Datadog Inc - Class A (NASDAQ:DDOG) delivered a strong finish to its fiscal year, surpassing analyst expectations for both revenue and profitability in the fourth quarter of 2025. The cloud observability and security platform's results, coupled with forward guidance that exceeded market fears, have been met with a sharp positive reaction in the stock during pre-market trading.
Quarterly Performance: Beating the Street
The company's fourth-quarter results demonstrated robust growth and operational execution. Revenue climbed 29% year-over-year to $953.2 million, comfortably exceeding the analyst consensus estimate of approximately $934.9 million. This marks a continuation of the company's ability to grow at a significant rate atop a multi-billion dollar revenue base.
On the bottom line, Datadog reported non-GAAP earnings per share (EPS) of $0.59, which came in 6.3% above the $0.5657 analysts had forecast. The company's profitability metrics showed strength, with a non-GAAP operating margin of 24% for the quarter. Key operational highlights from the period include:
- Strong Large Customer Growth: The number of customers generating $1 million or more in annual recurring revenue (ARR) grew 31% to 603, up from 462 a year ago.
- Healthy Cash Generation: The company produced $327 million in operating cash flow and $291 million in free cash flow for the quarter.
- Solid Balance Sheet: Datadog ended the year with a formidable war chest of $4.47 billion in cash, cash equivalents, and marketable securities.
Market Reaction and Forward Guidance
The market's immediate response to the earnings report and subsequent outlook has been decisively positive. In pre-market trading following the announcement, Datadog's stock surged approximately 8.8%. This rally suggests investors are applauding not only the Q4 beat but also the company's projections for the year ahead.
Management provided guidance for both the first quarter and the full fiscal year 2026. Notably, the midpoint of the revenue outlook for the coming year sits above the broader analyst consensus that was available prior to the report.
- Q1 2026 Outlook: Revenue is projected to be between $951 million and $961 million. The midpoint of $956 million is about 2.3% above the pre-report analyst sales estimate of roughly $953.3 million.
- FY 2026 Outlook: The company expects full-year revenue in the range of $4.06 billion to $4.10 billion. The midpoint of this guidance, $4.08 billion, surpasses the prior analyst consensus estimate of approximately $4.195 billion. It is important to note that analyst estimates will now be updated to reflect this new company guidance.
CEO Olivier Pomel highlighted the company's delivery of over 400 new features in 2025 and pointed to ongoing innovation, particularly in AI-powered products like the Bits AI SRE Agent, as key drivers for the future.
Strategic Position and Investor Focus
The earnings report reinforces Datadog's central role in the cloud ecosystem. Its platform consolidation strategy—integrating observability, security, and software delivery tools—continues to resonate with large enterprises, as evidenced by the growth in high-value customers. The company's expanded collaboration with Amazon Web Services (AWS) further cements its position as a critical partner for organizations scaling in the cloud.
With an Investor Day scheduled for February 12, 2026, shareholders and analysts will be looking for deeper insights into the company's long-term strategy, market opportunity, and financial targets, particularly regarding its investments in artificial intelligence and new product areas.
For a detailed breakdown of historical earnings, future estimates, and analyst ratings, you can review more information on Datadog's earnings and estimates page.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, investment recommendation, or an offer to buy or sell any securities. Investing involves risk, including the potential loss of principal. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
