Datadog beat on revenue, beat on earnings, raised full-year guidance - and the stock cratered 18% anyway. The cloud monitoring company reported Q2 revenue of $1.12 billion, up 36% and past the $1.08 billion consensus. Non-GAAP EPS of $0.65 crushed the $0.58 estimate. Management lifted the full-year outlook to $4.45-$4.47 billion. The stock had nearly doubled in 2026 before the report, closing near its all-time high the day before earnings.
None of it mattered. Datadog’s largest client - widely believed to be OpenAI - told the company it plans to scale back usage in the second half. Analysts estimate that customer’s annual recurring revenue could drop from $240 million to $80 million by Q4 as it shifts to internally built tools. Q3 guidance implies 28-29% revenue growth, down from 36%.
Datadog sells picks and shovels to the AI gold rush. It just found out its best customer is learning to forge its own.