Datadog Raises Full-Year Outlook After 125+ AI Feature Launches, But OpenAI Pullback Clouds Long-Term Growth

Zinger Key Points

Datadog Q2 revenue rose 28% to $826.76M, beating estimates; adjusted EPS of 46 cents topped consensus by 4 cents.
Datadog raised full-year revenue guidance but warned of OpenAI pullback; stock down 0.3% and 4% YTD.
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Datadog DDOG reported its quarterly results on Thursday.

The software-as-a-service (SaaS) platform’s fiscal second-quarter revenue increased 28% year-over-year to $826.76 million, beating the analyst consensus estimate of $790.97 million.

Adjusted EPS of 46 cents beat the analyst consensus estimate of 42 cents.

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As of June 30, Datadog had 3,850 customers with an ARR of $100,000 or more, an increase of 14% Y/Y. The adjusted gross margin declined by 100 bps to 81%, and the adjusted operating margin decreased by 400 bps to 20%.

As of June 30, Datadog had cash and equivalents of $3.9 billion, generating $165 million in free cash flow.

Co-founder and CEO Olivier Pomel noted that the company showcased its rapid pace of innovation at the DASH 2025 user conference by unveiling over 125 new features aimed at helping customers observe, secure, and act on their complex cloud environments and AI tech stacks.

Outlook: Datadog expects third-quarter revenue of $847 million–$851 million, above the analyst consensus estimate of $819.47 million. It projects an adjusted EPS of $0.44–$0.46, compared to the analyst consensus estimate of $0.42.

Datadog raised its fiscal 2025 revenue outlook to $3.312 billion to $3.322 billion (prior: $3.215 billion to $3.235 billion), exceeding the consensus estimate of $3.236 billion. It projects an adjusted EPS of $1.80-$1.83 (previously $1.67-$1.71), which is below the analyst consensus of $1.72.

Datadog stock is down 4% year-to-date. On July 8, Guggenheim downgraded Datadog from Neutral to Sell and cut its price target to $105, citing expectations that OpenAI will reduce its use of Datadog’s services in favor of cheaper, internally managed observability tools. The firm anticipates a sharp drop in annual recurring revenue from OpenAI, which could significantly weaken Datadog’s AI-native revenue base. Despite projected strong second-quarter results, Guggenheim expects revenue momentum to fade in the second half of the year and sees only 15% growth in 2026, which is below consensus estimates.

Price Action: DDOG stock is down 0.30% at $136.58 as of the last check on Thursday.

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