Earnings

Datadog's Biggest Customer Cut Its Usage In The Third Quarter, 10-Q Says

The quarterly report says the cut may slow revenue growth, though revenue still rose 35% to $1.2 billion in the quarter.

Datadog's largest customer reduced its usage in the third quarter of 2026, the company said in its 10-Q filed Wednesday, and the cut "may cause a deceleration in revenue growth." The customer belongs to an AI-native cohort that added high single digit percentage points to year-over-year revenue growth in the quarter.

A warning becomes a fact

The prior quarter's 10-Q used forward-looking language, saying Datadog would see a reduction in usage from its largest customer starting in the third quarter. The new filing states in the past tense that the reduction happened.

The risk-factor section ties the AI-native cohort's contribution to the quarter ended September 30, 2026. It adds that the cohort rapidly increased its usage and may in future optimize it or fail to renew.

Usage-based billing is why one buyer matters. Datadog recognizes revenue as products are used on many contracts, and the filing says decreases in one period may not show up immediately but could hurt revenue in later quarters.

Growth still ran at 35%

Datadog, which sells a cloud platform that monitors and secures applications and computing systems, reported third-quarter revenue of $1.2 billion, up 35% from $885.7 million a year earlier. Net income was $118.3 million, against $33.9 million.

About 70% of the revenue increase came from existing customers and 30% from new ones. Trailing 12-month dollar-based net retention, which compares spending by the same customers year over year, was in the low-120%'s, up from about 120% a year earlier.

Customers with annual run-rate revenue of $100,000 or more numbered about 4,860, versus 4,060, and total customers reached about 33,500 from about 32,000. Remaining performance obligations, contracted revenue not yet delivered, were $3,847.7 million at September 30, against $3,461.2 million at December 31.

The fourth-quarter guide

Datadog guided fourth-quarter revenue to between $1.19 billion and $1.20 billion and full-year revenue to between $4.515 billion and $4.525 billion. Benzinga's headline on the report said shares plunged on the soft fourth-quarter sales target.

One other line moved: the allowance for credit losses on receivables stood at $29.3 million at September 30, up from $19.3 million at December 31, 2025.

Datadog's market value was $79.2 billion as of the report on Wednesday, and its fourth-quarter revenue guide is $1.19 billion to $1.20 billion.