Datadog, Inc. Q3 FY2025 earnings

Datadog closed the third quarter of fiscal 2025 with revenue of $885.65 million, up 28.4% from $690.02 million in the prior-year quarter. Year-to-date revenue reached $2.47 billion, up 27.1% from $1.95 billion. Management attributed roughly 75% of the quarterly increase to growth from existing customers and the remaining 25% to new customers. Gross profit was $709.19 million for the quarter, up 28.4%, and gross margin held at 80.1%, flat against the prior-year quarter. The nine-month gross margin slipped to 79.8% from 80.9%, which the company tied to higher spend with third-party cloud infrastructure providers.

The bottom line tells a different story. GAAP operating income swung to a loss of $5.81 million in the quarter, down from income of $20.28 million a year earlier, and the operating margin fell to negative 0.7% from 2.9%. Year to date the operating loss was $53.73 million against income of $44.89 million. Net income came in at $33.88 million, down 34.5% from $51.70 million, and diluted EPS was $0.10 versus $0.14. For the nine months, net income of $61.17 million fell 55.7% from $138.15 million, with diluted EPS of $0.18 against $0.39. The gap between GAAP and non-GAAP results remains wide. Non-GAAP operating income was $207 million, a 23% margin, and non-GAAP diluted EPS was $0.55.

Customer metrics continued to expand. Datadog ended the quarter with about 4,060 customers at $100,000 or more in ARR, up from about 3,490 a year earlier, and those customers represented 89% of ARR. Total customers reached roughly 32,000, compared with about 29,200. The trailing 12-month dollar-based net retention rate was about 120%, up from the mid-110% range a year earlier, which the company credited to increased usage growth from existing customers. Product adoption also deepened: about 54% of customers used four or more products, up from 49%, and 31% used six or more, up from 26%. The platform passed 1,000 integrations.

Operating cash flow was $251.47 million for the quarter, up 10.0% from $228.68 million, and $723.07 million for the nine months, up 19.4%. Capital expenditures were $16.79 million in the quarter, up 100.2%, and $40.69 million year to date, up 50.9%. Free cash flow, a non-GAAP measure, was $214 million in the quarter at a 24% margin. Deferred revenue, current portion, rose 22.4% to $974.26 million, and remaining performance obligations climbed 53.0% to $2.79 billion.

For the fourth quarter of fiscal 2025, Datadog guided revenue to between $912 million and $916 million, non-GAAP operating income of $216 million to $220 million, and non-GAAP net income per share of $0.54 to $0.56 on roughly 367 million diluted shares. For the full fiscal year 2025, the company guided revenue of $3.386 billion to $3.390 billion, non-GAAP operating income of $754 million to $758 million, and non-GAAP EPS of $2.00 to $2.02 on about 364 million diluted shares. Datadog did not reconcile these non-GAAP outlook figures to GAAP.

The company flagged a familiar set of risks: macroeconomic uncertainty, changes in trade policies such as tariffs, competition, the possibility of a security breach, and its dependence on existing customers renewing and expanding subscriptions. It also noted that its recent rapid growth may not be indicative of future growth and that it has a history of operating losses. The One Big Beautiful Bill Act, enacted July 4, 2025, reduced forecasted U.S. income tax expense for 2025, though a full valuation allowance remains against U.S. deferred tax assets.