New logo bookings 2X+ YoY - all-time record. Shares jumped >30% - its best single-day gain ever.
What’s driving Datadog’s growth?
Hyperscalers aren’t just co-selling and co-innovating. They are buying
Why?
These are companies with massive balance sheets and deep engineering teams. If anyone can build anything in-house, it is them.
CEO Olivier Pomel: “If there was ever a set of companies for whom it makes sense to do it themselves, it’s those companies. And yet, we see that they have the same issue.
When it comes to going as fast as they can, being as efficient as they can with their resources, they come to us to replace some of the things they were using before.”
This is co-opetition at its best. Clouds can build, but they still buy best-of-breed products when the problem is important/urgent.
It is also why they co-sell with leading ISVs. Customers don’t want only cloud infra. They need solutions, including best-in-class products, AI, security, etc.
AI + Cloud: two growth engines
Pomel was clear:
“There is no change to our overall view that digital transformation and cloud migration are long-term secular growth drivers for our business. But we now have an additional secular growth driver with AI...”
AI numbers were striking:
6,500 customers now use 1+ AI integrations
They represent only 20% of customers, but ~80% of ARR
MCP server calls grew 4X QoQ
LLM Observability surged ~3X QoQ
Pomel added an insightful point for everyone considering agent pricing:
“We don’t care whether most of the usage is humans or agents. Our business model lends itself to do pretty well — we are usage-based, it doesn’t matter where the load is coming from.”
Regulated sectors still need channel
Datadog received FedRAMP High certification for U.S. federal customers.
CFO David Obstler explained:
“On the FedRAMP, we’ve been working on both the different certifications, but at the same time, we’ve been investing in the go-to-market function,
both in terms of reps and channel partners for a number of years…
the channel partner relationships are a very important part of this.”
Public sector GTM requires partners to unlock the market.
Cloud GTM flywheel runs both ways
AWS highlighted in Dec that Datadog crossed $2B in total sales on AWS Marketplace.
They also signed an expanded Strategic Collaboration Agreement covering “solution development, AWS Marketplace availability, and go-to-market programs.”
Datadog itself disclosed ~$1.4B in cloud commits they have for the next 5 years.
Which brings us to the bigger lesson
Datadog is:
major cloud customer
strategic hyperscaler partner
top marketplace seller
and now a vendor to hyperscaler AI teams
That is the new Cloud GTM playbook - strongest hyperscaler relationships are no longer one-dimensional.
