Key Takeaways
- Datadog’s revenue growth accelerated for five straight quarters, from 24.59% in Q1 2025 to 35.64% in Q2 2026, when sales reached $1.12 billion.
- The Q3 guide of $1.135 billion to $1.145 billion implies only about 1% to 2% sequential growth because management assumed the largest customer’s usage would remain at its contractual commitment level.
- The NTM P/E has rebounded to 101.14x, well above its 76.82x average since January, even with the stock still about 5% below its pre-earnings close.
Datadog Stock Fell on a Guide Built Around One Customer
On the morning of August 6, Datadog (DDOG) reported the kind of quarter growth investors wait years for. Revenue rose 36% to $1.12 billion, the $115 million sequential gain was a company record by a wide margin, and customers outside the AI cohort grew in the high 20s percent, up from 18% a year earlier. By the afternoon, the stock was down 16.6% at $235.95.
The trigger sat a few lines lower. Third-quarter guidance of $1.135 billion to $1.145 billion implies 28% to 29% year-over-year growth and revenue only about 1% to 2% above Q2. After an 11% sequential jump, that looked like a wall.
Management explained the gap on the Q2 earnings call. The largest customer, which CEO Olivier Pomel described as a leading AI company, signed a nine-figure renewal but reduced its usage starting in Q3. Rather than guess how far usage would drift, Datadog guided that account at its contractual floor. “It can’t go below the commitment,” CFO David Obstler said at a Goldman Sachs conference in September.
The revenue chart shows what that single account is standing in front of. Growth bottomed at 24.59% in Q1 2025, then rose to 28.12%, 28.35%, 29.21%, 32.15% and 35.64% over the next five quarters. Quarterly revenue climbed from $0.76 billion to $1.12 billion across that stretch.
Pomel argued the trend barely depends on the account in question, saying that backing out the largest customer leaves “pretty much the same growth rate.” New customers are also pulling more weight, accounting for about 30% of year-over-year revenue growth in Q2, up from 25% in Q1.
That does not make the guide meaningless. Usage-based revenue can fall as quickly as it rises, and Datadog learned that after the pandemic boom. Pomel told a Citi conference in September that cloud-native customers made up “about 40% of our business at peak” before spending contracted, and that exposure to AI natives today is “much smaller.”
The Market Has Already Forgiven the Guide
The valuation chart shows how quickly investors came around. Datadog’s NTM P/E peaked at 116.91x just before earnings, slid toward 80x by early September, and has since climbed back to 101.14x. NTM EV/Revenue sits at 18.75x, against a 21.76x high and a 13.98x average since January.
The share price has not fully followed. Datadog closed at $268.70 on September 28, about 14% above where it traded on August 6 but still roughly 5% below the $283.17 close before earnings. A multiple back near its highs with the price still below its pre-earnings level likely reflects higher forward earnings estimates after management raised full-year revenue guidance to $4.45 billion to $4.47 billion.
The results suggest the broader customer base remains strong despite the impact from the largest account. Five quarters of acceleration, a floor-based assumption for the largest account, and a guidance method that Obstler says deliberately discounts observed usage trends all leave room for Q3 to land above the range. At 101x forward earnings, though, the stock is no longer pricing a one-customer scare. It is pricing the acceleration holding.
That raises the stakes for the Q3 report. Non-AI growth staying in the high 20s and revenue clearing the $1.145 billion top end would support the rebuilt multiple. A fade in the broader customer base would be the real warning, because the guide already carries the largest customer at its contractual floor.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
