Datadog Q4 Earnings & Revenues Surpass Estimates, Both Increase Y/Y

Core Insights - Datadog (DDOG) reported a non-GAAP EPS of 59 cents for Q4 2025, marking a 20.4% increase year-over-year and surpassing the Zacks Consensus Estimate by 7.27% [1] - The company's net revenues reached $953.19 million, reflecting a 29.2% year-over-year growth and exceeding the consensus estimate by 4.22% [1] Customer Metrics - Datadog ended Q4 with 32,700 customers, an increase from approximately 30,000 in the same period last year [2] - The number of customers with an Annualized Run Rate (ARR) of $100,000 or more rose to 4,310, up from about 3,610 year-over-year, contributing to 90% of total ARR [2] - The company reported 603 customers with ARR of $1 million or more, a 30.5% increase from 462 in the previous year [2] Product Usage - 84% of customers utilized two or more products, up from 83% year-over-year [3] - 55% of customers used four or more products, an increase from 50% in the prior year [3] - 33% of customers employed six or more products, up from 26% a year ago, while 18% used eight or more products, increasing from 12% [3] - The trailing 12-month net revenue retention rate was approximately 120%, up from the high-110% range in the previous year [3] Financial Performance - Non-GAAP gross profit for Q4 increased by 28.8% year-over-year to $776.3 million [4] - Adjusted gross margin declined by 100 basis points year-over-year to 81% [4] - Research & development expenses grew by 32.5% year-over-year to $280.3 million, representing 29.4% of revenues, an increase of 70 basis points [4] - Sales and marketing expenses rose by 26.5% year-over-year to $219.1 million, accounting for 23% of revenues, a contraction of 50 basis points [5] - General & administrative expenses increased by 21% year-over-year to $46.8 million, representing 4.9% of revenues, a contraction of 30 basis points [5] - Non-GAAP operating income was $230.1 million, up 28.4% year-over-year, with a non-GAAP operating margin of 24%, unchanged from the prior year [6] Balance Sheet & Cash Flow - As of December 31, 2025, Datadog had cash, cash equivalents, and marketable securities totaling $4.5 billion, up from $4.1 billion as of September 30, 2025 [7] - Operating cash flow for the quarter was $327 million, an increase from $251 million in the previous quarter [7] - Free cash flow was $291 million, compared to $214 million in the prior quarter, with a free cash flow margin of 30.5% [7] Guidance - For Q1 2026, Datadog anticipates revenues between $951 million and $961 million, with non-GAAP EPS expected in the range of 49-51 cents [10] - For fiscal 2026, the company projects revenues between $4.06 billion and $4.10 billion, with non-GAAP EPS expected to be between $2.08 and $2.16 [10]