Datadog Says Lower Usage From Major AI Customer Is Weighing on Growth -- Update

By Connor Hart

Datadog delivered a solid third quarter, excluding one major customer.

The data-security company is seeing strong adoption across its platform as customers scale both their digital operations and use of artificial intelligence, Chief Executive Olivier Pomel said.

However, Datadog's largest customer--an undisclosed AI company--is scaling back its usage, a move the company said weighed on revenue growth in the recent period and contributed to a weaker-than-expected outlook for the current quarter.

Shares tumbled 14% to $190.51 in midday trading. Despite the loss, the stock is up 40% this year.

Datadog said revenue climbed 35% to $1.2 billion in the third quarter, beating Wall Street estimates, but was slightly slower compared with the 36% jump it posted in the previous quarter.

"Excluding our largest customer, revenue growth accelerated again," Chief Financial Officer David Obstler said on a call with analysts.

Looking ahead, Obstler said Datadog's fourth-quarter outlook assumes the customer will reduce its usage to its minimum commitment. Datadog forecast revenue of $1.19 billion to $1.20 billion in the current quarter, the midpoint of which is below analyst estimates.

Still, demand remains strong across the broader business, including among customers outside the AI industry, Datadog said.

Revenue growth from non-AI customers accelerated for the fifth consecutive quarter, while the company's AI customer base continued to expand and diversify, both in the number of customers and the scale of their operations, Pomel said.

Datadog has benefited from growing demand for its software as businesses expand their cloud infrastructure and deploy more AI-powered applications, creating greater complexity in their digital operations.

The company is also developing specialized AI models to help customers manage that complexity and move toward more automated operations, Pomel said.

Datadog reported a profit of $118.3 million, or 32 cents a share, for the quarter that ended Sept. 30, up from $33.9 million, or 10 cents a share, a year earlier. On an adjusted basis, per-share earnings of 81 cents topped the 64 cents analysts expected, according to FactSet.

The company also raised its full-year outlook, forecasting adjusted earnings of $2.73 to $2.75 a share on revenue of $4.52 billion to $4.53 billion, compared with its previous projections of $2.50 to $2.54 a share and revenue of $4.45 billion to $4.47 billion.

Wall Street had modeled adjusted earnings of $2.54 a share on revenue of $4.48 billion for the year.

Write to Connor Hart at connor.hart@wsj.com

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November 04, 2026 11:52 ET (16:52 GMT)