Datadog (DDOG) reported 36% year-over-year revenue growth for its most recent quarter and said its AI-native customer base has grown to approximately 750 companies, up from fewer than 100 roughly two years ago, during a presentation at Citi's 2026 Global TMT Conference on September 8.
CEO and co-founder Olivier Pomel told analysts moderated by Citi enterprise software research co-head Fatima Boolani that non-AI customer growth accelerated into the high-20% range from about 18% a year earlier. The company is now present in roughly half of Fortune 500 firms, with large customers averaging about $400,000 in annual recurring revenue. Gross retention remained in the high-90% range across both small and large customers.
Datadog estimates it holds about 13% to 14% market share in the observability segment, which Pomel noted is growing between 15% and 30% annually depending on the sub-segment. Large enterprise customers typically allocate 10% to 20% of their cloud spend on observability and security tools through Datadog, the company said.
The company's security products now generate approximately $100 million in annual recurring revenue, with roughly a quarter of its customer base using security software. Datadog also disclosed it spends about 30% of revenue—roughly $1 billion annually—on research and product development. Gross profit margin came in at nearly 80% over the trailing twelve months.
Pomel highlighted that an estimated 70% to 80% of the infrastructure stack used for AI observability resembles the stack built for cloud applications, with additional layers added for GPU monitoring, agent behavior tracking, and model outcome validation. The platform is structured around four pillars: metrics, traces, logs, and digital experience, which includes release monitoring and synthetic testing.
On pricing, Datadog said it is moving away from a pure data-volume-based model toward a mix incorporating AI credits and outcome-based measures. The company also pointed to its acquisition of Adaptive ML and its open-source time series models, Toto and Toto 2.0, as part of its broader AI strategy.
Datadog remains a SaaS-only company to preserve direct data access and customer feedback loops, Pomel said. Support operations are becoming increasingly automated, and engineering teams are expanding their use of AI agents internally.
Shares of Datadog, trading at $212.93, delivered a 56% return year-to-date and a 69% gain over the past six months. The company, which went public in 2019 and is now 16 years old, carries a market capitalization of $74.8 billion.
