DDOG: Agentic Tool Calls Grow More Than 22x

Datadog (NASDAQ: DDOG) said on its August 6, 2026 second-quarter earnings call that MCP tool call volume handled by its platform grew more than 22x compared with Q4 2025. The increase points to rapidly expanding agentic activity among customers, but Datadog did not disclose the absolute call volume or separately quantify the revenue associated with that growth.[1]

Datadog operates a cloud application observability and security platform whose revenue expands as customers use the platform and ingest more data. Its original LLM Observability product serves application developers and machine learning engineers by monitoring prompts, spans, cost, latency, and output quality. This helps teams troubleshoot applications, evaluate safety, and move large language model applications into production. The expanded Datadog for AI offering now also covers agent usage, cost, and effectiveness, making it part of the company's core platform business.[3]

From LLM monitoring to broader AI workflows

The product line has moved from development into a wider range of AI workflows. On November 7, 2023, management said Datadog was developing its own LLM observability products while also saying it could not yet determine the revenue opportunity for specialized tools. In 2024, LLM Observability became generally available and began connecting model signals with other application components. By early 2026, it had expanded into Datadog for AI, which provides end-to-end observability and security across the AI stack. The latest August 6, 2026 disclosure added capabilities including Data Observability, Agent Console, Agent Observability, and Bits Evals. The product's name and scope expanded, carrying the original application into agentic workflows rather than indicating that it had stopped.[4][3][2][1]

Usage is rising, but the metrics have different scopes

Usage metrics show that customers have adopted the expanded product. In February 2026, management said Over 1,000 customers were using Datadog for AI and that the number of spans sent had increased 10 times over the previous six months. In August, Datadog said MCP tool calls had grown more than 22x compared with Q4 2025.[2][1]

These figures measure different things over different periods. The first two cover customer count and the change in spans, while the third measures growth in agentic tool calls handled by the platform. They cannot be combined into one growth curve. The 22x figure is also a relative multiple and does not reveal the absolute scale.

The revenue link remains unquantified

This activity could flow into revenue through greater AI data ingestion, platform consumption, and adoption of multiple products. When development teams monitor models, agents, and other application components on one platform, rising workloads could increase both the data Datadog handles and the number of products customers use. Management described AI as a tailwind for platform consumption, but it did not disclose revenue, pricing relationships, or revenue share for Datadog for AI, LLM Observability, or MCP tool calls. Other customer transactions and platform products also affected revenue in the same period, so company revenue growth cannot be attributed directly to this business.

Datadog has expanded its early LLM monitoring product into a family that covers AI applications and agents. Customer adoption and activity growth provide clear evidence of operating progress. Establishing the product's financial weight would still require standalone Datadog for AI revenue, annual recurring revenue, or billed consumption data that can be matched to MCP tool call volume.

Application assessment

• Datadog LLM Observability | Business position: core business | Deployment stage: limited production | Scope: multiple businesses or regions | Value type: revenue growth

Sources

[1] Drillr · Datadog, Inc. (DDOG) · 2026-08-06 · Earnings call

Original: We're also seeing signs of rapid growth in agentic activity with a number of MCP tool calls quadrupling again quarter over quarter and growing more than 22x when compared to Q4 2025.

[2] Drillr · Datadog, Inc. (DDOG) · 2026-02-10 · Earnings call

Original: We are seeing an acceleration in growth. Over 1,000 customers are using the product, and the number of spans sent has increased 10 times over the last six months.

[3] Drillr · Datadog, Inc. (DDOG) · 2024-08-08 · Earnings call

Original: we announced the general availability of LLM Observability, which allows application developers and machine learning engineers to efficiently monitor, troubleshoot and secure LLM applications. With LLM Observability, companies can accelerate the development of AI applications into production environments and reliably operate and scale them.

[4] Drillr · Datadog, Inc. (DDOG) · 2023-11-07 · Earnings call

Original: So we are continuing to invest by integrating with more components at every layer of the new AI stack and by developing our own LLM observability products.