DDOG 2Q25:LLM Observability, OpenAI and 2Q checks

In our previous note, we discussed the potential of Datadog's agent product Bits AI, and why the product is important for not only DDog's future growth as well as stock narrative. In this note, we will elaborate on how DDog's LLM Observability could be a substantial driver in the future as well. Also, we present our thoughts on DDog's relationship with OpenAI, how it affects upcoming quarters, as well as recent channel checks on 2Q results.

Why LLM Observability is Important

Datadog launched its LLM Observability in mid-2024 as an extension of its Application Performance Management (APM) offerings, specifically to monitor AI applications and agents. Due to hallucinations in AI applications and the non-deterministic nature of agent work, this product has become a crucial component in the AI application inference process.