Datadog’s fourth quarter performance was met with a strong positive market reaction, reflecting broad-based customer adoption and increased multi-product usage. Management attributed this momentum to expanding demand from both enterprise clients and AI-native companies, while highlighting a record number of large deal wins. CEO Olivier Pomel pointed to rapid growth in core observability products and the company’s ongoing ability to consolidate disparate monitoring tools for large customers as critical factors supporting Datadog’s results. The company also noted stable retention rates, suggesting continued reliance on its platform.
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Datadog (DDOG) Q4 CY2025 Highlights:
- Revenue: $953.2 million vs analyst estimates of $918.2 million (29.2% year-on-year growth, 3.8% beat)
- Adjusted EPS: $0.59 vs analyst estimates of $0.55 (6.3% beat)
- Adjusted Operating Income: $230.1 million vs analyst estimates of $220.2 million (24.1% margin, 4.5% beat)
- Revenue Guidance for Q1 CY2026 is $956 million at the midpoint, above analyst estimates of $934.8 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.12 at the midpoint, missing analyst estimates by 9.5%
- Operating Margin: 1%, in line with the same quarter last year
- Customers: 4,310 customers paying more than $100,000 annually
- Annual Recurring Revenue: $4.00 billion (29.2% year-on-year growth, beat)
- Billings: $1.21 billion at quarter end, up 33.5% year on year
- Market Capitalization: $44.14 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Datadog’s Q4 Earnings Call
- Sanjit Singh (Morgan Stanley) asked about how agentic frameworks and AI-driven automation would affect Datadog’s observability category. CEO Olivier Pomel explained that increased application complexity creates more demand for observability, and the company is building its platform to serve both human and automated workflows.
- Gabriela Borges (Goldman Sachs) inquired about the potential for large language models (LLMs) to disrupt anomaly detection and security analytics. Pomel stated that Datadog’s advantage lies in aggregating and contextualizing data in real time, which LLMs alone cannot achieve at scale for proactive issue resolution.
- Ittai Kidron (Oppenheimer and Company) probed the level of conservatism in Datadog’s guidance and potential concentration risk among AI-native customers. CFO David Obstler responded that guidance assumes diversification and is cautious regarding growth from the largest customer, with most AI-native clients representing a broad, distributed base.
- Todd Coupland (CIBC) asked about changes in competition given the rise of LLMs. Pomel replied that competitive dynamics have not shifted materially, and Datadog continues to take market share, particularly as enterprises seek integrated observability for both traditional and AI workloads.
- Howard Ma (Guggenheim) sought clarity on whether large AI-native customers dilute gross margins. Obstler clarified that margin dynamics are more influenced by customer size than by industry or AI status, and ongoing investments are balanced with gross margin stability.
Catalysts in Upcoming Quarters
In the coming quarters, we will monitor (1) the pace of AI-native customer adoption and the resulting impact on multi-product usage, (2) the effectiveness of new AI-driven automation tools such as the SRE agent in driving customer expansion, and (3) Datadog’s progress in consolidating legacy observability solutions within large enterprise accounts. Continued advances in platform integration and new product launches could further influence the company’s growth trajectory.
Datadog currently trades at $125.10, up from $114.01 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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