Datadog (NASDAQ: DDOG) revenue jumps 35% but free cash flow margin slips

Posted by Lindsey Winhoffer on Nov 4th, 2026

What happened

Datadog, Inc. (NASDAQ: DDOG) reported third-quarter revenue of $1.20 billion, up 35% from a year earlier, and swung to a GAAP operating profit. Its fourth-quarter revenue guidance is level with the quarter just reported.

Revenue rose from $885.65 million in the third quarter of 2025. Over the first nine months of 2026, revenue reached $3.32 billion, up 34.4% from $2.47 billion a year earlier, by OptimistFi's calculation.

Datadog had about 4,860 customers with annual recurring revenue of $100,000 or more at Sept. 30. That is up 20% from about 4,060 a year earlier. CEO Olivier Pomel said customers are scaling their digital operations and their use of AI.

Datadog launched Scout 1.0, its first specialized model. It is in preview and now powers Bits Investigation. Forrester named Datadog a Leader in its 2026 Wave for AIOps Platforms for the second year in a row. Gartner's 2026 AI Vendor Race report singled out Datadog as the vendor to beat for observability platforms.

Key numbers

Metric	Latest	Change	Source
Third-quarter revenue	$1.20 billion	from $885.65 million, +35%	SEC 8-K Exhibit 99.1
Non-GAAP operating margin	28%	from 23%, +5 percentage points	SEC 8-K Exhibit 99.1
GAAP operating income	$75 million	from -$5.81 million	SEC 8-K Exhibit 99.1
Free cash flow	$251 million	from $213.95 million, +17.1%	Calculated from SEC 8-K
Free cash flow margin	21%	from 24%, -3 percentage points	SEC 8-K Exhibit 99.1
Customers with ARR of $100,000 or more	about 4,860	from about 4,060, +20%	SEC 8-K Exhibit 99.1

Read more: Datadog (DDOG) company research

Profit and cash flow

GAAP operating income was $75 million, a 6% margin. A year earlier it was a loss of $5.81 million. Non-GAAP operating income was $334 million, a 28% margin, up from 23%.

GAAP diluted earnings per share were $0.32, up from $0.10. Non-GAAP diluted earnings were $0.81, up from $0.55. Stock-based compensation of $237 million accounts for most of the roughly $260 million gap between GAAP and non-GAAP operating income.

Operating cash flow was $290 million, up 15.3% from $251.47 million a year earlier. Free cash flow was $251 million, up 17.1% from $213.95 million. By OptimistFi's calculation, free cash flow grew at about half the pace of revenue. Its margin fell to 21% from 24%. Cash, cash equivalents and marketable securities totaled $5.2 billion at Sept. 30.

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What the fourth-quarter outlook shows

Datadog guided fourth-quarter revenue to a range starting at $1.19 billion. Even the top of the range is level with the third quarter, not a step up. It also guided non-GAAP operating income and non-GAAP earnings per share of $0.69 to $0.71. Both sit below third-quarter results.

For the full year, Datadog guided revenue to between $4.51 billion and $4.53 billion. It guided non-GAAP operating income to between $1.09 billion and $1.1 billion. It guided non-GAAP earnings per share to between $2.73 and $2.75.

Datadog says it cannot reconcile its non-GAAP guidance to GAAP without unreasonable effort. It points to uncertainty over items such as stock-based compensation and employer payroll taxes on equity plans.

Why it matters

OptimistFi has argued that Datadog can be a durable compounder if it stays the independent, multi-use observability and security platform and turns usage growth into high-margin cash flow. This quarter supports the first half. Revenue and large-customer counts grew quickly. Operating margins widened on both a GAAP and a non-GAAP basis.

The cash half is less settled. Free cash flow margin fell even as operating margins widened. Cash conversion is the open question.

Datadog warns that its recent rapid growth may not be indicative of future growth. Its non-GAAP results exclude stock-based compensation and other items. Its risk list also cites dependence on existing customers buying more and renewing their subscriptions.

What's next

Datadog says more detail will appear in its Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2026.

The next test is the fourth-quarter report. It will show whether revenue and non-GAAP operating income land inside the guided ranges. A free cash flow margin that stays below its year-earlier level would weaken the cash half of the case. Results above the ranges would strengthen the growth half.