Datadog Q2: Non-AI growth remains sustainable with existing customers driving usage

Datadog Q2: sustainability of non-AI acceleration, and what drives growth (new logos vs. higher usage)

1) How sustainable is the acceleration in the non-AI portion?

Management’s view is that the non-AI acceleration is “sustainable” and within a historically reasonable range. They said the non-AI acceleration is “largely driven by existing customers,” not by a small number of new logos, and that they do not see the “digest” problem they experienced in earlier “headdy days of 2021.” ¹ They explicitly stated: “We think it’s sustainable.” ¹

Why they believe it’s sustainable (mechanics):

• Existing-customer-driven, not just new-customer-driven. They emphasized that most of the business would not “move” from only “a few newer customers,” because “the majority of our business” is existing customers. ¹
• Both volume increases and platform consolidation/modernization effects. They said non-AI acceleration is driven by “both increases in volume” and customers “moving more and more close to the cloud and adoption of our newer products as they consolidate on to us.” ¹
• Growth pattern is steadier than 2021-style acceleration. They compared current growth rates to 2021 and said current rates are “far below what we were seeing at that time,” and “we don’t create the same issue of customers having to digest very large increases multiple years in a row.” ¹
• The acceleration has continued rather than fading. They described non-AI (and excluding the largest AI customer) as “accelerated” and noted that the acceleration since last year “has been constant and very significant… [and] keeps happening as far as we can tell.” ²³

Bottom line on sustainability (based on the excerpts): The company is portraying non-AI acceleration as a continuation of structural drivers—cloud modernization, continued adoption of newer products, and existing-customer expansion—rather than a short-lived promotional or purely logo-driven spike. ¹²

2) Is non-AI growth driven by new logos or higher usage?

Non-AI growth is described as primarily usage- and expansion-led within the existing customer base, with new logos contributing but not being the core driver.

What management said about driver mix

• Non-AI is “largely driven by existing customers.” ¹
• It’s “driven by both increases in volume” and adoption/consolidation into newer products. ¹
• Consolidation and financial discipline reinforce usage. They stated that when customers adopt/consolidate, they consider the “financial side of the equation” (how much they “make or save”), and Datadog positions itself to help customers quantify savings—supporting continued spend/usage rather than one-time purchases. ¹
• There is also evidence that new logos matter, but the question is whether they explain the acceleration. They disclosed that the “portion of [y/y] revenue growth… related to new customers was about 30% in Q2, up from 25% in Q1,” which implies the remaining portion of growth is not new-customer-driven. ⁴

Direct comments tying new logos to compounding

• They said customers being landed are “not only the new logos,” but also “the growth of the new logos” added over the last couple of years, describing “a compounding of that.” ⁵
• They also stated they are seeing “new logos ramping faster and contributing more to revenue growth.” ⁴

Putting it together for “non-AI portion”

Even though new logos ramping faster is occurring, management’s non-AI acceleration framing stresses that it is “largely driven by existing customers” and by increases in volume plus adoption/consolidation. ¹ Therefore, the excerpt supports the conclusion that the non-AI acceleration is more sustainable if it reflects higher usage/adoption within the base rather than a dependence on continuous net-new logo flow. ¹

3) Will non-AI areas be more sensitive to CFO budget tightening than AI products?

From the excerpts, management does not describe non-AI as structurally more sensitive to CFO budget tightening than AI. Instead, they argue that:

• CFO conversations are increasingly about ROI/cost control, which can affect both AI and non-AI purchasing decisions. They explained that customers buy software because it “makes them more money or it saves them money,” and that Datadog helps customers “rein in” and “help… rein in my AI costs.” ⁶ They also connect adoption/consolidation to customers’ focus on the “financial side of the equation.” ¹
• Non-AI acceleration is tied to broad secular and operational drivers (cloud modernization + consolidation), not solely discretionary AI spend. They said non-AI customers accelerated in the high 20s y/y, up from mid-20s last quarter and 18% a year ago. ⁷ They also indicated non-AI acceleration is driven by customers moving to cloud and adopting newer products as they consolidate. ¹
• They explicitly characterized broad-based acceleration across the customer base. They said “revenue growth for our non-AI customers also accelerated again this quarter,” and that all customer segments (startups to enterprises) are adopting AI and that this is “accelerating their usage of cloud and modern technologies, as well as their usage of the Datadog platform to observe, secure, and act on their cloud and AI workloads.” ⁷
• They discussed ongoing investment and returns rather than a pause risk. They said they continue investing in R&D and go-to-market because they see the returns of those investments (including expanding quota capacity and geography), and this is a growth driver in “non-AI or enterprise type business.” ⁸⁹

Important nuance: The excerpt you provided includes the analyst’s question about whether CFO caution makes non-AI more sensitive than AI, but it doesn’t include a direct, explicit “yes/no” management answer to that specific comparative sensitivity question. ¹⁰ What we do have is management’s narrative that (a) growth in non-AI is still accelerating, (b) the underlying drivers are existing-customer volume and consolidation, and (c) CFO concerns are being addressed via ROI/cost-savings framing—mechanisms that should apply to non-AI budgets as well. ¹⁶⁷

Conclusion (supported by excerpts): The provided transcript content does not indicate that non-AI will be categorically more sensitive to CFO budget tightening than AI. Instead, management frames both AI and non-AI activity as increasingly justified by measurable ROI/cost-savings and by ongoing cloud modernization/adoption processes within existing accounts. ¹⁶⁷

4) Growth is not only “new logos”—it’s also multi-product adoption and expanding usage

Even beyond the non-AI question, Datadog gave adoption metrics that align with usage-driven growth:

• Customers using more products are increasing. They reported 58% of customers now use 4+ products (up from 52% a year ago), 37% use 6+ (up from 29%), and 13% use 10+ (up from 7%). ⁷ This supports the idea that the growth acceleration (including non-AI) is tied to deeper penetration/usage rather than solely net-new customer wins. ⁷

Overall answers to your questions

1. Sustainability of non-AI acceleration: Management says the non-AI acceleration is “sustainable,” largely because it is existing-customer-driven and tied to cloud modernization and product adoption/consolidation, with growth rates that they believe are well within a sustainable range versus 2021. ¹²
2. New logos vs. higher usage in non-AI: The excerpts indicate non-AI acceleration is primarily higher usage/volume and adoption by existing customers, though new customer contribution exists and has been rising (new-customer-related portion of y/y revenue growth ~30% in Q2, up from 25% in Q1). ¹⁴
3. Sensitivity to CFO budget tightening: The excerpts do not support the idea that non-AI is more likely to be cut than AI. Management’s framing suggests CFO budgets are being influenced by ROI and cost control, and the non-AI growth is still accelerating via consolidation and adoption dynamics that are connected to cost/financial outcomes. ¹⁶⁷