Datadog Q2 Preview: Can AI Upside Offset Slower Cloud Growth?

Datadog DDOG will report Q2 2025 results before the open on August 7. Wall Street expects EPS at $0.41 and revenue of $791 million, reflecting a 23% YoY growth. The stock is down 8% year-to-date, and a muted reaction to Datadog's recent addition to the S&P 500 underscores the importance of this quarter's report in restoring momentum in a maturing cloud market.

Investors will assess Datadog's ability to expand its platform footprint and upsell across its customer base. In Q1, the company reported continued growth in larger accounts and deeper product adoption. A continuation of this trend would reinforce the platform's stickiness and enterprise value proposition.

Another crucial area is the company's AI strategy. At its recent DASH 2025 conference, Datadog announced a suite of new AI-powered tools for observability, security, and developer workflows. Management's commentary on the early traction of these features will be monitored closely. Investors want to see evidence that these innovations are converting into new customers and increased spending from existing ones, particularly in the competitive LLM observability and cloud security segments.

Finally, forward guidance for Q3 and FY 2025 will likely be the stock's main catalyst. Given recent rumors of a potential acquisition of the security firm Upwind for approximately $1 billion, any commentary on this or other strategic moves will also be closely monitored. A strong outlook would reassure investors that Datadog can navigate a more measured cloud spending environment while continuing its rapid pace of innovation and growth.