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Datadog, Inc. (DDOG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered accelerating growth and broad-based strength: revenue $885.651M (+28% YoY), non-GAAP diluted EPS $0.55, free cash flow $213.952M, and non-GAAP operating margin 23% .
  • Results beat Wall Street: revenue above consensus by ~$33M and EPS by ~$0.09, driven by highest-in-12-quarters sequential usage growth in non‑AI customers, record new logo bookings, and expanding AI-native cohort contribution* .
  • FY25 guidance raised materially (revenue to $3.386–$3.390B, non-GAAP EPS to $2.00–$2.02) with Q4 guidance implying ~24% YoY growth and 24% operating margin .
  • Narrative catalysts: broadening AI opportunities (BITS AI agents, MCP server, >1,000 integrations), accelerating Security ARR growth (mid‑50% YoY), and cloud efficiency initiatives improving gross margins .

Values retrieved from S&P Global*

What Went Well and What Went Wrong

What Went Well

  • Sequential usage from existing non‑AI customers was the strongest in 12 quarters; new logo annualized bookings more than doubled YoY with larger average lands, particularly in enterprise .
  • Security suite growth accelerated (mid‑50% YoY ARR), with Cloud SIEM included in larger deals; broad success across code security and cloud security .
  • Gross margin ticked up to ~81.2% on cloud-efficiency projects; non-GAAP operating margin improved to 23% and FCF was $213.952M .
    • “Our engineers’ cost-saving efforts increase Q3 as they deliver on our cloud efficiency projects.” — CFO David Obstler .

What Went Wrong

  • GAAP operating loss of $(5.809)M amid elevated stock-based compensation and opex growth; non-GAAP opex grew 32% YoY as Datadog invests for long-term growth .
  • Management reiterated potential volatility in AI-native cohort due to renewals and unit rate negotiations, though growth remains strong .
  • GPU monetization remains nascent; revenue acceleration is not yet tied to GPU-specific products .

Financial Results

Results vs Prior Periods and Estimates

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$761.553 $826.760 $885.651
Non-GAAP Diluted EPS ($USD)$0.46 $0.46 $0.55
GAAP Diluted EPS ($USD)$0.07 $0.01 $0.10
Non-GAAP Operating Margin %22% 20% 23%
Non-GAAP Gross Margin %80% 80.9% 81.2%
Operating Cash Flow ($USD Millions)$271.541 $200.055 $251.470
Free Cash Flow ($USD Millions)$244.391 $165.353 $213.952
Revenue YoY Growth %25% 28% 28%
Metric (Q3 2025)ConsensusActual
Revenue ($USD Millions)$852.269*$885.651
Non-GAAP Diluted EPS ($USD)$0.457*$0.55
# of Estimates (Revenue / EPS)37 / 35*—

Values retrieved from S&P Global*

Notes:

  • Press release text rounds revenue to $886M; statements of operations present $885.651M .

KPIs

KPIQ1 2025Q2 2025Q3 2025
Customers with ≥$100k ARR (approx.)~3,770 ~3,850 ~4,060
Platform adoption (≥2 products)—83% 84%
Platform adoption (≥4 products)—52% 54%
Platform adoption (≥6 products)—29% 31%
Platform adoption (≥8 products)—14% 16%
Billings ($USD Millions)—$852 $893
RPO ($USD Billions)—$2.43 $2.79

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025—$912–$916 New
Non-GAAP Operating Income ($USD Millions)Q4 2025—$216–$220 New
Non-GAAP EPS ($USD)Q4 2025—$0.54–$0.56 (≈367M diluted shares) New
Revenue ($USD Billions)FY 2025$3.312–$3.322 $3.386–$3.390 Raised
Non-GAAP Operating Income ($USD Millions)FY 2025$684–$694 $754–$758 Raised
Non-GAAP EPS ($USD)FY 2025$1.80–$1.83 (≈364M shares) $2.00–$2.02 (≈364M shares) Raised

Consensus context (for reference): Q4 revenue $916.817M*, EPS $0.553*; FY revenue $3.389B*, EPS $2.019* — guidance aligns closely to consensus*.

Values retrieved from S&P Global*

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI initiatives (BITS AI, MCP, LLM Observability)Announced acquisitions (Eppo, Metaplane); Innovating across platform Launched BITS AI agents; MCP server; LLM experiments; AI Agents Console Expanded AI Observability suite; strong preview adoption of BITS AI; >5,000 customers sending AI data Accelerating adoption and breadth
Security suite—Security ARR >$100M; mid‑40% YoY growth Security ARR growth mid‑50% YoY; Cloud SIEM in larger deals Accelerating growth
Sales capacity & new logos—Increased sales capacity; pipeline improving New logo bookings more than doubled YoY; larger enterprise lands Strengthening go‑to‑market
Gross margin & cloud efficiency—Engineers’ cost-saving efforts; expected H2 improvement Gross margin ~81.2%; continued cloud efficiency projects Improving margins
OCI & hyperscaler support—Amazon region expansion; GPU monitoring Expanded OCI support incl. GPU Monitoring, Cloud Cost Mgmt, Cloud SIEM Platform & ecosystem breadth
Integrations/platform breadth—>125 innovations at DASH; broad platform Milestone: >1,000 integrations; average >50 per customer Structural advantage

Management Commentary

  • “We saw acceleration of year-over-year revenue growth across our non‑AI customers. The sequential usage growth for non‑AI existing customers was the highest we have seen going back 12 quarters.” — CEO Olivier Pomel .
  • “New logo annualized bookings more than doubled year-over-year and set a new record… particularly in enterprise.” — CFO David Obstler .
  • “Security ARR growth was in the mid-50%… success in including Cloud SIEM in larger deals… fast uptake of code security and wins in cloud security.” — CEO Olivier Pomel .
  • “Our engineers’ cost-saving efforts… deliver on our cloud efficiency projects.” — CFO David Obstler .
  • “Our preview customers are using real-time production data… ‘The Datadog MCP server… I’ve never been more hooked on Datadog.’” — CEO Olivier Pomel .

Q&A Highlights

  • GPU monetization: Products for GPU monitoring are early; current revenue acceleration is not related to GPU monetization .
  • AI-native cohort: Contribution rose to 12% of revenue; more customers >$100k and >$1M ARR; potential volatility acknowledged, but broad adoption continuing .
  • Pricing dynamics: Larger customers commit more and receive volume discounts; renewals can temporarily lower unit rates before resuming growth .
  • Security go-to-market: Channel investments help; product maturity (e.g., FlexLogs) and refined GTM for enterprise-wide security are key .
  • Seasonality: Guidance incorporates holiday usage patterns; Datadog adjusts for day-level impacts .

Estimates Context

  • Q3 2025 delivered clear beats: revenue $885.651M vs $852.269M consensus*, non‑GAAP diluted EPS $0.55 vs $0.457*; 37 revenue and 35 EPS estimates underpin consensus*.
  • Q4 2025 and FY25 guidance align closely to consensus*: Q4 revenue guide $912–$916M vs $916.817M*, EPS guide $0.54–$0.56 vs $0.553*; FY revenue guide $3.386–$3.390B vs $3.389B*, EPS guide $2.00–$2.02 vs $2.019* .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Broad-based strength beyond AI cohort: strongest non‑AI sequential usage in 12 quarters and record new logo bookings support durable growth into Q4 .
  • Security momentum: ARR growth accelerating to mid‑50% YoY; Cloud SIEM now in larger enterprise deals, aided by FlexLogs economics .
  • Efficiency and profitability: Cloud efficiency initiatives are boosting gross margins; Q3 non‑GAAP operating margin at 23% with robust FCF .
  • Guidance credibility: FY25 guide raised meaningfully and aligns with consensus; Q4 guide implies sustained ~24% growth and disciplined margins .
  • AI product cycle: BITS AI agents and MCP integrations deepen differentiation; watch for monetization as preview converts and breadth expands in 2026 .
  • Enterprise GTM: Larger lands and improved sales capacity suggest continued upmarket traction; expect further investments in Fortune 500 motions .
  • Risk monitor: AI-native cohort renewals can introduce unit rate/usage volatility; Datadog’s diversified base and efficiency gains mitigate impact .

Appendix: Key Financial Disclosures and Non-GAAP Notes

  • Non-GAAP metrics exclude stock-based compensation, amortization of intangibles, employer payroll taxes on stock transactions, M&A costs, and amortization of issuance costs; non‑GAAP tax rate assumption 21% .
  • Cash, cash equivalents, and marketable securities: $4.1B as of 9/30/2025 .
  • Q4 and FY25 outlook assumes ~367M and ~364M diluted shares, respectively .