Datadog(DDOG) - 2025 Q4 - Annual Report

Financial Performance - For the fiscal year ended December 31, 2025, Datadog reported revenues of $3,427.2 million, representing a year-over-year growth of 28% from $2,684.3 million in 2024[226]. - Revenue for the year ended December 31, 2025, was $3,427,158, representing an increase of $742,883 or 28% compared to 2024[255]. - The dollar-based net retention rate for the trailing 12 months as of December 31, 2025, was about 120%, up from the high-110% range in 2024[232]. - Revenue from regions outside of North America accounted for approximately 29% of total revenue for both 2025 and 2024[237]. Customer Metrics - As of December 31, 2025, Datadog had approximately 32,700 customers, an increase from approximately 30,000 customers in 2024[229]. - The annual run-rate revenue (ARR) from customers with $100,000 or more increased to approximately 4,310, representing 90% of total ARR, up from 88% in 2024[231]. Cash Flow and Liquidity - Datadog's operating cash flow for the fiscal year ended December 31, 2025, was $1,050.1 million, compared to $870.6 million in 2024[226]. - Free cash flow for the fiscal year ended December 31, 2025, was $914.7 million, an increase from $775.1 million in 2024[226]. - Cash and cash equivalents were $0.4 billion, with marketable securities totaling $4.1 billion as of December 31, 2025, indicating strong liquidity[262]. - Net cash provided by operating activities for the year ended December 31, 2025, increased by $179.5 million to $1,050.1 million compared to $870.6 million in 2024[267]. Expenses and Costs - Cost of revenue increased by $171,426 to $686,957, a 33% increase from 2024, primarily due to higher third-party cloud infrastructure costs[256]. - Gross margin decreased to 80% in 2025 from 81% in 2024, attributed to increased costs from third-party cloud infrastructure providers[257]. - Research and development expenses rose by $395,748 to $1,548,451, a 34% increase, driven by higher personnel costs and cloud infrastructure investments[258]. - Sales and marketing expenses increased by $199,818 to $956,423, a 26% rise, mainly due to higher personnel costs and increased marketing activities[259]. - General and administrative expenses grew by $74,548 to $279,700, a 36% increase, primarily due to higher personnel and professional service costs[260]. Investment and Financing - The company issued $1.0 billion in 2029 Notes in December 2024, with net proceeds of approximately $979.1 million after costs[264]. - Net cash used in investing activities increased by $597.6 million to $(1,334.5) million in 2025, primarily due to a $946.6 million increase in purchases of marketable securities[268]. - Net cash provided by financing activities decreased by $1,359.6 million to $(572.5) million in 2025, largely due to the absence of proceeds from the issuance of the 2029 Notes amounting to $979.1 million[269]. Future Outlook and Strategy - Datadog plans to continue investing in sales and marketing to drive new customer acquisition and brand awareness[229]. - The company aims to expand its product offerings and enhance its platform capabilities to support new use cases and customer needs[235]. Risk and Commitments - Non-cancelable purchase commitments for business operations totaled $1.4 billion, primarily related to cloud hosting services[263]. - The fair value of the 2029 Notes issued in December 2024 is subject to interest rate risk and market risk, with a principal amount of $1.0 billion[286]. - The company has not entered into any hedging arrangements for foreign currency risk for the fiscal year 2025[288]. - A hypothetical 10% change in interest rates would not have a material impact on the company's consolidated financial statements[285].