Preview|DDOG 3Q26: Constructive Checks, Enterprise AI Supports Core Demand and Consolidation Gains

Summary

DDOG’s 3Q26 setup remains constructive. Our repeat channel checks point to healthy demand with some seeing acceleration and above-plan performance. Existing-customer expansion is improving, new customers are buying more modules at entry, and enterprise AI deployments are creating additional demand for infrastructure monitoring, application tracing and logs. We see this as a broadening of the core observability opportunity, with DDOG also gaining share as customers consolidate fragmented toolsets and migrate from incumbent platforms. AI-native demand also remains healthy as our check suggests its largest AI customer’s usage has stabilized and resumed growth following its renewal and the guidance reset. This supports a recovery in DDOG ARR from that customer, although recognized revenue lags and is expected to decline initially. Meanwhile, continued training demand from other AI-native customers supports strong momentum into 4Q despite moderation at the other large LLM customer. Budget discipline, logging optimization and uneven partner execution remain relevant. Overall, we expect DDOG could deliver 36% YoY revenue growth in 3Q26, beating guidance by 5–6 percentage points and meeting buyside expectations. We expect the high end of 4Q26 revenue guidance to imply 30–31% YoY growth, effectively signaling stable sequential revenue growth despite a roughly 3-percentage-point tougher comparison.

3Q26 Checks and Outlook — Healthy Demand and Better Expansion

Channel Expert A — Global GSI

• 3Q26 growth: The practice’s final 2Q26 growth was 34.2%, within the prior 33–35% expectation. Preliminary 3Q26 growth is estimated to have slightly accelerated to 34.6–34.8%. This is in line with the previously raised 32–37% second-half target, with the expert describing underlying performance as slightly better than expected. Strength is broad across the traditional observability portfolio, particularly logs, rather than dependent on a single new product.
• 4Q26 and 2027 outlook: The GSI expects approximately 34–35% growth in 4Q26, allowing for seasonality, and discussed an initial 1H27 range of 32–36% that is not yet finalized. These expectations support continued healthy demand beyond 3Q.

Channel Expert B — European Systems Integrator

• 3Q26 beat and better expansion: 3Q26 growth is trending around 25%, versus a 20% expectation and approximately 20% in 2Q26.
• Existing-customer expansion: Existing-customer spend growth improved to 12–15% from 8–10% in the first half.
• New-logo mix: New customers increasingly start with two or three modules rather than one. More opportunities converted than planned, supported by upsell, cross-sell and preparation for AI workloads. Budget limits remain, but the check points to a healthier expansion engine than last quarter.
• 4Q26 and 2027 outlook: The European integrator expects approximately 25% growth in 4Q26 and a 30% starting forecast for 2027; the expert’s personal upside view is closer to 35%. Customer expansion and consolidation opportunities underpin the outlook, rather than a large immediate contribution from Bits AI.

Channel Expert C — North American Reseller