Datadog Beat Earnings, Raised Guidance— but DDOG Stock Still Plunged 19% as Wall Street Says It All 'Comes Down to One Customer'

Despite reporting a massive 36% revenue surge and raising its full-year guidance for the second quarter of 2026, Datadog Inc. (NASDAQ: DDOG ) saw its stock plummet 19% on Thursday as weak third-quarter guidance tied to a single major client sparked investor panic.

Futurm Equities’ Shay Boloor observed that the massive software sector sell-off “comes down to one customer.” The ‘One Customer’ Dilemma Datadog delivered a robust second quarter with $1.12 billion in revenue and adjusted earnings of $0.65 per share, clearing Wall Street estimates.

However, the company’s third quarter guidance implied a deceleration to roughly 29% year-over-year revenue growth.

Management attributed this slowdown to its largest customer—a leading AI company with a nine-figure contract using 17 Datadog products—reducing its usage starting in the third quarter, despite a recent renewal.

While the CEO Olivier Pomel refused to explicitly name the client on the earnings call, the leading AI company is widely believed by Wall Street analysts to be OpenAI. “The entire reaction comes down to one customer,” explained Boloor, highlighting the inherent risks of Datadog’s consumption-based business model where large enterprises treat cloud and AI workloads like a utility bill.

Addressing the investor anxiety during the earnings call, Datadog CEO defended the core business, stating, “We don’t control what’s happening to a specific customer.” Pomel noted that the company chose to fully de-risk its guidance to prevent this isolated usage reduction from overshadowing broader business momentum.

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Pomel emphasized that revenue growth for non-AI customers accelerated to the high 20s percent range, up from 18% a year ago.

Furthermore, Datadog now serves over 750 AI customers, including all 10 of the top 10 AI leaders.

The company is also leaning heavily into automation, launching a suite of new capabilities for Bits AI at its recent DASH conference.

Pomel underscored this strategic shift on the call, declaring, “The future of observability is not just observing, it’s fixing.” While the steep pullback reflects the market’s high expectations and an expensive valuation multiple, Boloor concluded that if the rest of the business continues accelerating, “the sell will look excessive in hindsight.” How Has DDOG Performed In 2026? DDOG shares rose 68.61% year-to-date, down 10.21% over the last month, and higher by 67.41% over the year.

It closed 19.03% lower at $229.29 per share on Thursday, and it was up 1.09% in premarket on Friday. ’s Edge Stock Rankings indicate that DDOG maintains a strong price trend in the short, long, and medium terms, with a moderate quality score.

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