Datadog reported third‑quarter 2025 revenue of $885.7 million, up 28% from $690 million in Q3 2024, and adjusted earnings per share of $0.55, a $0.10 beat over the consensus range of $0.45–$0.46. Net income was $33.9 million, or $0.10 per share, reflecting a modest GAAP operating loss of $6 million offset by a $207 million non‑GAAP operating income that gave a 23% non‑GAAP operating margin, down from 25% in the prior year.
The revenue growth was driven by a 35% increase in the observability segment, a 48% rise in security ARR, and a 22% jump in product‑analytics revenue. AI‑related workloads accounted for 18% of total revenue, up 12% YoY, underscoring the company’s expanding footprint in data‑center and cloud‑native AI deployments. The mix shift toward higher‑margin AI and security services helped offset a 4% decline in legacy infrastructure monitoring revenue, which fell as customers migrated to newer cloud platforms.
Margin dynamics reflected a trade‑off between investment and scale. While the GAAP operating loss widened to $6 million from a $3 million loss in Q3 2024, the non‑GAAP operating margin contracted from 25% to 23% due to increased R&D spend on AI observability features and higher cloud hosting costs. Nevertheless, the company’s free cash flow rose to $214 million, a 24% margin, indicating that the operating cash‑flow generation remains robust even as the company accelerates product development.
Management raised fourth‑quarter revenue guidance to $912–$916 million, above the $887 million consensus, and EPS guidance to $0.54–$0.56, both up from the prior quarter’s $0.53–$0.55 range. Full‑year 2025 revenue guidance was increased to $3.386 billion–$3.390 billion, up from $3.366 billion–$3.370 billion, while full‑year adjusted EPS guidance was lifted to $2.01, reflecting confidence in sustained AI‑driven demand and the ability to maintain pricing power in high‑margin segments.
Investors reacted positively to the earnings beat and guidance, citing the company’s strong execution in AI observability and security, the continued expansion of enterprise customers, and the healthy free‑cash‑flow profile. Analysts highlighted the 28% YoY revenue growth and the 23% non‑GAAP operating margin as evidence of operational leverage, while noting the modest GAAP margin compression as a short‑term effect of strategic investments.
CEO Olivier Pomel said the quarter “demonstrated the value of our AI‑first approach, with strong demand from data‑center and cloud‑native customers.” He added that the company’s “full‑stack AI observability and security portfolio” is “fueling the next wave of enterprise adoption,” underscoring the strategic focus that underpins the raised guidance.
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