Datadog’s (DDOG) better-than-expected earnings and bullish outlook send shares sharply higher.
Cloud monitoring and analytics platform Datadog delivered an impressive third-quarter earnings report, easily beating Wall Street expectations and raising its full-year outlook. The results reinforced Datadog’s position as one of the best company investments in the fast-growing AI and cloud software sector.
Key Points:
- Datadog’s Q3 revenue rose 28% year-over-year to $886 million, beating forecasts.
- Adjusted earnings of $0.55 per share exceeded analyst expectations by $0.10.
- Billings climbed 30%, showing strong customer growth and retention.
What Drove Datadog’s Massive Earnings Beat?
Datadog’s strong quarter was powered by broad-based demand across industries and growing adoption of its monitoring and security tools. Revenue surged 28% to $886 million, topping analyst estimates of $854 million, while adjusted earnings per share came in at $0.55 — well above the expected $0.45.
The company’s billings, a key indicator of future revenue, rose 30%, signaling that customers are committing to longer-term contracts. Free cash flow reached $214 million, with a healthy 24% margin, underscoring efficient operations and solid profitability.
Datadog now serves about 32,000 customers, up from 29,200 a year ago. Of those, roughly 4,060 clients generate at least $100,000 in annual recurring revenue (ARR), reflecting a 16% increase.
How Is AI Fueling Datadog’s Growth?
AI continues to be a powerful driver of Datadog’s momentum. The company reported that AI-native customers now account for 12% of total revenue, double their share from a year ago. CEO Olivier Pomel noted strong demand from AI-focused clients, including model vendors and application developers, as organizations scale their artificial intelligence workloads.
The company’s products, such as GPU monitoring and AI observability tools, are becoming key infrastructure for customers running complex cloud and AI systems. While these features are not yet major revenue contributors, they represent future growth potential as AI adoption accelerates.
Additionally, Datadog’s partnerships with major platforms like Amazon Web Services and Oracle Cloud continue to expand its reach across the enterprise software ecosystem.
Why Did Shares Surge Over 20%?
Following the report, shares jumped more than 23% to $194.87 — their biggest one-day gain since late 2023 — and are now up over 30% for the year. Investors were particularly encouraged by the company’s upbeat guidance.
For the fourth quarter, Datadog expects revenue of around $914 million, far exceeding Wall Street’s estimate of $889 million. Full-year guidance was also raised to a range of $3.386 billion to $3.39 billion, well above earlier projections.
These results suggest Datadog is successfully navigating a competitive cloud software market and capturing demand from both AI and enterprise clients.
What It Means for Investors
For investors looking to analyze stocks or identify companies that are good to invest in, Datadog offers a compelling mix of growth, profitability, and innovation. The company’s strong fundamentals — including high customer retention, diversified revenue streams, and AI-driven expansion — make it a standout in the cloud technology space.
Datadog’s success highlights several basics of investing: focus on companies with strong recurring revenue, expanding customer bases, and the ability to adapt to new technology trends. While short-term volatility is common in tech stocks, Datadog’s performance shows how innovation and execution can deliver long-term value.
For those tracking the best stocks to buy in the software sector, Datadog’s strong quarter and rising AI demand position it as one of the best company investments to watch in 2025.
Conclusion
Datadog’s third-quarter results mark a clear turning point, with accelerating revenue, rising profitability, and strong demand from AI and enterprise clients. The company’s raised guidance and expanding product ecosystem reinforce confidence in its long-term growth trajectory. For investors seeking exposure to the digital infrastructure powering the AI revolution, Datadog may remain a key stock to watch.
FAQs
What were Datadog’s third-quarter results?
Datadog reported revenue of $886 million, up 28% year-over-year, and adjusted earnings of $0.55 per share, both above analyst expectations.
How did Datadog’s customer base perform?
Datadog grew its customer count to about 32,000, with 4,060 generating $100,000 or more in annual recurring revenue — a 16% increase from last year.
Why did Datadog’s stock surge?
The stock rose over 21% after the company beat earnings expectations and issued stronger-than-expected guidance for the fourth quarter and full year.
How is AI contributing to Datadog’s growth?
AI-native customers now represent 12% of revenue, with more than 500 AI clients using Datadog’s platform to monitor and optimize their workloads.
Is Datadog a good investment?
For long-term investors, Datadog’s consistent growth, expanding product suite, and strong financials make it one of the best company investments in the cloud and AI space.
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