Why it matters: Datadog sells monitoring and security software that companies use to watch their cloud systems and AI workloads, so its count of customers paying $100,000 or more a year is a gauge of how much large businesses are spending on running software at scale.
Datadog (DDOG) reported revenue of $1.20 billion for its third quarter, ended Sept 30, before the market opened on Wednesday. That is up 35% from $885.7 million a year earlier.
Profit: The company had GAAP operating income of $74.7 million, compared with an operating loss of $5.8 million a year earlier, for an operating margin of 6%. Net income rose to $118.3 million, or 32 cents per diluted share, from $33.9 million, or 10 cents. Gross margin was 80%, the same as a year earlier.
Non-GAAP results: Datadog's non-GAAP figures exclude stock-based compensation, which was $237.2 million in the quarter, along with amortization of acquired intangibles, employer payroll taxes on employee stock transactions, deal costs and debt issuance costs, and apply an assumed 21% tax rate. On that basis, operating income was $334.3 million, up from $207.4 million, an operating margin of 28% compared with 23%, and earnings were 81 cents per diluted share, compared with 55 cents.
Cash: Operating cash flow was $290.0 million and free cash flow, a non-GAAP measure, was $250.6 million, up from $214.0 million. Free cash flow came to 21% of revenue, down from 24%. Cash, cash equivalents and marketable securities totaled $5.2 billion at the end of September.
Customers: Datadog had about 4,860 customers with annual recurring revenue of $100,000 or more at Sept 30, up 20% from about 4,060 a year earlier. The company defines that recurring revenue as its monthly subscription run-rate multiplied by 12, and says it is an operating metric, not revenue.
AI model: The company says it introduced Scout 1.0, the first specialized model from its AI research team, which it uses in its AI agent product for diagnosing problems in production systems. Scout is in preview. Datadog says it matches frontier-model performance at a fraction of the inference cost. That is the company's own claim.
The company's outlook: Datadog expects fourth-quarter revenue of $1.19 billion to $1.20 billion and non-GAAP earnings of 69 to 71 cents per share. For the full year it expects revenue of $4.515 billion to $4.525 billion and non-GAAP earnings of $2.73 to $2.75 per share. The company did not reconcile these non-GAAP forecasts to GAAP, citing the variability of items such as stock-based compensation. These are the company's own projections.
This story is for information only and is not investment advice.
Sources
- Datadog: third-quarter 2026 financial results release, Form 8-K Exhibit 99.1, SEC EDGAR, Nov 4, 2026
- Datadog: Form 8-K filing index (Item 2.02), SEC EDGAR, Nov 4, 2026
How we checked this: We read Datadog's third-quarter release as filed with the SEC (Form 8-K, Exhibit 99.1, accepted Nov 4, 2026 at 7:11 AM ET) in copies saved on Nov 4, 2026 at about 8:14 AM ET, and checked every figure and company statement against it, including its financial tables.
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