Highlights

  • Datadog increased second-quarter revenue by 36% as its cloud monitoring and security platform expanded customer usage.
  • The company generated USD 279 million in free cash flow and held USD 5.0 billion in liquidity.
  • Larger customer numbers increased 23%, with approximately 4,720 accounts generating at least USD 100,000 in recurring revenue.
  • Management forecast full-year revenue of USD 4.45 billion to USD 4.47 billion while expanding AI-related products.

Cloud spending and artificial intelligence adoption converged in Datadog (NASDAQ:DDOG)'s second-quarter results, with revenue climbing 36% while reported operating profitability remained close to breakeven. The quarter ended 30 June 2026 combined a growing enterprise customer base, substantial cash generation and a broader software portfolio. Its results, published on 6 August, also set out revenue and adjusted earnings expectations for the remainder of 2026.

Usage Growth Lifts Revenue

Revenue reached USD 1.12 billion, compared with USD 826.8 million a year earlier. Datadog provides software that brings together infrastructure monitoring, application performance, logs and security signals. Its largely usage-based revenue model ties commercial performance to customer workloads and adoption of additional products.

Chief executive Olivier Pomel linked the quarter's performance to customers building and deploying with artificial intelligence. That commentary accompanied growth in larger accounts: approximately 4,720 customers generated annual recurring revenue of at least USD 100,000, compared with about 3,850 a year earlier. The company reported a 23% increase in that cohort.

Two Measures of Profitability

GAAP operating income was USD 5 million, representing an operating margin of approximately zero, while diluted earnings per share were USD 0.12. Non-GAAP operating income reached USD 257 million, with a 23% margin and diluted earnings per share of USD 0.65.

The distinction matters because the adjusted figures and statutory results present materially different profitability levels. Cash generation was stronger than GAAP operating income: operating cash flow totalled USD 316 million and free cash flow reached USD 279 million, equivalent to a 25% margin. Cash and marketable securities stood at USD 5.0 billion at quarter-end.

AI Features Broaden the Platform

At its DASH 2026 conference, Datadog announced more than 100 capabilities. These included autonomous Bits AI incident response and AI Guard, which is designed to help protect AI agents. Bits Code, Bits Chat and Bits Agent Builder reached general availability.

The company also acquired Adaptive ML, a reinforcement learning operations start-up, to support AI observability research. These developments extend the product portfolio alongside the established monitoring and security services. The supplied document does not separate revenue generated by the new capabilities from overall sales.

Guidance Keeps Growth in Focus

For the third quarter, management forecast revenue of USD 1.135 billion to USD 1.145 billion and non-GAAP operating income of USD 260 million to USD 270 million. Non-GAAP diluted earnings per share were guided to USD 0.63–0.65.

Full-year expectations were revenue of USD 4.45 billion to USD 4.47 billion, non-GAAP operating income of USD 1.01 billion to USD 1.03 billion and non-GAAP diluted earnings per share of USD 2.50–2.54. These remain forecasts. Customer cloud usage and spending remain relevant sensitivities within the company's revenue model.