Datadog’s Earnings Call Highlights Robust Growth and Strategic Advancements

Datadog Inc ((DDOG)) has held its Q3 earnings call. Read on for the main highlights of the call.

Datadog’s recent earnings call painted a picture of robust growth and strategic advancements, with the company reporting impressive revenue figures and customer acquisitions. Despite some challenges in GPU monetization and maintaining consistent gross margins, the overall sentiment was positive, highlighting the company’s strong performance and promising future prospects.

Record Revenue and Customer Growth

Datadog reported a remarkable Q3 revenue of $886 million, marking a 28% increase year-over-year and surpassing the high end of their guidance range. The company also expanded its customer base to approximately 32,000, up from about 29,200 a year ago, showcasing its ability to attract and retain clients.

Strong Growth in AI and Non-AI Segments

The earnings call highlighted significant growth in both AI and non-AI segments. Revenue from AI-native customers rose to 12% of total revenue, up from 11% last quarter. Meanwhile, revenue growth from non-AI native customers accelerated to 20% year-over-year, up from 18% in Q2, indicating balanced growth across different customer segments.

Impressive New Logo Wins and Expansions

Datadog achieved record new logo annualized bookings, more than doubling year-over-year. The company secured several 7-figure deals, including partnerships with a leading European telecom and a Fortune 500 technology hardware company, reflecting its strong market presence and appeal.

Increased Product Adoption

Product adoption saw a notable increase, with 84% of customers using two or more products, up from 83% a year ago. Additionally, 31% of customers are now using six or more products, up from 26% a year ago, and digital experience products exceeded $300 million in ARR, indicating a deepening engagement with Datadog’s offerings.

Accelerating Security Product Growth

Security ARR grew in the mid-50s percentage year-over-year, up from the mid-40s last quarter. This acceleration across all security products underscores Datadog’s strengthening position in the security domain, a critical area for modern enterprises.

Challenges in GPU Monetization

Despite the overall positive performance, Datadog faces challenges in fully capitalizing on GPU monitoring products. Current revenue growth does not significantly benefit from these products, suggesting a future opportunity rather than a current strength.

Continued Pressure on Gross Margins

Maintaining consistent gross margins remains a challenge for Datadog, despite some improvements. The company aims for a long-term goal around 80%, indicating ongoing efforts to optimize operational efficiency.

Forward-Looking Guidance

Looking ahead, Datadog provided optimistic guidance for Q4 2025, projecting revenue between $912 million and $916 million, reflecting a 24% year-over-year growth. For the full fiscal year, revenues are expected to reach between $3.386 billion and $3.390 billion, marking a 26% growth. The guidance highlights Datadog’s strategic positioning in cloud migration, digital transformation, and AI opportunities, setting a positive tone for future performance.

In conclusion, Datadog’s earnings call revealed a company on a strong growth trajectory, with impressive revenue and customer acquisition figures. While challenges in GPU monetization and gross margin consistency remain, the overall sentiment was positive, with significant advancements in AI, security, and product adoption. Datadog’s forward-looking guidance further underscores its strategic positioning and potential for continued success.