On 6 August, Datadog — which sells cloud monitoring software billed by the host watched, the gigabyte of logs ingested and the trace stored — told investors its largest customer would reduce usage starting in the third quarter. The account is a nine-figure artificial-intelligence company running 17 Datadog products. Chief executive Olivier Pomel declined to name it; Wall Street analysts widely believe it is OpenAI. Datadog had just beaten and raised. The shares fell 20.4% that day.

That is the arithmetic of consumption billing. Revenue is a direct read on telemetry actually emitted, so a single customer's cost-engineering decision arrives in the quarter it is taken. Datadog's quarter was otherwise its best in years: revenue of $1.121bn, up 35.6%, a fourth consecutive acceleration. Customers spending over $100,000 a year reached 4,720, up 22.6%, and now supply 91% of annual recurring revenue. Net revenue retention sits in the low 120s. Management still guided the September quarter to 28–29% growth. Bernstein's Peter Weed cut the stock to Market Perform with a $226 objective, arguing the valuation required near-flawless execution.

The opposite contract

Dynatrace, a Waltham, Massachusetts company selling an enterprise monitoring platform built around its Davis causal-inference engine, is mid-conversion to a subscription in which customers commit spend up front and draw it down. That structure delays revenue recognition. Reported growth duly decelerated to 16.2% in the June quarter from 19.4% two quarters earlier — revenue of $555m, with subscription at 96% of the total.

Underneath, the direction reverses. Annual recurring revenue reached $2.14bn, up 17% in constant currency. Net new ARR of $85m rose 66% year on year, or 41% organically. The trailing-twelve-month organic net-new-ARR growth rate hit 17%, up from 12% and accelerating for a fourth straight quarter. Average new-customer land size rose for a fifth consecutive quarter, to roughly $285,000 across 122 new logos. Log management, the category most exposed to price competition, is now Dynatrace's fastest-growing, at $200m of annualized consumption — nearly double the level of two quarters ago. Committed billing is understating this business, not flattering it. Management bought back $275m of stock in the quarter, citing undervaluation; its chief financial officer, Jim Benson, has announced his retirement by the end of the fiscal year, mid-conversion.

The standard feared as a commoditizer is being absorbed instead. Dynatrace bought BindPlane, which supports the OpenTelemetry collector, and it added $13m of ARR ahead of plan.

Elastic is being paid before it reports

Elastic sells search software off an open-source core that anyone can self-host, with observability layered on top. Its growth has decelerated across four quarters, from 19.5% to 16.0%, and it guides the July quarter to about 13.1%. Its last reported figures, on 28 May, showed fiscal-2026 revenue of $1.74bn and a 112% net expansion rate. Since then it has risen 58% on no new numbers at all. It reports on 27 August. Part of the bid is rotation: money left semiconductors in mid-August after Anthropic told investors its run rate reached $65bn, below circulating expectations.

On price-to-forward-gross-profit — the fair lens here, since margins differ and Elastic's 24.6x trailing earnings multiple reflects a one-off $435.9m item that put a quarter's net margin at 96.7% — Elastic trades at 5.98x against 3.85x in early May. Dynatrace is at 7.66x forward versus 6.87x then, having risen 24% in three months while gross profit grew with it. Datadog, at 23.40x forward and 26.35x trailing, has fallen from 30.44x in late July but remains 55% above its early-May reading and three to four times either peer.

What the charts hide

Datadog's 50-day average has stayed above its 200-day since 21 May, an unbroken uptrend on paper. It has delivered 7.1%. Strip two sessions — 1 June and 10 August — and the remainder is -14.4%; the trend is two gaps around a collapse. Elastic's month is the genuine grind: up 39%, and still up 18.4% after removing its two best days.

The cost pressure is real and named. Datadog's management said finance chiefs are pushing back on bills and that customer priorities have moved from validating AI to optimizing its cost; the company shipped Infinite Cardinality Metrics, which removes unpredictable cardinality charges — capping one of its own billing vectors. Industry surveys find 97% of organizations have hit unexpected observability overages. Datadog absorbs that in-quarter. Dynatrace absorbs it at renewal, and 70% of its resets fall in the second half.

The setup

Where it stands — Dynatrace's committed-spend metrics are accelerating while its reported revenue decelerates; Datadog's usage model exposed one customer immediately.

Would confirm — Dynatrace trailing-twelve-month organic net-new-ARR growth holding at or above 17% next quarter.

Would invalidate — Dynatrace net retention failing to inflect above 110% in the second half despite the renewal concentration.

Watch next — Elastic reports fiscal first-quarter results on 27 August, against its own 13.1% growth guide.

Valuation — Dynatrace 8.48x trailing and 7.66x forward gross profit, versus 6.87x in early May; Datadog 23.40x forward.