Datadog Q3 revenue and non-GAAP EPS exceed estimates; Q4 revenue outlook is roughly flat

Datadog exceeds Q3 revenue and non-GAAP EPS estimates

Datadog reported third-quarter 2026 revenue of $1.2 billion, up 35.2% year over year and above the $1.135-$1.145 billion guidance reported in the reviewed coverage. Non-GAAP earnings per share were 81 cents, up 47.3% year over year and above the cited 64-cent consensus estimate. The company ended September with approximately 33,500 customers, up 4.7% from about 32,000 a year earlier.

The results also showed continued expansion in platform usage. Customers with at least $100,000 in annual recurring revenue increased 19.7% to about 4,860 from 4,060 and represented 91% of total ARR, compared with 89% a year earlier. The share of customers using four or more products rose to 61% from 54%; usage of six or more products increased to 41% from 31%, and usage of at least 10 products doubled to 16%.

Q4 outlook points to limited sequential revenue growth

Datadog expects fourth-quarter revenue of $1.19-$1.20 billion, according to the lead coverage. The lead coverage described the outlook as based on its largest customer's minimum commitment. It represents a narrower range than the reported Q3 revenue of $1.2 billion and does not itself establish that revenue has been received.

Quarterly revenue growth moderated to 6.7% sequentially from 11.4% in the second quarter. The reviewed reporting also characterized the Q4 outlook as a point of concern, but the available sources do not establish that Datadog's results or guidance caused the stock's subsequent decline.

AI and non-AI customer growth remained the focus

Datadog served more than 850 AI customers, up from about 750 in the preceding quarter, including 39 customers spending more than $1 million annually. About one-third of customers used at least one AI product, including three-quarters of customers with ARR of at least $100,000. Bits AI was described as the company's fastest-adopted product, while the new Scout model powers automated incident investigations.

Revenue growth among non-AI customers accelerated for a fifth consecutive quarter to the high-20% range year over year. Management attributed the performance to growing cloud usage and broader platform adoption. The number of GPUs monitored rose eightfold during the year through the reporting period, while Infrastructure Monitoring surpassed $2 billion in ARR.

Growth remained strong, while profitability and cash-flow measures diverged

Non-GAAP gross profit rose 35.2% to $971.8 million. Non-GAAP gross margin was 81.2%, unchanged year over year but higher than 79.6% in the second quarter. Non-GAAP operating expenses increased 24.6% to $637.5 million, below the rate of revenue growth, and non-GAAP operating income rose 61.2% to $334.3 million.

The non-GAAP operating margin expanded to 27.9% from 23.4% a year earlier. Operating cash flow increased 15.3% to $289.9 million, while free cash flow rose 17.1% to $250.6 million. Free-cash-flow margin narrowed to 21% from 24%. Datadog ended the quarter with $5.2 billion in cash, cash equivalents and marketable securities, and billings grew 30% to $1.16 billion.

Market reaction followed the release

Datadog shares fell more than 14% after the earnings release, according to the reviewed market coverage. One earnings page reported a 14.42% decline from $220.52 before the release to $188.72 the following day, while a Nov. 5 market listing showed the stock at $174.60. The sources did not establish a definitive cause for the decline.