Datadog Q3 Earnings & Revenues Surpass Estimates, Both Increase Y/Y

Datadog DDOG reported third-quarter 2025 non-GAAP earnings per share (EPS) of 55 cents, which increased 19.6% from the year-ago quarter and beat the Zacks Consensus Estimate by 22.22%.

The company’s net revenues of $885.7 million rose 28.4% year over year and beat the consensus estimate by 4.22%.

Q3 Details of DDOG

The company ended the third quarter with 32,000 customers, up from about 29,200 in the prior-year period.

In the quarter under review, Datadog had 4,060 customers with an annualized run rate (ARR) of $100,000 or more, up from about 3,490 in the year-ago quarter. These customers generated about 89% of the total ARR.

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote

As of the end of the third quarter, 84% of customers used two or more products, up from 83% in the year-ago period. Additionally, 54% of customers utilized four or more products, up from 49% in the year-ago quarter.

Datadog reported a trailing 12-month net revenue retention rate of approximately 120% in the third quarter, up from the mid-110% in the prior-year quarter.

Operating Details of DDOG

In the third quarter, non-GAAP gross profit increased 28.4% year over year, reaching $718.9 million. Datadog’s adjusted gross margin held steady on a year-over-year basis at 81.2%.

Research & development expenses grew 38.2% on a year-over-year basis to $269.5 million. Research & development, as a percentage of revenues, expanded 220 bps to 30.4%.

Sales and marketing expenses rose 25.5% year over year to $195.5 million. Sales and marketing expenses, as a percentage of revenues, contracted 50 bps to 22.1%.

General & administrative expenses increased 28.7% year over year, reaching $46.5 million in the reported quarter. General and administrative expenses, as a percentage of revenues, remained flat year over year.

Datadog reported a non-GAAP operating income of $207.4 million, up 19.8% year over year. However, its non-GAAP operating margin of 23.4% declined by 170 basis points from the prior year.

Datadog’s Balance Sheet & Cash Flow

As of Sept. 30, 2025, Datadog had cash, cash equivalents and marketable securities of $4.1 billion compared with $3.9 billion as of June 30, 2025.

Operating cash flow was $251 million in the reported quarter, up from $200 million reported in the previous quarter.

Free cash flow during the quarter was $214 million compared with $165 million in the prior quarter.

Datadog’s Guidance for Q4 & 2025

For the fourth quarter of 2025, Datadog anticipates revenues between $912 million and $916 million. Non-GAAP EPS is expected in the range of 54-56 cents. Non-GAAP operating income is expected in the band of $216-$220 million.

For 2025, Datadog anticipates revenues between $3.386 billion and $3.390 billion. Non-GAAP EPS is projected to be between $2.00 and $2.02. Non-GAAP operating income is expected in the range of $754-$758 million.

Datadog’s Zacks Rank & Other Stocks to Consider

Currently, Datadog carries a Zacks Rank #2 (Buy).

Exodus Movement, Inc. EXOD, CoreWeave Inc. CRWV and monday.com MNDY are some other top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While Exodus Movement sports a Zacks Rank #1 (Strong Buy) at present, CoreWeave and monday.com carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

EXOD, CRWV and MNDY are scheduled to report their respective third-quarter 2025 results on Nov. 10.

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This article originally published on Zacks Investment Research (zacks.com).

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