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Datadog's $100,000-plus customer base rose 23% to about 4,720 in Q2 2026, fueling enterprise growth.
AI adoption deepens, with 750-plus AI-native customers and MCP tool calls quadrupling quarter over quarter.
Datadog posted 36% revenue growth, while guidance reflects a usage reduction from its largest customer.
Datadog's (DDOG - Free Report) enterprise customer base is expanding at a pace that stands out even in a crowded observability and security software market. In the second quarter of 2026, the company's enterprise new logo annualized bookings more than doubled year over year, while the number of customers generating $100,000 or more in annual recurring revenue climbed to about 4,720, a 23% increase from roughly 3,850 a year prior. Total customer count rose to approximately 33,400 from 31,400. This broadening of large-account relationships is unfolding alongside deeper product adoption, as Datadog continues to layer AI-driven observability and security capabilities, including Bits Code, Bits Chat and Bits Agent Builder, all reaching general availability in the quarter, onto its core monitoring platform.
Over 750 AI-native customers now rely on Datadog to monitor their tech stacks, and all 10 of the largest AI companies are counted among its customers. Management also pointed to a sharp rise in agentic activity, with MCP tool calls quadrupling quarter over quarter, alongside expanding use of newer offerings such as Cloud SIEM, Data Security and GPU monitoring within larger enterprise accounts.
The recent enterprise momentum builds on the second quarter in which revenues grew 36% year over year to $1.12 billion, ahead of the company's guidance. Non-GAAP operating margin reached 23%, up from 20% a year earlier, and free cash flow rose to $279 million from $165 million. Remaining performance obligations reached $3.47 billion, up 43% year over year, while current RPO grew roughly 40%, suggesting that contracted revenue visibility remains solid even as usage-based pricing introduces some quarter-over-quarter variability.
Guidance reflects both the opportunity and its limits. Datadog's third-quarter revenue outlook of $1.135 billion to $1.145 billion and full-year range of $4.45 billion to $4.47 billion embed a previously flagged usage reduction from its single largest customer, a reminder that concentrated accounts can introduce volatility even as the broader enterprise base expands. Full-year non-GAAP operating income guidance of $1.01 billion to $1.03 billion points to continued margin discipline. Balanced against this is elevated GAAP operating expense growth, driven partly by the recent Adaptive ML acquisition aimed at bolstering AI research capabilities — an investment that trades near-term profitability for longer-term product differentiation.
Rival Software Firms See Similar Enterprise Momentum
Dynatrace (DT - Free Report) and Elastic (ESTC - Free Report) , two other listed observability and monitoring companies, are reporting comparable enterprise expansion trends. Dynatrace posted record new-logo annual recurring revenue growth of more than 160% in its most recent quarter, while total ARR reached $2.14 billion, up 17% year over year. Elastic, meanwhile, grew its $100,000-plus ACV customer cohort past 1,800 accounts, its largest quarterly addition to that tier on record, alongside 27% remaining performance obligation growth. Both Dynatrace and Elastic cite AI-driven workload complexity as a key demand driver, a theme that mirrors Datadog's enterprise trajectory, even as each company's growth rates and cohort sizes differ.
Shares of DDOG have surged 74.7% year to date, outperforming the broader Zacks Computer and Technology sector's growth of 17%.
DDOG’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, DDOG appears overvalued, trading at a forward price-to-sales ratio of 16.04, significantly higher than the Internet – Software industry average of 4.2. The company carries a Value Score of F.
DDOG’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DDOG’s 2026 earnings is currently pegged at $2.52 per share, suggesting an increase of 0.4% over the past 30 days.
View the Zacks #1 Rank List
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Datadog's Enterprise Customer Expansion Accelerates: What's Ahead?
Key Takeaways
Datadog's (DDOG - Free Report) enterprise customer base is expanding at a pace that stands out even in a crowded observability and security software market. In the second quarter of 2026, the company's enterprise new logo annualized bookings more than doubled year over year, while the number of customers generating $100,000 or more in annual recurring revenue climbed to about 4,720, a 23% increase from roughly 3,850 a year prior. Total customer count rose to approximately 33,400 from 31,400. This broadening of large-account relationships is unfolding alongside deeper product adoption, as Datadog continues to layer AI-driven observability and security capabilities, including Bits Code, Bits Chat and Bits Agent Builder, all reaching general availability in the quarter, onto its core monitoring platform.
Over 750 AI-native customers now rely on Datadog to monitor their tech stacks, and all 10 of the largest AI companies are counted among its customers. Management also pointed to a sharp rise in agentic activity, with MCP tool calls quadrupling quarter over quarter, alongside expanding use of newer offerings such as Cloud SIEM, Data Security and GPU monitoring within larger enterprise accounts.
The recent enterprise momentum builds on the second quarter in which revenues grew 36% year over year to $1.12 billion, ahead of the company's guidance. Non-GAAP operating margin reached 23%, up from 20% a year earlier, and free cash flow rose to $279 million from $165 million. Remaining performance obligations reached $3.47 billion, up 43% year over year, while current RPO grew roughly 40%, suggesting that contracted revenue visibility remains solid even as usage-based pricing introduces some quarter-over-quarter variability.
Guidance reflects both the opportunity and its limits. Datadog's third-quarter revenue outlook of $1.135 billion to $1.145 billion and full-year range of $4.45 billion to $4.47 billion embed a previously flagged usage reduction from its single largest customer, a reminder that concentrated accounts can introduce volatility even as the broader enterprise base expands. Full-year non-GAAP operating income guidance of $1.01 billion to $1.03 billion points to continued margin discipline. Balanced against this is elevated GAAP operating expense growth, driven partly by the recent Adaptive ML acquisition aimed at bolstering AI research capabilities — an investment that trades near-term profitability for longer-term product differentiation.
Rival Software Firms See Similar Enterprise Momentum
Dynatrace (DT - Free Report) and Elastic (ESTC - Free Report) , two other listed observability and monitoring companies, are reporting comparable enterprise expansion trends. Dynatrace posted record new-logo annual recurring revenue growth of more than 160% in its most recent quarter, while total ARR reached $2.14 billion, up 17% year over year. Elastic, meanwhile, grew its $100,000-plus ACV customer cohort past 1,800 accounts, its largest quarterly addition to that tier on record, alongside 27% remaining performance obligation growth. Both Dynatrace and Elastic cite AI-driven workload complexity as a key demand driver, a theme that mirrors Datadog's enterprise trajectory, even as each company's growth rates and cohort sizes differ.
DDOG’s Share Price Performance, Valuation & Estimates
Shares of DDOG have surged 74.7% year to date, outperforming the broader Zacks Computer and Technology sector's growth of 17%.
DDOG’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, DDOG appears overvalued, trading at a forward price-to-sales ratio of 16.04, significantly higher than the Internet – Software industry average of 4.2. The company carries a Value Score of F.
DDOG’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DDOG’s 2026 earnings is currently pegged at $2.52 per share, suggesting an increase of 0.4% over the past 30 days.
Datadog, Inc. Price and Consensus
Datadog, Inc. price-consensus-chart | Datadog, Inc. Quote
Datadog stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.