Datadog is making significant strides in AI, which is becoming a more central part of its growth strategy.
Datadog’s Q3 revenue increased 26 percent to $690 million.
Datadog had about 3,490 customers with ARR of $100,000 or more, an increase of 12 percent from about 3,130 as of September 30, 2023.
Datadog is targeting revenue of $709 million – $713 million in the fourth-quarter of 2024. Datadog is targeting revenue of $2.656 billion – $2.66 billion in 2024.
Here are key points about the company’s AI focus:
AI-native customers now account for over 6 percent of Datadog’s annual recurring revenue (ARR) for Q3 2023, up from 2.5 percent a year ago. This group alone contributed around 4 percentage points of the company’s year-over-year ARR growth.
Datadog’s AI offerings include specialized integrations and observability tools designed for AI, machine learning, and large language model (LLM) applications. As of Q3, about 3,000 customers were using these AI integrations to monitor their AI use. The company is also seeing traction with its LLM observability products, helping customers reduce investigation times for LLM latency and errors from days or hours to minutes.
Datadog has secured substantial expansion deals, including seven-figure contracts with a hyperscaler division delivering next-gen AI models and an online food delivery company in Latin America. These customers leverage Datadog’s scalable observability platform to reduce alert noise, enable cross-team collaboration, and gain deeper insights into performance across their AI and tech stacks.
Datadog anticipates a continued rise in demand as customers deploy more AI applications into production, boosting the need for observability tools. The growth of cloud-based AI workloads further strengthens Datadog’s position, given its expertise in cloud monitoring.
Reflecting its strong growth driven by AI and other factors, Datadog raised its annual revenue and profit forecasts. The company’s AI-backed cybersecurity offerings and expanded platform strategy are well-aligned with the broader market trends toward cloud-based AI solutions.
Datadog’s strategic focus on AI is paying off as it deepens its footprint in observability for AI-driven applications and expands its customer base among organizations increasingly relying on AI in their operations.
Baburajan Kizhakedath
