Overview
- Datadog reported second-quarter revenue of $1.12 billion and adjusted earnings per share of $0.65, topping analyst estimates when it released results on Thursday.
- Shares fell roughly 17–20% in immediate trading as some investors took profits after a large 2026 rally and others reacted to signs of compressed unit economics.
- Management raised full-year guidance to $4.45 billion–$4.47 billion in revenue and $2.50–$2.54 in adjusted EPS while setting third-quarter revenue and EPS targets above consensus.
- The company posted $316 million in operating cash flow and $279 million in free cash flow for the quarter, but analysts flagged a drop in free-cash-flow margin to about 25% from 29% a year earlier and noted that reduced usage from its largest AI customer is baked into guidance.
- Datadog said AI adoption and product rollouts such as MCP Server, a Bits AI Security Agent, and GPU monitoring are driving customer expansion to roughly 4,720 accounts with more than $100,000 in ARR, and the market will watch margin recovery, net revenue retention, and large-customer usage in coming quarters.