Preview|DDOG 2Q26: Healthy Channel Momentum, Bits AI Still Early, OpenAI Optimization Absorbed by Anthropic

We spoke with six experts this quarter: two channel/GSI delivery partners covering global enterprise accounts, one North American F500 channel partner, one observability industry consultant, and two North American enterprise customers on the user side. Overall, channel partners report healthy business trends. Growth is still led by the traditional three (Infra/APM/Logs), with security and Dev-related products taking over as the second growth curve, while AI products themselves are still early in their contribution. On the frontier LLM customers, we understand OpenAI’s 2Q usage declined roughly 10-20% q/q with further optimization ahead, while Anthropic’s 2Q usage should be quite strong — net net, limited impact on the quarter.

2Q26 Progress and Outlook — Broadly Constructive

North America Channel Expert A

• This expert’s 1Q26 ultimately landed at about 26% y/y, above the preliminary 21% we had last quarter; 2Q26 is tracking to 33-35%, a clear acceleration and above his own expectations
  • Last quarter his 1H26 target was 22-24.5%; it has since been revised up to 23.5-26.5%, with 1Q coming in slightly above 26%
• The 2H26 target has been raised sharply from 26-28.5% to 32-37%, making DDOG one of the few vendors for which he has taken targets up this year
• Three reasons for the 2Q acceleration:
  • Customers have reached a reasonably mature stage in their AI deployments and can now judge how observability spend should keep pace with AI; the MELT 2.0 transition largely ended at the close of 1Q26
  • Five large deals closed in 2Q, three of which had been in the works since late last year, for aggregate TCV of more than $25-30m and up to $35m on his widest measure; year one is concentrated on activation and implementation, so revenue is front-loaded
  • Deal slippage has fallen off materially — in prior quarters at least half of signings would push into the following quarter, whereas most 2Q organic bookings landed within the quarter, and July is following the same pattern
• Larger-TCV deals remain concentrated in high-tech and parts of financial services, and have not yet spread across the broader customer base
• On the source of growth: new logos will still contribute less than one-third in 2H and into next year, with the bulk of the incremental dollars coming from product expansion within the installed base
  • Customers previously running 2-3 DDOG products are moving to at least 5; the land products are still Infra and APM, then Logs, followed by Synthetics and Cloud Security
  • The buying center is no longer just the CIO/CISO — SRE, QA, DevOps and platform engineering are now decision-makers, pulling through Synthetic Monitoring, CI Visibility and Error Tracking
• 2H growth mix: traditional products (applications/infrastructure/logs) account for at least two-thirds; security contributes at least 15% and Dev-related products about 10%, together roughly one-quarter; AI-related products total 10-15%, which he concedes is on the optimistic side
• The multiplier effect of AI on application count: before mid-2023, a typical enterprise had roughly 100 developers supporting 400 applications; today headcount is up only 5-10% (and skewed to senior engineers) while application count is close to 650, up more than 50%
  • Application architecture is being rebuilt as well — what used to be a simple web call to a database now layers in vector DBs, models, and embedding models, at least doubling component count and widening the observability surface accordingly

Global Channel Expert B

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