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    DDOG
    Earnings call· Sep 2025(Q3 FY25)

    Datadog, Inc. DDOG

    Nov 6, 2025 Source

    Executive summary

    Datadog Q3 FY25 — Strong Revenue Growth and AI Adoption Acceleration

    Datadog delivered a very strong Q3 FY25, driven by broad-based positive demand trends, accelerated usage growth from existing non-AI customers, and record new logo bookings. The company saw significant traction in its AI-native customer base and product adoption, while also expanding its security offerings. Management expressed confidence in long-term cloud migration and AI opportunities, with investments in product and sales capacity paying off.

    Highlights

    5

    • Revenue reached $886 million, an increase of 28% year-over-year, exceeding the high end of guidance.

    • Sequential usage growth for non-AI existing customers was the highest seen in 12 quarters.

    • New logo annualized bookings more than doubled year-over-year, setting a new record.

    • Security ARR growth accelerated to the mid-50s percentage year-over-year in Q3, up from mid-40s percentage last quarter.

    • Free cash flow was $214 million, representing a 24% free cash flow margin.

    Guidance & targets

    10
    CategoryTargetConfidence
    Revenue
    $912M to $916M
    high materiality
    High
    Non-GAAP operating income
    $216M to $220M
    high materiality
    High
    Non-GAAP net income per share
    $0.54 to $0.56
    medium materiality
    High
    Revenue
    $3.386B to $3.390B
    high materiality
    High
    Non-GAAP operating income
    $754M to $758M
    high materiality
    High
    Non-GAAP net income per share
    $2.00 to $2.02
    medium materiality
    High
    Net interest and other income
    ~$170M
    low materiality
    High
    Cash taxes
    $10M to $20M
    low materiality
    High
    Non-GAAP tax rate
    21%
    low materiality
    High
    Capital expenditures and capitalized software
    4% of revenues
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    AI native customers
    Year-over-year revenue growth from AI native customers, excluding the largest customer, accelerated in Q3. This group's revenue contribution increased sequentially and year-over-year.
    Revenue contribution: 12% of Q3 revenueRevenue contribution Q2: 11%Revenue contribution YoY: 6%
    		—accelerated——
    Non-AI native customers
    Year-over-year revenue growth accelerated from 18% in Q2 to 20% in Q3. Sequential usage growth was the strongest in 12 quarters.
    YoY revenue growth Q2: 18%Sequential usage growth: highest in 12 quarters
    		—20%——

    Operational metrics

    15
    Non-GAAP gross margin
    81.2%vs 80.9% Q2, vs 81.1% YoY
    Q3 FY25

    Impacted by engineers' cost-saving efforts and cloud efficiency projects.

    Non-GAAP operating margin
    23%vs 20% Q2, vs 25% YoY
    Q3 FY25

    Reflects continued investments in long-term growth opportunities and execution on hiring plan.

    Free cash flow margin
    24%
    Q3 FY25

    Calculated after taking into consideration capital expenditures and capitalized software.

    Cash and investments balance
    $4.1B
    Q3 FY25

    Includes cash, cash equivalents, and marketable securities.

    Operating expenses growth
    32%down from 36% Q2
    Q3 FY25

    Indication of execution on hiring plan and investment in long-term growth.

    Digital Experience products ARR
    >$300M
    Q3 FY25

    Includes RUM, Synthetics, and Product Analytics.

    Security ARR growth
    mid-50s%up from mid-40s% Q2
    Q3 FY25

    Year-over-year growth, with acceleration across all security products.

    Integrations supported
    >1,000
    Q3 FY25

    Unparalleled in the space, critical part of the Datadog platform.

    Average integrations used by customers
    >50
    Q3 FY25

    Average usage across 32,000 customers.

    Average integrations used by $1M+ ARR customers
    >150
    Q3 FY25

    Average usage for customers spending over $1 million annually.

    LLM spans customers sending to Datadog
    quadrupled
    past few months

    Indicates strong interest and adoption of LLM observability.

    Customers sending AI data
    >5,000
    Q3 FY25

    Sending AI data to one or more AI integrations.

    New logo annualized bookings growth
    more than doubledYoY
    Q3 FY25

    Set a new record, driven by an increase in average new logo land size, particularly in enterprise.

    Revenue growth from new customers
    25%up from 20% Q2
    Q3 FY25

    Portion of year-over-year revenue growth related to new customers.

    AI native companies
    >500
    Q3 FY25

    Broadening in number and size, indicating future potential as AI usage expands.

    Industry KPIs

    12
    MetricValueDetails
    Capacity CAPEX4%% of revenues
    Revenue growth$886MUSD
    Arr net new arr>$300MUSD
    Rpo current rpo$2.79BUSD
    Bookings billings$893MUSD
    Customer account count32,000customers
    Large deal new logo metricsmore than doubled%
    Gross retention renewal ratemid-to-high 90s%
    Multi product platform attach84%%
    Operating FCF margin rule of 4023%%
    Ai product adoption monetization>1,000customers
    Net revenue net dollar retention120%%

    Orderbook & backlog

    3
    Remaining Performance Obligations (RPO)$2.79BQ3 FY25

    up 53% YoY

    Current RPO growthlow 50s%Q3 FY25

    YoY

    Billings$893MQ3 FY25

    up 30% YoY

    Product announcements

    4
    ProductTypeDetails
    Bits AI SRE agentupdate
    LLM experiments and playgroundslaunch
    Custom LLM as a judge evaluationslaunch
    Datadog MCP serversupdate

    Deals & partnerships

    8
    Leading European telcoLargest ever land deal in Europe, consolidating 10+ commercial and open source tools.7-figure annualized deal

    The company's previous setup was expensive, inefficient, and not scaling to meet needs.

    Leading financial risk and analytics companyDisplacing fragmented tooling that led to major incidents.7-figure annualized deal

    Plans to start with 11 Datadog products, including On-Call, Cloud SIEM, and Bits AI, replacing 14 commercial, open source, and hyperscale observability tools.

    Fortune 500 technology hardware companyStrategic observability partnership, displacing commercial tools.7-figure annualized deal

    Chosen as a strategic observability partner, displacing commercial tools across availability, cloud team, and incident response. Starting with 14 Datadog products.

    Fortune 500 financial services companyExpansion to consolidate siloed teams and data, replacing SIEM solution.7-figure annualized expansion

    Will adopt 15 Datadog products, including all three pillars across all business units, and replace their SIEM solution with Datadog Cloud SIEM.

    Fortune 500 heavy equipment companyExpansion to replace open source log solution and adopt new observability tools.7-figure annualized expansion

    Will replace open source log solution with Datadog log management and Flex logs, adopt LLM Observability, and use cloud cost management for cost visibility and governance.

    Leading vertical SaaS companyReturning customer benefiting from OpenTelemetry alignment.7-figure annualized deal

    Will implement incident and reliability processes previously unable to execute on, benefiting from Datadog's alignment with OpenTelemetry.

    Major American carmakerExpansion due to faster-than-expected product adoption.7-figure annualized expansion

    Adopting Datadog incident management and On-Call solution company-wide for 5,000 users to support operational continuity.

    Leading AI companyLong-time customer expanding usage and securing better economics with an early renewal.9-figure annualized expansion

    Expanded usage of multiple products, securing better economics for a higher commitment with an early renewal.

    What to watch in Q4 FY25

    5

    Non-AI customer usage growth

    Next quarter
    CurrentHighest in 12 quarters
    TargetContinued acceleration or strong growth

    Why it matters

    Indicates underlying health and broad-based demand beyond AI, crucial for overall business momentum.

    And the sequential usage growth for non-AI existing customers was the highest we have seen going back 12 quarters.

    Q&A highlights

    8

    How close is Datadog to confidently expanding and monetizing GPU clusters for AI training and inferencing workloads?

    Datadog has products for GPU monitoring entering the market, but they do not yet generate significant revenue. This represents a future opportunity, and current revenue acceleration is not tied to GPU monetization.

    “So we have products that are getting into the market now for GPU monitoring. But these don't generate any significant revenue yet. So all the revenues we've shared, like the acceleration, et cetera, that's not related to us capitalizing more on GPUs, that's a future opportunity.”

    asked by Kasthuri Rangan · answered by Olivier Pomel

    2 min read6 chapters

    Detailed Narrative

    01

    Demand Environment & Customer Growth

    Datadog observed broad-based positive trends in demand, with accelerated year-over-year revenue growth across its non-AI customers. Sequential usage growth for non-AI existing customers was the highest in 12 quarters. New customer bookings and revenue contribution increased, with new logo annualized bookings more than doubling year-over-year and setting a new record. Churn remained low, and gross revenue retention was stable in the mid-to-high 90s, highlighting the platform's mission-critical nature.

    02

    Product Adoption & Platform Strategy

    The company's platform strategy continues to resonate, with 84% of customers using 2 or more products (up from 83% a year ago), 54% using 4 or more products (up from 49% a year ago), 31% using 6 or more products (up from 26% a year ago), and 16% using 8 or more products (up from 12% a year ago). Digital Experience products, including RUM, Synthetics, and Product Analytics, now exceed $300 million in ARR, with Product Analytics adopted by over 1,000 customers.

    03

    Security Portfolio Acceleration

    Datadog's security suite is accelerating growth, with Security ARR growth in the mid-50s percentage year-over-year in Q3, up from the mid-40s percentage last quarter. This acceleration is attributed to success in including Cloud SIEM in larger deals, fast uptake of good security, and increasing wins in cloud security. All security products experienced year-over-year growth acceleration.

    04

    AI Innovation & Adoption

    The company is rapidly advancing its AI roadmap, with high customer interest in Bits AI agents. Thousands of customers are in preview for the Bits AI SRE agent, receiving enthusiastic feedback on time and cost savings. LLM observability products like LLM experiments, playgrounds, and custom LLM as a judge evaluations are now generally available. The number of LLM spans customers are sending to Datadog has quadrupled in recent months, and over 5,000 customers are sending AI data to one or more AI integrations.

    05

    Go-to-Market Success & Large Deals

    Datadog's go-to-market teams achieved record new logo bookings, with annualized bookings more than doubling year-over-year, driven by an increase in average new logo land size, particularly in enterprise. The company secured several 7-figure annualized deals and expansions, including with a leading European telco, a financial risk company, a Fortune 500 hardware company, a Fortune 500 financial services company, and a major American carmaker. A significant 9-figure annualized expansion was also signed with a leading AI company.

    06

    AI Native Customer Cohort

    The AI native customer base continues to exhibit rapid growth, representing 12% of Q3 revenue, up from 11% in Q2 and 6% a year ago. Year-over-year revenue growth from AI native customers (excluding the largest customer) accelerated in Q3. This cohort now includes over 500 companies, with more than 100 spending over $100,000 annually and more than 15 spending over $1 million annually.

    AI-generated summary of the company’s earnings call. Not investment advice.