Datadog Q2 2026 earnings: revenue up 36%, guidance raised despite big customer's usage pullback
Datadog beat Q2 profit and revenue estimates and raised its full-year outlook, but shares dropped as investors weighed a usage cut from its largest customer.
| Q2 2026 | Reported | Expected | Surprise |
|---|---|---|---|
| EPS | $0.65 | $0.60 | +8.0% |
| Revenue | $1.12B | $1.10B | +2.0% |
Key takeaways
- Datadog’s revenue rose 36% year-over-year, beating Wall Street’s expectations, and per-share profit also topped analyst forecasts.
- Despite the beat, shares fell sharply after the report, as investors focused on a usage pullback from Datadog’s largest customer – reportedly an AI company – even though management said it had already adjusted its outlook for that risk.
- Growth was broad-based: both AI-related and traditional (non-AI) customers accelerated, with non-AI customer revenue growth reaching the high-20% range year-over-year.
- The number of large customers paying at least $100,000 a year grew 23% to about 4,720, showing more big companies are expanding their use of Datadog’s monitoring tools.
- Management raised its full-year revenue guidance to $4.45-$4.47 billion, signaling confidence that demand – including from AI product adoption – will keep growing even after accounting for the large customer’s reduced usage.
- The company said AI-related integrations now touch about 80% of its annual recurring revenue, underscoring how central AI infrastructure monitoring has become to its business, and it unveiled over 100 new product capabilities at its DASH conference, including tools to help detect and respond to AI system issues and protect AI agents from attacks.
- Looking at the trailing twelve months, Datadog’s operating margin was roughly break-even and net profit margin was a thin 3.7%, reflecting that the company is still spending heavily – on R&D, sales, and AI infrastructure – relative to the profit it currently generates, even as gross margin remained strong near 80%.
- Trailing twelve-month earnings per share were down about 18% from a year earlier, a reminder that even as quarterly results beat estimates, the company’s profitability over the full past year has been uneven amid continued investment.
Q2 2026 in context
| Metric | Jun 2026 | Jun 2025 | Change |
|---|---|---|---|
| Revenue | $1.1B | $827M | +35.6% |
| Net income | $45M | $3M | +1583.3% |
| Free cash flow | $306M | $185M | +65.5% |
| Diluted EPS | $0.12 | $0.01 | +1100.0% |
| Gross margin | 78.6% | 79.9% | -1.3 pts |
| Operating margin | 0.5% | -4.3% | +4.8 pts |
| Net margin | 4.0% | 0.3% | +3.7 pts |
Figures for the quarter ended Jun 2026 and the quarter ended Jun 2025, as reported to the SEC.
How the stock took it
Datadog Inc (Pre-Reincorporation) closed at $283.17 on Aug 5, 2026, the last session before the report, and at $233.93 on Aug 7, 2026, the first session after it — -17.4% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| May 7, 2026 | $143.71 | $200.16 | +39.3% |
| Nov 7, 2025 | $190.82 | $199.72 | +4.7% |
Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.
Fundamentals
| Metric | Value | Period |
|---|---|---|
| Gross margin | 79.9% | Trailing 12 months |
| Operating margin | -0.7% | Trailing 12 months |
| Net profit margin | 3.7% | Trailing 12 months |
| Pretax margin | 4.2% | Trailing 12 months |
| EPS | $0.37 | Trailing 12 months |
| Revenue growth (YoY) | 29.5% | Trailing 12 months |
| EPS growth (YoY) | -17.9% | Trailing 12 months |
| Return on equity | 3.8% | Trailing 12 months |
Sources: company report · publication (StockStory/Seeking Alpha) · earnings call