Key Highlights

  • Third quarter Revenue reached USD 1.197 billion, up 35% from USD 885.7 million a year earlier.
  • Non-GAAP EPS of USD 0.81 compares with USD 0.64 estimated, while GAAP EPS was USD 0.32.
  • Non-GAAP Operating Margin reached 28%, and free Cash Flow totaled USD 251 million, a 21% margin.
  • Fourth quarter revenue is guided to USD 1.19 billion to USD 1.20 billion, implying 25% to 26% growth.

Datadog (NASDAQ:DDOG) reported third quarter revenue of USD 1.197 billion, ahead of the USD 1.15 billion estimate and above the top of its own guidance range. Non-GAAP EPS of USD 0.81 exceeded the USD 0.64 estimate. On a GAAP basis, Net Income rose to USD 118.3 million from USD 33.9 million a year earlier, or USD 0.32 per diluted share.

Growth Mix and Customer Base

Chief executive Olivier Pomel said revenue from customers outside the AI cohort grew in the high-20s% year over year, an acceleration for the fifth straight quarter and up from about 20% a year earlier. Customers focused on AI remain the faster-growing group, with more than 850 such customers, up from about 750 in the prior quarter, including 39 spending over USD 1 million annually.

The company counted about 33,500 customers in total, up from about 32,000. Customers with annual Recurring Revenue of USD 100,000 or more rose 20% to about 4,860 and generated about 91% of annual recurring revenue. Platform adoption deepened as well: 61% of customers use four or more products, against 54% a year ago, and 16% use ten or more, double the prior-year share. Infrastructure monitoring products now exceed USD 2 billion in annual recurring revenue, growing in the mid-30s%.

Remaining performance obligations stood at USD 3.85 billion, up 38%, and billings were USD 1.16 billion, up 30%. Trailing twelve month net revenue retention held in the low-120s%.

Margins, Cash and the Largest Customer

Non-GAAP gross margin was 81.2%, level with a year ago and above the 79.6% of the second quarter. Non-GAAP Operating Income was USD 334 million, a 28% margin compared with 23% in both the prior quarter and the year-earlier period. GAAP operating income was USD 75 million, a 6% margin. Operating expenses grew 25% year over year, slower than the 32% pace of the year-earlier quarter.

Operating cash flow was USD 290 million, and cash and marketable securities totaled USD 5.2 billion. The company's chief financial officer said the largest customer reduced usage during the quarter but stayed above its minimum commitment. Excluding that customer, revenue growth accelerated again. Several large AI customers also renewed earlier than planned, trading higher commitments for better pricing, which management described as a near-term headwind to revenue.

Fourth Quarter and Full Year Guidance

Datadog guided fourth quarter revenue to USD 1.19 billion to USD 1.20 billion, with non-GAAP operating income of USD 280 million to USD 290 million and non-GAAP EPS of USD 0.69 to USD 0.71 on about 379 million diluted shares. The guide counts the largest customer only at its minimum commitment. Excluding that customer, implied fourth quarter growth runs in the low to mid-30s%.

For 2026, revenue is guided to USD 4.515 billion to USD 4.525 billion, about 32% growth, with non-GAAP operating income of USD 1.095 billion to USD 1.105 billion and non-GAAP EPS of USD 2.73 to USD 2.75.

Metrics to Track

Third quarter revenue of USD 1.197 billion compares with the fourth quarter guide of USD 1.19 billion to USD 1.20 billion, while the 28% non-GAAP operating margin compares with about 24% implied for the fourth quarter and full year. Third quarter non-GAAP EPS of USD 0.81 sits against a fourth quarter range of USD 0.69 to USD 0.71. Free cash flow margin of 21% for the quarter compares with 26% on a trailing twelve month basis.