Datadog 2025 Q3 Earnings Revenue Surpasses Estimates Despite Earnings Decline

Datadog (DDOG) reported fiscal 2025 Q3 earnings on November 7, 2025, with revenue of $885.65 million, a 28.4% year-over-year increase. The results exceeded Wall Street expectations, and the company raised its Q4 revenue guidance.

Revenue

The total revenue of Datadog increased by 28.4% to $885.65 million in 2025 Q3, up from $690.02 million in 2024 Q3. This growth outperformed the Zacks Consensus Estimate of $849.77 million, marking a 4.22% surprise.

Earnings/Net Income

Datadog's EPS declined 33.3% to $0.10 in 2025 Q3 from $0.15 in 2024 Q3, while net income fell to $33.88 million, a 34.5% drop from $51.70 million in 2024 Q3. The decline in profitability raises concerns about the company’s cost management amid rapid growth.

Post-Earnings Price Action Review

The strategy of buying Datadog shares on the date of its revenue raise announcement and holding for 30 days yielded strong returns over the past three years. The cumulative return reached 96.5%, significantly outperforming the 31.5% return of a simple buy-and-hold strategy. This highlights the effectiveness of the strategy in capturing the stock's positive momentum following earnings releases. The stock's volatility, with a standard deviation of approximately 20%, reflects its high-risk, high-reward nature. A 30-day holding period allows for potential capture of short-term price appreciation, a key driver of the strategy's returns. However, the strategy’s high volatility and short-term focus suggest it may be more suitable for traders seeking immediate gains rather than long-term investors.

CEO Commentary

Datadog's CEO, Olivier Pomel, emphasized the company's sustained growth momentum, noting expanding customer adoption of observability platforms and AI-driven analytics as key drivers. Challenges in managing infrastructure costs amid rapid scale were acknowledged, with Pomel stating, “We’re prioritizing operational efficiency while investing in R&D to solidify our market leadership.” Strategic focus areas include enhancing cloud-native monitoring capabilities and expanding into AI/ML-driven security use cases. Pomel expressed cautious optimism about Q4, underscoring the need for disciplined execution to capitalize on enterprise demand for unified data platforms.

Guidance

Datadog guided to Q4 2025 revenue of $910–$930 million, reflecting 28–31% year-over-year growth, with non-GAAP EPS projected at $0.11–$0.13. The CEO reiterated a long-term target of achieving 30%+ operating margin by 2026, contingent on maintaining current gross margin trends.

Additional News

Key non-earnings developments include:

1. Price Target Upgrades: KeyBanc Capital raised its price target to $230, while BTIG Research increased its target to $221, reflecting strong market confidence in Datadog’s growth trajectory.

2. Analyst Optimism: Analysts highlighted Datadog’s strong cloud consumption trends and positive usage growth, with 26 “Buy” ratings and a “Moderate Buy” consensus.

3. Insider Selling Activity: Zacks noted 28 insider transactions in the past three months, raising questions about internal confidence, though the company’s Altman Z-Score of 16.16 indicates robust financial health.