and R&D.
“We took the liberty to fully derisk the guidance for the rest of the year with respect to that customer. And again, the reason for that is we don't control what's happening to a specific customer, but we do have a great amount of control on what's happening to everything else in the business, and the business is booming, and we don't want that to overshadow basically the acceleration we see pretty much everywhere else in the business.”
on Guidance derisking
“We are also seeing signs of rapid growth in agentic activity with a number of MCP tool calls quadrupling again quarter-over-quarter and growing more than 22x when compared to Q4 2025.”
on Agentic AI growth
“The future of observability is not just observing, it's fixing. It's not waking up people in the middle of the night because something book, but fixing it for them.”
on Bits AI vision
On the acceleration in revenue growth again this quarter... any additional details in terms of the new contract? Was it a similar duration? And in terms of the lower usage, is that a function of the customer getting lower unit price because of making a new commitment? Or is there some churn downsell?
Olivier Pomel: We don't want to comment too much on any specific customer... we took the liberty to fully derisk the guidance for the rest of the year with respect to that customer. David Obstler: We essentially use the inputs of what we see... we have a level of commit, and we can derisk our guidance by using that.
If we broaden it out, inference is really becoming the bigger part. Can you talk a little bit about like how much more observability is needed?
Olivier Pomel: There's opportunity at every layer of the stack in inference... We see growing adoption from the products we already have there. We mentioned our GPU monitoring product is actually getting quite a bit of usage... We're also seeing an explosion of volume in our agent monitoring product.
This probably was the weakest quarter I ever remember for you guys, especially in the quarter where you had DASH... Any color there would be great.
David Obstler: Our gross customer additions continue to be strong and on trend line... We have at the very low end, the border between free and contract, and that has variability, very low effect on revenues. Olivier Pomel: When you look at the customers above certain thresholds, like whether it's above $1 million, above $100,000, all of those are trending very well.