0001561550-25-000313
SEC filingRevenue grew 28% YoY to $885.7M, driven by existing customer expansion, with gross margin stable at 80%.
For the three months ended September 30, 2025, Datadog reported revenue of $885.7 million, a 28% increase year-over-year from $690.0 million. Growth was driven primarily by existing customer expansion (75% of the increase) and new customer acquisition (25%). Gross profit rose to $709.2 million, with gross margin stable at 80%, as revenue growth proportionally matched increases in third-party cloud infrastructure costs. Operating income swung to a loss of $5.8 million from a profit of $20.3 million in the prior year, driven by a 38% increase in research and development expenses ($110.2 million increase) and a 42% increase in general and administrative expenses ($21.9 million increase). Net income decreased to $33.9 million from $51.7 million, impacted by higher operating expenses partially offset by a $5.6 million increase in other income, net. For the nine-month period, revenue grew 27% to $2.47 billion, with gross margin declining slightly to 80% from 81% due to increased cloud infrastructure spend. Operating loss was $53.7 million versus income of $44.9 million in the prior year, and net income fell to $61.2 million from $138.2 million.
The MD&A does not report segment-level financials. However, key operational metrics indicate strong platform adoption and customer expansion. As of September 30, 2025, Datadog had approximately 32,000 customers, up from 29,200 a year ago. Customers with annual run-rate revenue (ARR) of $100,000 or more grew to 4,060, representing 89% of total ARR, compared to 3,490 customers (88% of ARR) a year earlier. The trailing 12-month dollar-based net retention rate was approximately 120%, up from mid-110%'s in the prior year, reflecting increased usage growth from existing customers. Product adoption is expanding: 84% of customers use two or more products (consistent with 83% a year ago), 54% use four or more (up from 49%), 31% use six or more (up from 26%), and 16% use eight or more (up from 12%). International revenue accounted for 29% of total revenue for the nine months ended September 30, 2025, slightly down from 30% in the prior year.
Management's outlook emphasizes continued investment in innovation, sales and marketing, and international expansion to drive long-term growth. The company intends to sustain its land-and-expand model, focusing on new customer acquisition and deeper penetration of existing accounts. Key strategic priorities include investing in product development (over 20 products currently), expanding geographically in EMEA and APAC, and evaluating strategic acquisitions. The MD&A notes that macroeconomic uncertainties (trade policies, inflation, geopolitical conflicts) could impact future spending, but the subscription model may delay the full effect on results. The company believes its cash position ($540.6 million cash and equivalents, $3.6 billion marketable securities) and operating cash flow are sufficient for the next 12 months and beyond. No specific forward guidance on revenue or margins is provided in this section.
CFO of $723.1M exceeded net income of $61.2M by a factor of ~11.8x, reflecting significant non-cash add-backs (stock-based compensation of $545.3M, deferred contract cost amortization of $48.1M, depreciation/amortization of $39.1M). Working capital generated $16.5M of cash, with accounts receivable declining $38.9M, offset by growth in deferred contract costs and prepaids.
Total capex of $99.4M (PP&E $40.7M + capitalized software $58.7M) represented 5.9% of trailing revenue. The capitalized software ratio increased YoY, likely reflecting investments in platform expansion.
No share repurchases or dividends were disclosed in the nine-month period. The financing section showed a net $635.5M repayment of 2025 Convertible Senior Notes and $33.2M in equity proceeds (stock options and ESPP). Free cash flow (CFO less total capex) was $623.7M, providing ample coverage of debt repayments.
The $117.3M cash paid for acquisitions (net of cash acquired) and $53.0M in non-cash stock issued for acquisitions were notable investing activities. Marketable securities transactions (purchases less maturities/sales) consumed $620.0M net cash, resulting in a cash decrease of $706.4M despite strong operating cash flow.