0001561550-25-000220
SEC filingRevenue grew 28% YoY to $826.8M, driven by existing customer expansion; gross margin declined to 80% due to cloud infrastructure costs.
For the three months ended June 30, 2025, revenue increased 28% year-over-year to $826.8 million, driven primarily by growth from existing customers (80% of incremental revenue) and new customer acquisitions. Gross margin declined to 80% from 81% in the prior-year period, mainly due to increased spending with third-party cloud infrastructure providers. Operating expenses rose significantly, with research and development up 41% to $387.5 million (47% of revenue), sales and marketing up 28% to $239.0 million (29% of revenue), and general and administrative up 47% to $69.8 million (8% of revenue). The operating loss was $35.5 million compared to an operating income of $12.6 million in Q2 2024. Net income fell to $2.6 million from $43.8 million, impacted by higher operating investments and a slight increase in tax provision.
For the six months ended June 30, 2025, revenue grew 26% to $1.59 billion, with gross margin similarly declining to 80%. Operating loss for the half-year was $47.9 million versus an income of $24.6 million in the prior period. Operating cash flow improved to $471.6 million from $376.7 million, and free cash flow reached $409.7 million, up from $330.5 million.
The MD&A does not provide formal segment reporting but offers key customer metrics. Total customers reached approximately 31,400 as of June 30, 2025, up from 28,700 a year earlier. Customers with annual run-rate revenue (ARR) of $100,000 or more increased to 3,850, representing 89% of total ARR, compared to 3,390 and 87% in the prior year. The trailing 12-month dollar-based net retention rate increased to about 120% from mid-110%'s, reflecting stronger usage growth among existing customers. Product adoption continues to broaden: 83% of customers use more than one product (consistent with prior year), while customers using more than four products grew to 52% from 49%, and those using more than eight products increased to 14% from 11%. International revenue accounted for 29% of total revenue in the first half of 2025, slightly down from 30% in the prior period, indicating room for geographical expansion.
The MD&A does not provide explicit financial guidance for future periods. Management highlights ongoing investments in product innovation, sales and marketing, and international expansion as strategic priorities. The company also notes potential impacts from macroeconomic uncertainties and the recent enactment of the One Big Beautiful Bill Act (OBBBA), which is being evaluated for financial statement effects. The change in accounting estimate for capitalized software development costs (useful life extended from two to three years) will likely reduce future amortization expense. No other forward-looking metrics were provided beyond the general outlook of continued investment for long-term growth.
As of June 30, 2025, Datadog held $489.0 million in cash and cash equivalents and $3.4 billion in marketable securities, totaling $3.9 billion in liquid assets. Total assets were $5.8 billion, with stockholders' equity of $3.2 billion. The company had $981.4 million in convertible senior notes (net), consisting solely of the 2029 Notes (0.00% coupon, $1.0 billion principal). The 2025 Notes ($634 million principal) were fully converted or repaid during the period. Deferred revenue stood at $996.3 million ($966.4 million current, $29.9 million non-current).
Operating lease liabilities totaled $283.1 million (present value) as of June 30, 2025, with total undiscounted lease payments of $356.6 million. The weighted-average remaining lease term was 6.6 years, and the weighted-average discount rate was 6.69%. No other material changes to contractual obligations were disclosed outside of ordinary course. The company also disclosed $16.1 million in acquisition holdback payments as a non-cash financing activity.
No share buyback program or dividend was disclosed. Capital expenditures (property and equipment) were $23.9 million for the six months ended June 30, 2025, plus $38.0 million in capitalized software development costs. The company issued $1.0 billion in 2029 Convertible Senior Notes (net proceeds $979.1 million) and repaid $635.5 million of the 2025 Notes. Capped call transactions were entered into for both note issuances, with net costs of $89.6 million (2025 Notes) and $100.9 million (2029 Notes).
No operating segment information was disclosed in the Notes. Geographic revenue was provided: North America contributed $586.7 million (71%) and International $240.1 million (29%) for the three months ended June 30, 2025. United States revenue was $559.6 million for the quarter.
Datadog's operating cash flow (CFO) of $471.6M for H1 2025 significantly exceeded net income of $27.3M, reflecting strong non-cash adjustments ($344.7M stock-based compensation, $30.8M amortization of deferred contract costs) and working capital benefits ($85.6M increase in accounts payable, $7.2M deferred revenue growth). Capex (including capitalized software) totaled $61.9M, resulting in an implicit free cash flow of approximately $409.7M, though the filing does not explicitly state FCF. Investing cash flow was heavily negative at ($634.5M) due to net purchases of marketable securities ($455.5M net) and $117.1M cash paid for acquisitions. Financing activities consumed $603.8M, primarily from the $635.5M repayment of 2025 convertible notes, partly offset by $28.6M from stock issuances. The company used $757.9M in cash overall, ending with $489.0M. Compared to H1 2024, CFO grew 25.2%, while capex increased 24.5% (from $46.2M to $61.9M). Working capital swings were favorable, with accounts receivable growth slowing significantly compared to the prior period.