Datadog, Inc. (DDOG Quick QuoteDDOG - Free Report) emphasized accelerating demand from traditional customers, expanding AI adoption and changing consumption patterns during its third-quarter 2026 earnings call.

Management highlighted broad-based growth while addressing near-term revenue pressures from early renewals and volume discounts among large AI customers. Its fourth-quarter outlook also reflects conservative assumptions about spending by its largest customer.

DDOG's Core Business Maintains Growth Momentum

CEO Olivier Pomel said revenue growth from non-AI customers accelerated for the fifth consecutive quarter, reaching the high-20% range year over year. Growth improved approximately one percentage point sequentially.

CFO David Obstler attributed the momentum to stronger usage among existing customers and healthy contributions from new accounts across industries and spending categories.

The company reported adjusted earnings of $0.81 per share, surpassing the consensus estimate of $0.64. Revenues came in at $1.20 billion, up 35% year over year, exceeding the Zacks Consensus Estimate of $1.14 billion.

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote

Datadog's Q4 Outlook Reflects Customer Spending Caution

For the fourth quarter, management projected revenues between $1.19 billion and $1.20 billion, representing 25% to 26% annual growth. Excluding its largest customer, implied revenue growth is in the low-to-mid-30% range.

Obstler clarified that guidance assumes only the largest customer's contractual minimum commitment, despite consumption substantially exceeding that threshold during the third quarter.

During exchanges with Morgan Stanley and Goldman Sachs analysts, management explained that early renewals among large AI customers introduce temporary revenue headwinds through improved pricing and workload optimization. Obstler also cited December seasonality affecting usage-based consumption.

DDOG Sees Broader AI Adoption and Product Expansion

Pomel reported more than 850 AI customers, including 39 spending over $1 million annually. All 15 leading AI companies identified by management use Datadog.

AI adoption is also spreading through traditional enterprises. Approximately one-third of customers use at least one AI product, including three-quarters of customers generating more than $100,000 in annual recurring revenue.

Platform penetration continues improving. About 61% of customers use four or more products, compared with 54% a year earlier. Infrastructure Monitoring surpassed $2 billion in ARR, growing in the mid-30% range.

Datadog Advances AI Automation and Cost Management

Pomel highlighted Scout 1.0, Datadog's specialized reasoning model powering Bits Investigations. Management said its performance on alert investigations matches or exceeds frontier models at substantially lower inference costs.

Bits AI has become the company's fastest-adopted product. During questioning from Bernstein, Pomel explained that AI credits support direct monetization while model efficiency improvements enable broader investigation volumes.

Datadog is simultaneously expanding AI infrastructure monitoring and cost management. GPU devices monitored increased eightfold this year, while more than one-third of Cloud Cost Management customers now track AI expenses.

DDOG Targets Larger Deals While Maintaining Investments

Management highlighted substantial enterprise wins, including a federal defense agency, major Japanese banks and a large technology company's AI division. These agreements demonstrate opportunities to consolidate monitoring, security and AI tools.

During JPMorgan's questioning, Pomel explained that larger initial deals increasingly contribute to business expansion, although recently signed enterprise customers have yet to fully ramp consumption.

Obstler reiterated continued investments in sales capacity and research. Non-GAAP operating margin reached 28%, compared with 23% a year earlier, while management expects fourth-quarter margin of approximately 24%, reflecting additional marketing investments.

Datadog Maintains Focus on Long-Term Platform Growth

Management maintained its emphasis on cloud migration, AI-driven software development and expanding enterprise adoption. Pomel positioned unified observability and increasingly autonomous operations as central product priorities.

Obstler reaffirmed full-year revenue guidance of $4.515 billion to $4.525 billion, representing approximately 32% annual growth. Management remains focused on balancing expansion investments with profitability while navigating consumption variability among major customers.

What Zacks Rank and Style Scores Indicate for DDOG

Datadog currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term earnings estimate revision outlook. Its Growth and Momentum Scores of A highlight favorable growth characteristics and price trends, while its Value Score of F reflects comparatively weaker valuation characteristics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock's VGM Score of B indicates an attractive combined profile across value, growth and momentum factors. However, the neutral Zacks Rank warrants a measured interpretation of these favorable Style Scores. The Zacks Rank can change as analysts revise earnings estimates following the latest quarterly results.