Datadog, Inc.

Q2 revenue was $1.12 billion, up 36% year over year. Gross profit was $892 million, with gross margin of 79.6% versus 80.2% last quarter and 80.9% a year ago. Operating income was $257 million, with a 23% operating margin; operating expenses grew 26% year over year. Billings were $1.18 billion, up 38% year over year; RPO was $3.47 billion, up 43% year over year. Free cash flow was $279 million, with a 25% margin, and cash, cash equivalents and marketable securities totaled $5 billion. For Q3 FY26, Datadog expects revenue of $1.135 billion to $1.145 billion, up 28% to 29% year over year, operating income of $260 million to $270 million, and EPS of $0.63 to $0.65. For FY26, it guided to revenue of $4.45 billion to $4.47 billion, up 30% year over year, operating income of $1.01 billion to $1.03 billion, and EPS of $2.50 to $2.54. Management also said FY26 capex plus capitalized software should be 4% to 5% of revenue, with cash taxes of about $30 million to $40 million and a 21% tax rate.

Olivier Pomel said Datadog is seeing accelerating revenue growth across both AI-native and non-AI customers, and that AI is now an additional secular growth driver on top of cloud migration and digital transformation. He emphasized that the company is broadening its platform with Bits AI, Datadog for AI, and security products for AI workloads, while also expanding research efforts around time series models and new AI-native capabilities. His tone was confident and expansive, repeatedly pointing to broad-based demand, deeper product adoption, and a strong pipeline.

David Obstler highlighted that Q2 revenue growth accelerated to 36%, with 11% sequential growth, the highest since Q2 2022, and a record $115 million of quarter-over-quarter revenue added. He said billings rose 38% year over year to $1.18 billion, RPO increased 43% to $3.47 billion, gross margin was 79.6%, operating margin was 23%, and free cash flow was $279 million. On capital allocation and outlook, he noted $5 billion in cash and said FY26 capex plus capitalized software should stay in the 4% to 5% of revenue range, while guidance incorporates a usage reduction from the largest customer but otherwise reflects the company’s conservative methodology.

Analysts focused heavily on the largest customer’s lower usage after renewal, asking whether it reflected price, churn, or duration changes; management declined to give customer-specific details but said the reduction was fully derisked in guidance. They also pressed on AI monetization, especially inference, cost control, and whether Bits AI could eventually reduce consumption; management said AI creates opportunities across the stack, that customers are buying more Datadog products, and that automation tends to increase value and usage rather than cannibalize it. Other questions covered the acceleration in non-AI growth, new logo ramp, security/AI SOC opportunities, and whether customer additions were unusually weak; Datadog said customer count noise is mostly at the low end and that growth above key spending thresholds remains strong.