📢 Earnings Summary — DDOG

Datadog delivered a strong Q3 with revenue growth accelerating, broad‑based usage expansion, and record new logo bookings, beating guidance and strengthening visibility via a 53% YoY increase in RPO. Non‑AI customer growth reaccelerated, while AI‑native customers continued to scale and a major AI customer expanded on an early renewal. Profitability and cash generation remained robust with an 81% gross margin, 23% operating margin, and 24% FCF margin, aided by cloud efficiency initiatives. Product momentum was notable in security, digital experience, and AI/LLM observability, with Bits AI agents approaching GA and expanding integration into developer workflows. Management maintained a conservative guidance posture but highlighted continued momentum into October and a strong Q4 pipeline. Overall tone was confident, emphasizing secular cloud and AI tailwinds and Datadog’s platform consolidation strategy.

📈 Growth Highlights

• Revenue $886M, +28% YoY and +7% QoQ, above high end of guidance
• Sequential usage growth from existing non‑AI customers strongest in 12 quarters; non‑AI revenue growth accelerated to +20% YoY (vs +18% in Q2)
• AI‑native cohort was 12% of revenue (11% in Q2; ~6% a year ago); growth excluding the largest AI customer accelerated
• New logo annualized bookings >2x YoY; new customers contributed ~25% of YoY revenue growth (vs ~20% in Q2)
• Customers ~32,000 (vs ~29,200 YoY); $100k+ ARR customers 4,060 (vs ~3,490 YoY) generating ~89% of ARR
• Security ARR growth in mid‑50% YoY (up from mid‑40% last quarter); Digital Experience exceeds $300M ARR; Product Analytics >1,000 customers
• Billings $893M (+30% YoY); RPO $2.79B (+53% YoY); cRPO growth low‑50s% YoY

🔨 Business Development

• 7‑figure lands with a leading European telco, a financial risk/analytics company, and a Fortune 500 hardware company; consolidating 10–14+ tools across 11–14 Datadog products
• 7‑figure expansions with a Fortune 500 financial services firm (Cloud SIEM replacement; 15 products), a Fortune 500 heavy equipment company (logs replacement; LLM Observability; cloud cost management), and a major U.S. automaker (Incident Mgmt & On‑Call for ~5,000 users)
• 7‑figure win‑back with a vertical SaaS provider aligned to OpenTelemetry and improved incident/reliability processes
• 9‑figure annualized expansion and early renewal with a leading AI company, securing better economics at a higher commitment
• AI‑native cohort >500 companies; ~100 spending >$100k annually; >15 spending >$1M annually

💵 Financial Performance

• Gross margin 81.2% (80.9% in Q2; 81.1% YoY) driven by cloud efficiency efforts
• Operating income $207M; operating margin 23% (20% in Q2; 25% YoY)
• Operating cash flow $251M; free cash flow $214M (24% FCF margin)
• TTM NRR ~120%; GRR mid‑ to high‑90s
• Q4 guide: revenue $912–$916M (+24% YoY), operating income $216–$220M (~24% margin), non‑GAAP EPS $0.54–$0.56 on ~367M diluted shares
• FY25 guide: revenue $3.386–$3.390B (+26% YoY), operating income $754–$758M (~22% margin), non‑GAAP EPS $2.00–$2.02 on ~364M shares
• FY25 net interest and other income ~ $170M; cash taxes $10–$20M; capex + capitalized software ~4% of revenue

🏦 Capital & Funding

• Cash, cash equivalents and marketable securities $4.1B; no new capital raises disclosed
• RPO $2.79B (+53% YoY) and cRPO growth in low‑50s% provide strong revenue visibility
• Early renewal and higher commitment from largest AI‑native customer enhances near‑term revenue certainty

🧠 Operations & Strategy

• Platform adoption deepening: 84% of customers use 2+ products; 54% use 4+; 31% use 6+; 16% use 8+ (all up YoY)
• Security momentum: Cloud SIEM included in larger deals; accelerating growth across each security product; more cloud security wins
• Digital Experience leadership: Named leader in 2025 Gartner Magic Quadrant for Digital Experience Monitoring; >$300M ARR across RUM, Synthetics, Product Analytics
• AI roadmap: Bits AI SRE agent in preview with thousands of customers; reported MTTR improvements; preparing for GA
• LLM Observability GA for Experiments/Playgrounds and custom LLM‑as‑judge evaluations; LLM spans ingested quadrupled in recent months
• Datadog MCP server connects production telemetry to external AI agents (e.g., OpenAI, Anthropic, GitHub Copilot), embedding into customer workflows
• 1,000+ integrations; customers average >50 integrations; $1M+ spenders use >150; ongoing cloud efficiency program lowering COGS
• Expanded sales capacity and enterprise focus targeting largest, most sophisticated customers; strong tool‑consolidation value proposition

🌍 Market Outlook

• Broadly positive demand environment with continued strength in cloud migration and digital transformation
• Growth acceleration across enterprise/SMB, new logos and existing customers, and multiple industries; momentum continued into October
• AI adoption expected to broaden across the customer base over time; AI‑native cohort metric expected to diminish in relevance
• Large TAM in cloud and AI cited (multi‑trillion‑dollar opportunity); Datadog positioning as observability, security, and AI operations platform
• Guidance methodology unchanged and embeds conservatism; management cites an exciting Q4 pipeline

⚠ Risks & Headwinds

• Usage‑based model exposure to fluctuations in customer cloud consumption
• Rising OpEx (+32% YoY) as hiring ramps to pursue long‑term opportunities
• Customer concentration within AI‑native cohort, including a very large customer despite renewal
• Competitive intensity in observability, SIEM/cloud security, and digital experience markets

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.