Thesis

Datadog's usage-based pricing model — a tailwind when engineering budgets were expanding — becomes a structural headwind as AI agents generate telemetry volumes that explode beyond linear growth but without proportional budget expansion. Customers facing unpredictable bills will cap, sample, or migrate observability workloads to cheaper alternatives.

What would prove this wrong

Datadog revenue growth stays above 25% AND net retention stays above 120% for four consecutive quarters through Q2 FY2028

Status