Datadog Plunges, Soft Q4 Sales Target Overshadows Stellar Cash Flow

Datadog Inc. (NASDAQ:DDOG) stock declined Wednesday despite reporting third-quarter results that topped Wall Street expectations and raising its full-year revenue and adjusted earnings guidance.

The company reported adjusted earnings of 81 cents per share, beating the analyst consensus estimate of 65 cents. Revenue increased 35% year over year to $1.197 billion, exceeding analysts’ expectations of $1.146 billion.

GAAP net income increased to $118.32 million, or 32 cents per diluted share, from $33.89 million, or 10 cents per diluted share, a year earlier.

Non-GAAP operating income rose to $334.29 million from $207.36 million, while operating cash flow climbed to $289.95 million and free cash flow increased to $250.63 million.

Adjusted gross margin remained stable at 81%, while adjusted operating margin expanded by 500 bps to 28% during the quarter.

Cash, cash equivalents and marketable securities totaled about $5.2 billion at the end of the quarter.

Datadog executives pointed to broad platform adoption and growing AI usage as key drivers of third-quarter growth.

Executives Highlight Platform Adoption, AI Innovation

Co-founder and CEO Olivier Pomel said customers are increasing their use of Datadog as they expand digital operations and adopt AI. He also highlighted the company’s continued investment in innovation, including specialized AI models developed by its AI Research team to help customers manage greater complexity and move toward autonomous operations.

Guidance Raised Above Wall Street Expectations

Datadog forecast fourth-quarter adjusted earnings of 69 cents to 71 cents per share on revenue of $1.19 billion to $1.20 billion, compared with analysts’ estimates of 66 cents per share and $1.202 billion in revenue.

The company also raised its full-year 2026 guidance. It now expects adjusted earnings of $2.73 to $2.75 per share (up from prior outlook of $2.50 to $2.54 per share), compared with analysts’ estimate of $2.56.

Revenue is projected at $4.515 billion to $4.525 billion (up from previous guidance of $4.450 billion to $4.470 billion), and above the consensus estimate of $4.475 billion.

DDOG Price Action: Datadog shares were down 9.54% at $198.19 at the time of publication on Wednesday, according to Benzinga Pro data.

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