Datadog DDOG reported third-quarter 2025 non-GAAP earnings per share (EPS) of 55 cents, which increased 19.6% from the year-ago quarter and beat the Zacks Consensus Estimate by 22.22%.
The company’s net revenues of $885.7 million rose 28.4% year over year and beat the consensus estimate by 4.22%.
Q3 Details of DDOG
The company ended the third quarter with 32,000 customers, up from about 29,200 in the prior-year period.
In the quarter under review, Datadog had 4,060 customers with an annualized run rate (ARR) of $100,000 or more, up from about 3,490 in the year-ago quarter. These customers generated about 89% of the total ARR.
Datadog, Inc. Price, Consensus and EPS Surprise
Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote
As of the end of the third quarter, 84% of customers used two or more products, up from 83% in the year-ago period. Additionally, 54% of customers utilized four or more products, up from 49% in the year-ago quarter.
Datadog reported a trailing 12-month net revenue retention rate of approximately 120% in the third quarter, up from the mid-110% in the prior-year quarter.
Operating Details of DDOG
In the third quarter, non-GAAP gross profit increased 28.4% year over year, reaching $718.9 million. Datadog’s adjusted gross margin held steady on a year-over-year basis at 81.2%.
Research & development expenses grew 38.2% on a year-over-year basis to $269.5 million. Research & development, as a percentage of revenues, expanded 220 bps to 30.4%.
Sales and marketing expenses rose 25.5% year over year to $195.5 million. Sales and marketing expenses, as a percentage of revenues, contracted 50 bps to 22.1%.
General & administrative expenses increased 28.7% year over year, reaching $46.5 million in the reported quarter. General and administrative expenses, as a percentage of revenues, remained flat year over year.
Datadog reported a non-GAAP operating income of $207.4 million, up 19.8% year over year. However, its non-GAAP operating margin of 23.4% declined by 170 basis points from the prior year.
Datadog’s Balance Sheet & Cash Flow
As of Sept. 30, 2025, Datadog had cash, cash equivalents and marketable securities of $4.1 billion compared with $3.9 billion as of June 30, 2025.
Operating cash flow was $251 million in the reported quarter, up from $200 million reported in the previous quarter.
Free cash flow during the quarter was $214 million compared with $165 million in the prior quarter.
Datadog’s Guidance for Q4 & 2025
For the fourth quarter of 2025, Datadog anticipates revenues between $912 million and $916 million. Non-GAAP EPS is expected in the range of 54-56 cents. Non-GAAP operating income is expected in the band of $216-$220 million.
For 2025, Datadog anticipates revenues between $3.386 billion and $3.390 billion. Non-GAAP EPS is projected to be between $2.00 and $2.02. Non-GAAP operating income is expected in the range of $754-$758 million.
Datadog’s Zacks Rank & Other Stocks to Consider
Currently, Datadog carries a Zacks Rank #2 (Buy).
Exodus Movement, Inc. EXOD, CoreWeave Inc. CRWV and monday.com MNDY are some other top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While Exodus Movement sports a Zacks Rank #1 (Strong Buy) at present, CoreWeave and monday.com carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
EXOD, CRWV and MNDY are scheduled to report their respective third-quarter 2025 results on Nov. 10.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
