Datadog shares drop 14.5% despite Q3 revenue beat and higher forecast

Datadog (DDOG) reported third-quarter revenue of $1.20 billion, up 35% from a year earlier, and adjusted earnings of 81 cents per share, topping the 67 cents consensus estimate. The company also raised its full-year forecasts, according to its press release issued Nov. 4.

Shares fell 14.5% in regular trading as of 3:59 p.m. ET, from a regular-session close of $220.52.

The company provides an observability and security platform that brings applications, infrastructure, data, models and security into one place, according to the release.

Here's how the company did:

• Adjusted EPS: 81 cents vs. 67 cents expected
• Revenue: $1.20 billion vs. $885.7 million a year earlier, against $1.17 billion expected
• GAAP EPS: 32 cents per diluted share
• Operating cash flow: $290 million, with free cash flow of $251 million

GAAP net income was $118.3 million, up from $33.9 million a year earlier. Non-GAAP operating income reached $334 million, a 28% margin, compared with a 23% margin a year earlier.

Revenue has risen in each of the last three quarters, from $885.7 million in the third quarter of 2025 to $1.12 billion in the second quarter of 2026, according to its SEC filings.

Co-founder and CEO Olivier Pomel said, “We are seeing strong adoption across our platform as customers scale their digital operations and use of AI.”

Customers and product

The company had about 4,860 customers with annual recurring revenue of $100,000 or more as of Sept. 30, up 20% from about 4,060 a year earlier.

Datadog introduced Scout 1.0, its first specialized model for investigating production issues. Scout, in preview, now powers Bits Investigation, the company said.

2026 guidance

For the fourth quarter, the company expects revenue of $1.19 billion to $1.20 billion and non-GAAP net income of 69 cents to 71 cents per share.

For the full year, it now expects revenue of $4.515 billion to $4.525 billion, up from the $4.45 billion to $4.47 billion range it gave on Aug. 6. Non-GAAP operating income is now forecast at $1.095 billion to $1.105 billion, from $1.01 billion to $1.03 billion, and non-GAAP net income at $2.73 to $2.75 per share, from $2.50 to $2.54.

Costs and cash

Stock-based compensation expense was $237.2 million in the quarter. The company held $5.2 billion in cash, cash equivalents and marketable securities as of Sept. 30.