Datadog NASDAQ: DDOG CEO and co-founder Olivier Pomel said the company is benefiting from both ongoing cloud migration and the rapid expansion of artificial intelligence workloads, describing the observability and security provider as still early in a long-running market cycle.
Speaking at a company news event, Pomel said Datadog helps engineering and product teams understand whether software and services are working properly, performing fast enough, delivering business value and remaining secure. He said the company serves customers ranging from startups and AI-native companies to large, older enterprises.
“We’re in still fairly early in a super cycle of digitalization and cloud migration,” Pomel said. He added that AI is adding “new kinds of complexities,” additional infrastructure and new surfaces that need to be monitored, managed and secured.
The operator noted that Datadog recently reported 32% revenue growth at roughly a $4 billion scale, with acceleration for the fourth consecutive quarter. Pomel said that acceleration was broad-based, including both AI-native customers and the rest of the company’s customer base.
AI Demand Expands Beyond Model Companies
Pomel said AI-native companies are scaling quickly as AI moves into production, with use cases such as coding becoming “very real” and growing fast. He said this demand is supporting large model companies as well as application companies built around AI.
At the same time, Pomel said the acceleration among non-AI-native customers is especially significant. He said many of those companies are modernizing faster so they can be ready for AI, while others are still moving workloads to the cloud.
Pomel pointed to Gartner market share data as evidence of the size of the opportunity, saying Datadog is the leader in observability but has 13.6% of the market, according to Gartner. “This tells you how early it is in the market for us,” he said.
The discussion also addressed Datadog’s AI-native customer base. The operator said Datadog has 22 AI-native customers spending more than $1 million and five spending more than $10 million. Pomel said those customers face pressure to deliver quickly and rely on Datadog’s end-to-end visibility, from infrastructure such as CPUs, networks and GPUs through to end users and business outcomes.
Training Workloads Emerging as a Potential Market
Pomel said Datadog is beginning to see AI training become a market for the company, a shift from its prior view that training was not yet a meaningful opportunity. He said the development was “a bit of a surprise.”
He explained that earlier training workloads were mostly pre-training efforts conducted by only a handful of companies, often using homegrown systems. More recently, he said, post-training has become more specialized, richer in infrastructure requirements and more common among a larger set of companies.
“Instead of having 5-10 companies doing that, now there were 50-100 doing that,” Pomel said. He added that multiple customers, including several hyperscalers, approached Datadog about training around the same time, suggesting “the emergence of a new market.”
Still, Pomel cautioned that training remains small compared with inference and other parts of customers’ technology stacks. He described it as an “interesting new green shoot,” while noting that training runs are still often episodic and custom-coded rather than continuous production operations.
Core Customers Continue Cloud Modernization
For Datadog’s non-AI-native customers, Pomel said some early production adoption of AI is visible through traffic to its MCPs and LLM Observability product. However, he said AI remains a small part of the growth driver for that group.
The larger drivers, he said, are cloud modernization, Datadog’s expanded sales capacity and the company’s broader product portfolio. Pomel said Datadog has built up go-to-market coverage in more regions and segments, and that more products are reaching product-market fit and adoption inflection points.
He characterized that part of the business as less dramatic than AI but highly repeatable. “It’s a predictably high return on investment, very buildable part of the business,” Pomel said.
Bits AI and Automation Draw Customer Interest
Pomel said Datadog is seeing strong demand for Bits AI SRE, with customers asking for faster movement toward auto-resolution. The operator cited 100,000 investigations since launch and 2,000 customers using the product.
Pomel said Datadog initially worried that too much automation could create trust issues, but customers are increasingly asking the company to resolve problems automatically or provide a button to fix them. He said customers also want Bits AI to work across other systems, including other logging systems, security tools and open-source technologies.
Datadog is also investing in more proactive and predictive capabilities, Pomel said. He highlighted Toto, the company’s second version of a time series foundation model, which he said was released about 10 days before the event. Pomel said the model is open weight, trained largely on observability data and performs well across time series use cases.
Pomel said Datadog currently charges per investigation for Bits AI SRE, but the long-term packaging model is not yet clear. He said Datadog’s usage-based business model gives the company flexibility in how it monetizes intelligence-based features.
Security and Long-Term Opportunity
Pomel said Datadog continues to invest in R&D, which he described as around 30% of revenue. He said the company may eventually shift some spending from labor toward tokens or GPUs, but it is still hiring and scaling engineering capacity because of customer demand and product opportunities.
On security, Pomel highlighted code security and Cloud SIEM as areas of recent strength. He said coding models are changing the code security market and creating more demand. For Cloud SIEM, he said Datadog combines a strong data backend and log management system with its Bits AI security assistant.
Looking ahead, Pomel said the collapse of development cycles and the rising volume of software being built create opportunities for Datadog. He said value is shifting beyond writing code to determining what to build, whether it works, whether it is safe and whether users find value in it.
“For us, it’s a huge driver of short and long-term growth,” Pomel said.
About Datadog NASDAQ: DDOG
Datadog NASDAQ: DDOG is a cloud-based monitoring and observability platform that helps organizations monitor, troubleshoot and secure their applications and infrastructure at scale. Its software-as-a-service offering collects and analyzes metrics, traces and logs from servers, containers, cloud services and applications to provide real-time visibility into system performance and health. Datadog's platform is widely used by engineering, operations and security teams to reduce downtime, accelerate incident response and improve application reliability.
The company's product suite includes infrastructure monitoring, application performance monitoring (APM), log management, real user monitoring (RUM), synthetic monitoring and network performance monitoring, along with security-focused products such as security monitoring and cloud SIEM.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Datadog, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Datadog wasn't on the list.
While Datadog currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Click the link to see MarketBeat's list of seven stocks and why their long-term outlooks are very promising.
Get This Free Report
