Datadog, Inc. (DDOG) FY2025 10-K and Q2 FY2026 10-Q Summary

Business

From the fiscal 2025 Form 10-K, accession 0001628280-26-008819.

Datadog sells a cloud-based, multi-tenant SaaS observability and security platform for cloud applications. The platform integrates infrastructure monitoring, application performance monitoring (APM), log management, user experience monitoring, cloud security, service management and related capabilities into a single real-time view of a customer's technology stack. Substantially all revenue is subscription revenue. Customers buy either a committed contractual amount of usage recognized ratably, a committed amount delivered as used, or a monthly subscription billed on usage; usage above the commitment is billed incrementally. Contract terms are primarily monthly, annual or multi-year, with the majority of revenue coming from annual subscriptions. Professional services are generally not required to implement the products and revenue from them has been immaterial. Datadog reports as a single business and does not disclose operating segments.

As of December 31, 2025 the company had approximately 32,700 customers in over 160 countries, up from approximately 30,000 a year earlier. Approximately 4,310 of those customers carried annual run-rate revenue (ARR) of $100,000 or more and represented 90% of ARR, up from 3,610 customers and 88% of ARR at the end of 2024; 603 customers carried ARR of $1.0 million or more, up from 462. Revenue from regions outside North America, measured by customer billing address, was approximately 29% of total revenue in each of 2025 and 2024. Beyond North America the company sells primarily from Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney and Tokyo. Headcount was approximately 8,100 employees across 35 countries at year-end 2025, of which approximately 3,900 were in research and development and approximately 3,600 in sales and marketing; approximately 44% of full-time employees were outside the United States, 34% of those in France.

The go-to-market model is land-and-expand: products are self-service to adopt, customers typically increase usage of what they first bought and then add other products on the platform. The company measures this with a trailing 12-month dollar-based net retention rate, which was about 120% as of December 31, 2025 versus the high-110%'s a year earlier. Cross-product adoption is the other expansion metric: approximately 84% of customers used two or more products at December 31, 2025, 55% used four or more (up from ~50%), 33% used six or more (up from ~26%), 18% used eight or more (up from ~13%) and 9% used ten or more (up from 5%).

The product line now runs to more than 20 products built on a common data model in which every ingested data point is tagged with consistent metadata, so metrics, traces, logs, sessions and security signals can be queried and correlated together. Products include Infrastructure Monitoring, APM, Log Management (with Logging Without Limits and Flex Logs), Observability Pipelines, Synthetics, Real User Monitoring, Product Analytics, Continuous Profiler, Database Monitoring, Data Observability (Data Streams Monitoring and Data Jobs Monitoring), LLM Observability, Error Tracking, Cloud and Network Device Monitoring, Incident Response, Workflow Automation and App Builder, Event Management, Bits AI SRE, Cloud Cost Management, Cloud Security, Code Security, Cloud SIEM, Threat Management (Workload Protection and App & API Protection), Sensitive Data Scanner and CI Visibility. A single agent and more than 1,000 out-of-the-box integrations feed the platform, which the company says processes trillions of events per hour. Product cadence has been steady and cumulative: APM in 2017; Log Management in 2018; Digital Experience Monitoring and Network Performance Monitoring in 2019; Cloud SIEM, Continuous Profiler and Incident Management in 2020; Cloud Security Posture Management, Cloud Workload Security, Database Monitoring and Sensitive Data Scanner in 2021; Application Security Management, Cloud Security Management, Audit Trail, Observability Pipelines, Cloud Cost Management and Universal Service Monitoring in 2022; Application Vulnerability Management, Data Streams Monitoring and Workflow Automation in 2023; Event Management and LLM Observability in 2024; and OnCall, Product Analytics and Bits AI SRE in 2025.

Management sizes the opportunity using Gartner's framework: the Health and Performance Analytics (Observability) market within IT Operations Management is put at $39 billion in 2029, and the combination of the IT Operations Management, Security Software, Application Development and Analytic Platforms markets the company participates in at $187 billion in 2029.

Competition is fragmented by product category because the platform spans several traditional categories at once. In on-premise infrastructure monitoring the named competitors are IBM, Microsoft and SolarWinds; in APM, Cisco Systems, New Relic and Dynatrace; in log management, Cisco Systems and Elastic; in cloud monitoring, the native tools of AWS, Microsoft Azure and Google Cloud Platform. Home-grown and open-source tooling competes across all of these. Many competitors are larger and better resourced, and an increasing share of sales through cloud-provider marketplaces would both reduce the number of direct customer relationships and compress margin on those sales.

On intellectual property, the company owned 43 patents globally as of December 31, 2025, with 18 U.S. applications pending, 3 pending PCT applications and 3 pending foreign applications, plus 11 registered U.S. trademarks and 127 registered non-U.S. trademarks. Management states that the skills of its personnel and the pace of new product delivery matter more to its position than the patent estate. The company uses open source software in its products, and its API libraries and customer-side agent are themselves licensed on an open source basis.

Corporate history and structure: Datadog was incorporated in Delaware in June 2010 and is headquartered at 620 8th Avenue, New York. On April 21, 2026, following stockholder approval at a special meeting, the company completed a conversion from a Delaware corporation to a Nevada corporation by plan of conversion; each outstanding Class A and Class B share became one share of the corresponding Nevada class, equity awards carried over on the same terms, and the Class A shares continue to trade on Nasdaq under DDOG. The company states the redomiciliation changed nothing about the business, management, properties, headcount, assets, liabilities or material contracts other than the costs of effecting it (Form 8-K dated April 21, 2026, accession 0001193125-26-168261; Form 10-Q, accession 0001628280-26-054458). The capital structure remains dual class: Class A carries one vote per share and Class B ten votes per share, with Class B converting to Class A on sale or transfer. At June 30, 2026 there were 334,438,127 Class A and 24,518,658 Class B shares outstanding.

Risk factors

Condensed from the fiscal 2025 Form 10-K, accession 0001628280-26-008819, with the current-quarter update from the Form 10-Q, accession 0001628280-26-054458.

Concentration in a usage-optimizing customer cohort. The most specific revenue risk the company discloses is that cohorts of customers ramp usage sharply and then optimize it. Management names its AI-native cohort, which includes its largest customer, as having contributed high single digit percentage points to total company year-over-year revenue growth in the quarter ended June 30, 2026, against approximately seven percentage points in the prior-year-end quarter ended December 31, 2025, and warns that such customers may optimize their usage, renew on terms less favorable to the company or fail to renew, producing revenue volatility. The reduction in that customer's usage beginning after the quarter end is set out under Subsequent events below.

Growth rate and forecasting. Revenue was $3,427.2 million, $2,684.3 million and $2,128.4 million in 2025, 2024 and 2023. Management explicitly expects the growth rate to decline over time as the business matures and says its limited operating history at current scale makes forecasting difficult.

Profitability is recent and not assured. The company incurred net losses in every fiscal year from inception through 2022 (including a net loss of $50.2 million in 2022) and cautions that it may not sustain profitability, particularly because it intends to keep raising spending on the platform, sales capacity and international expansion.

Renewal and expansion dependence. Subscription terms are primarily monthly or annual and customers have no renewal obligation. Renewal and expansion depend on customer health, usage, satisfaction, competitor pricing, customer M&A and account consolidation, and IT budget levels; as the base skews toward larger enterprises, the sales effort becomes more costly and the sales cycle longer and less predictable.

Security. The platform stores and transmits customer data including personal information, and the company has been and expects to be targeted by cyber-attacks, including by nation-state actors, and by ransomware. It discloses a specific incident: in April 2025 it notified customers of access by an unauthorized third party to a number of Datadog source code repositories arising from compromised employee account credentials; credentials were revoked and the access terminated, but the company notes the exposure may increase vulnerability to later exploitation of its source code or platform. It operates a shared-responsibility model in which customers configure their own security measures, and it can be harmed reputationally by customer-side incidents it did not cause. Insurance may not cover the resulting fines, judgments and costs.

Reliability and third-party hosting. Substantially all infrastructure is outsourced to third-party cloud hosting providers, and the company provides uptime service-level commitments backed by service credits. It cites the March 2023 outage that affected multiple products and regions and was substantially resolved in roughly a day. Capacity limits at a hosting provider would constrain onboarding and expansion; a prolonged disruption would harm the business directly. Failure to optimize third-party cloud spend as it scales would compress gross margin, a risk that has in fact been the stated driver of gross margin decline in both the latest year and the latest quarter.

Software defects. Undetected errors, failures and bugs have occurred and may recur, including vulnerabilities inherited from acquired entities that due diligence did not surface.

Competition and technology change. The market is rapidly evolving, with competitors that have larger patent portfolios, bigger budgets and stronger brand recognition, and with pricing competition that has already produced pressure. Selling through cloud-provider marketplaces could reduce direct relationships and margins.

Artificial intelligence. The company both incorporates AI into its products and is exposed to AI regulation. It flags unresolved intellectual property and license questions around AI outputs, novel cybersecurity and privacy risk, the EU Artificial Intelligence Act (effective August 2024, extraterritorial, with significant fines), state and national AI statutes, FTC enforcement that has required disgorgement of AI-derived assets, and dependence on third-party AI services that may become unavailable or repriced. Competitors may incorporate AI more successfully.

Data privacy and cross-border transfer. The company is subject to the EU and UK GDPR, NIS2 and the UK NIS Regulations, the EU Data Act, DORA operational-resilience obligations negotiated into customer contracts, the CCPA as amended by the CPRA and the other comprehensive U.S. state privacy laws, HIPAA, and non-European regimes including Brazil's LGPD, China's PIPL, Canada's PIPEDA and the privacy acts of Australia, New Zealand and India. Transfer mechanisms out of the EEA and UK remain subject to legal challenge. Plaintiffs increasingly bring privacy class claims and mass arbitration demands with per-violation statutory damages.

Legal and regulatory. Additional exposures include service-level credit obligations, uncapped indemnity provisions in some customer and partner agreements, anti-corruption laws (FCPA, UK Bribery Act), U.S. export controls and OFAC sanctions applicable to its encryption technology, and the distinctive procurement, termination-for-convenience and budget-cycle risks of selling to government and highly regulated customers.

Tax. As of December 31, 2025 the company held approximately $340.2 million of federal and $474.2 million of state net operating loss carryforwards, with state NOLs beginning to expire in 2028; some acquired NOLs are subject to Section 382 annual limitation, which the company is still evaluating. Post-2017 federal NOLs carry forward indefinitely but offset only 80% of taxable income in a year. The OECD Pillar Two 15% global minimum tax has been adopted in various jurisdictions, with new "side-by-side" administrative guidance released January 5, 2026; the company reports no material impact on its financial statements for the period ended December 31, 2025. A full valuation allowance is carried against federal and state deferred tax assets. Post-Wayfair state sales and use tax assertions could create liabilities on past sales.

People and culture. Growth depends on the continued service of co-founder and CEO Olivier Pomel, co-founder and CTO Alexis Lê-Quôc and CFO David Obstler, all employed at will, and on hiring and retaining engineers, including AI and machine learning specialists, against better-resourced competitors, under immigration and visa constraints and with recruiting leverage that varies with the value of the company's equity awards.

Acquisitions. The company acquires and invests regularly and flags integration difficulty, loss of acquired key personnel, technology that does not adapt to the platform, customer attrition, impairment charges, and dilution or debt from consideration.

Capital structure and the notes. The dual-class structure concentrated approximately 43% of voting power in Class B shares as of December 31, 2025, and index providers have in the past excluded multi-class companies. The $1.0 billion of 0.00% Convertible Senior Notes due 2029 must be serviced from future cash flow; the indenture does not restrict additional debt, liens, buybacks or dividends; a triggered conversion feature could force cash settlement or require reclassification of the principal as a current liability, materially reducing net working capital; and the capped call transactions carry counterparty credit risk and hedging activity that can move the Class A share price. The company has never paid a dividend and does not intend to.

Management's discussion, fiscal year 2025

From the fiscal 2025 Form 10-K, accession 0001628280-26-008819. Figures for the fiscal years ended December 31, 2025 and 2024.

Revenue rose $742.9 million, or 28%, to $3,427.2 million from $2,684.3 million. Approximately 75% of the increase came from growth within existing customers and 25% from new customers. Growth in the prior year had been 26%.

Cost of revenue rose $171.4 million, or 33%, to $687.0 million, driven by $149.8 million more in third-party cloud infrastructure hosting and software costs and $18.2 million more in personnel costs including allocated overhead on higher headcount. Gross margin declined one point to 80%, attributed to the higher third-party cloud infrastructure provider costs.

Operating expenses rose to $2,784.6 million from $2,114.5 million. Research and development was $1,548.5 million, up $395.7 million or 34%, and rose to 45% of revenue from 43%; the increase was $324.4 million in personnel and allocated overhead for engineering, product and design on higher headcount plus $60.0 million in cloud infrastructure-related investments. Sales and marketing was $956.4 million, up $199.8 million or 26%, flat at 28% of revenue; the increase was $165.4 million in personnel and allocated overhead including higher variable compensation for sales personnel, plus $26.3 million in advertising, sales, marketing and promotional activity. General and administrative was $279.7 million, up $74.5 million or 36%, flat at 8% of revenue, driven by $58.2 million more in personnel and related costs and $10.4 million more in legal and other professional services. The result was a GAAP operating loss of $(44) million, a (1)% operating margin, against non-GAAP operating income of $768 million and a 22% non-GAAP operating margin (fourth quarter and fiscal year 2025 results release, Form 8-K dated February 10, 2026, accession 0001628280-26-006645).

Other income, net increased $21.7 million, or 15%, driven by $39.1 million more interest income from marketable securities, offset by $14.0 million of adverse foreign currency movement. Net income was $107.7 million, against $183.7 million in 2024 and $48.6 million in 2023, a decline on rising revenue, as operating expense growth outpaced revenue growth.

Cash flow and liquidity. Operating cash flow was $1,050.1 million, $870.6 million and $660.0 million in 2025, 2024 and 2023; free cash flow, defined as operating cash flow less capital expenditures and capitalized software development, was $914.7 million, $775.1 million and $597.5 million. The $179.5 million increase in operating cash flow was driven by $215.4 million more in non-cash charges (principally $180.3 million more stock-based compensation on higher headcount), $75.7 million more deferred revenue and $54.5 million more accrued expenses and other liabilities, offset by $52.9 million more accounts receivable and $50.8 million more deferred contract costs. Net cash used in investing rose $597.6 million, mainly on $946.6 million more purchases of marketable securities, $110.9 million more cash paid for acquisitions net of cash acquired, $25.1 million more capitalized software development and $14.9 million more property and equipment, partly offset by $468.8 million more maturities and $30.9 million more sales of marketable securities. Net cash provided by financing fell $1,359.6 million, principally because the prior year included $979.1 million of proceeds from the 2029 Notes and $54.7 million from terminating the capped calls on the 2025 Notes, while the current year carried $438.8 million higher repayments of the 2025 Notes; this was partly offset by the absence of $100.9 million of capped call purchases and $13.1 million of employee stock purchase plan proceeds.

At December 31, 2025 the company held $401.3 million of cash and cash equivalents and $4,073.5 million of marketable securities. Non-cancelable purchase commitments for business operations, primarily cloud hosting and software services, totaled $1.4 billion, and operating lease obligations $375.2 million, both due primarily over the next five years. The only long-term debt is the $1.0 billion of 2029 Notes issued in December 2024, which netted approximately $979.1 million after discounts and issuance costs.

Market risk. All sales are denominated in U.S. dollars, so revenue carries no direct currency exposure; operating expenses are incurred primarily in the United States, France and Ireland. For fiscal 2025 the company had entered into no hedging arrangements. A hypothetical 10% change in interest rates or in the relative value of the dollar would not have had a material effect.

Current quarter, three and six months ended June 30, 2026

From the Form 10-Q for the quarter ended June 30, 2026, accession 0001628280-26-054458, and the second quarter 2026 results release furnished on Form 8-K dated August 6, 2026, accession 0001628280-26-053829.

Revenue for the June 2026 quarter was $1,121.5 million, up $294.7 million or 36% from $826.8 million. Approximately 70% of the increase came from existing customers and 30% from new customers, a larger new-customer contribution than the 75/25 split of the full prior year. For the six months, revenue was $2,127.9 million against $1,588.3 million, up 34%.

Margins and spending. Cost of revenue rose 45% in the quarter to $240.1 million, on $64.1 million more third-party cloud infrastructure hosting and software costs and $5.2 million more personnel cost; gross margin declined year over year, again attributed to third-party cloud infrastructure spend, and gross profit was $881.3 million. Cost of revenue grew faster than revenue in both the quarter (45% versus 36%) and the half (39% versus 34%). Research and development rose $90.5 million or 23% to $478.0 million, on $62.5 million more personnel and $28.2 million more cloud infrastructure and software investment. Sales and marketing rose $72.5 million or 30% to $311.5 million, on $56.6 million more personnel including higher sales variable compensation and $12.0 million more advertising and promotional spend. General and administrative rose $16.6 million or 24% to $86.4 million, on $12.9 million more personnel. Each operating expense line grew more slowly than revenue this quarter, and GAAP operating income turned positive at $5.5 million, a 0% operating margin, against an operating loss of $(35.5) million a year earlier. Non-GAAP operating income was $257 million, a 23% non-GAAP operating margin.

Below the operating line, other income, net rose $4.7 million or 11% to $46.3 million, driven by a $3.4 million favorable currency swing; interest income was essentially flat at $50.6 million. Net income was $44.6 million against $2.6 million, or $0.12 per diluted share against $0.01, on 371.0 million weighted average diluted shares. For the six months net income was $97.1 million against $27.3 million. Stock-based compensation net of amounts capitalized was $220.3 million in the quarter and $417.1 million for the half, against $180.5 million and $344.7 million, roughly 20% of revenue and the principal reason GAAP and non-GAAP results diverge so widely.

Customer metrics. Approximately 33,400 customers as of June 30, 2026, against approximately 31,400 a year earlier. Approximately 4,720 customers carried ARR of $100,000 or more and represented 91% of ARR, up 23% from approximately 3,850 customers representing 89% of ARR. The trailing 12-month dollar-based net retention rate was in the low-120%'s, up from about 120% a year earlier, attributed to increased usage growth from existing customers. Cross-product adoption continued to deepen: approximately 85% of customers on two or more products (from ~83%), 58% on four or more (from ~52%), 37% on six or more (from 29%), 22% on eight or more (from 14%) and 13% on ten or more (from 7%). Revenue from outside North America was approximately 27% of the total for the six months, down from approximately 29%.

Cash and capital. Operating cash flow was $316 million in the quarter with free cash flow of $279 million; for the six months, operating cash flow was $650.5 million and free cash flow $567.8 million, against $471.6 million and $409.7 million. The six-month increase reflected $69.8 million more net income, $97.0 million more non-cash charges (principally $72.4 million more stock-based compensation), $69.5 million more accounts payable and $67.9 million more deferred revenue, offset by $84.1 million more accounts receivable and $26.2 million more deferred contract costs. Cash and cash equivalents were $435.0 million and marketable securities $4.6 billion at June 30, 2026, $5.0 billion in total. Financing cash flow rose $655.3 million for the half, essentially because the prior-year period contained $635.5 million of repayments on the 2025 convertible notes and the current period contained no equivalent. The 2029 Notes remain outstanding at $1.0 billion principal, $985.5 million net carrying value, with an estimated fair value of approximately $1,419.7 million at June 30, 2026; the initial conversion price is approximately $217.60 per share and the capped call cap price $322.38.

Acquisitions. During the six months ended June 30, 2026 the company entered into three purchase agreements accounted for as business combinations, none of which it considers material individually or in aggregate. Aggregate purchase price was $191.5 million, consisting of $98.5 million in cash net of cash acquired, $14.3 million of deferred acquisition holdback payments and the issuance of 796,509 restricted shares of Class A common stock. The consideration was allocated $11.5 million to intangible assets and $178.7 million to goodwill, on preliminary purchase price allocations; none of the goodwill is deductible for tax. Goodwill rose to $706.7 million at June 30, 2026 from $530.6 million at December 31, 2025. This compares with three agreements totaling $178.4 million in 2025 and one in 2024. The second quarter results release names one acquisition among its second quarter and recent business highlights: Adaptive ML, described as a frontier AI startup developing a Reinforcement Learning Operations platform, acquired to accelerate Datadog AI Research's work on world models and agentic LLM post-training for observability. No purchase price is disclosed for that transaction individually.

Product and other developments in the period. The company launched more than 100 new capabilities at its DASH 2026 conference in June, including fully autonomous Bits AI for end-to-end incident detection, investigation and remediation; AI Guard, which protects AI agents against prompt injection and poisoning; Bring Your Own Cloud for deploying Datadog inside customer environments; and Bits Agent Builder for building custom AI agents. Bits Code, Bits Chat and Bits Agent Builder reached general availability. The company was named a Leader in the 2026 Gartner Magic Quadrant for Observability Platforms, its sixth consecutive year in that position. Earlier in 2026 it achieved FedRAMP High certification for Datadog for Government, brought GPU Monitoring, Datadog Experiments, the Bits AI Security Analyst and its MCP Server to general availability, and entered a strategic partnership with Sakana AI focused on enterprise AI adoption initially in Japan (first quarter 2026 results release, Form 8-K dated May 7, 2026, accession 0001628280-26-031677). The company began using foreign currency forward contracts designated as cash flow hedges to reduce volatility in operating expenses denominated in currencies other than the dollar, a change from fiscal 2025, when it held no hedges; an estimated $(3.3) million of net losses in accumulated other comprehensive income is expected to be reclassified into earnings within the next twelve months.

Governance in the period. The Delaware-to-Nevada conversion took effect at 11:59 p.m. Eastern on April 21, 2026, approved by 332,195,858 votes for against 199,605,477 votes opposed with 351,779 abstentions, Class A and Class B voting together (Form 8-K dated April 21, 2026, accession 0001193125-26-168261). At the annual meeting on June 15, 2026, stockholders elected Olivier Pomel, Dev Ittycheria, Shardul Shah and Ami Vora as Class I directors, approved named executive officer compensation on an advisory basis, ratified Deloitte & Touche LLP as auditor for the year ending December 31, 2026, and rejected a shareholder proposal to adopt a simple majority voting provision by 296,078,084 votes against to 217,163,770 for (Form 8-K dated June 15, 2026, accession 0001628280-26-043590). Dominic Phillips was appointed a Class II director on February 26, 2026, expanding the board from ten to eleven members, with his initial restricted stock unit grant raised from $400,000 to $600,000 (Form 8-K dated February 26, 2026, accession 0001628280-26-013236). During the quarter, 871,473 shares of Class B stock converted into Class A.

Subsequent events

The Form 10-Q for the quarter ended June 30, 2026 (accession 0001628280-26-054458) contains no separate subsequent-events note. The post-period matters it and the concurrent results release disclose are set out below.

Reduced usage from the largest customer, beginning in the third quarter of 2026. This is the most consequential post-period disclosure. In both its discussion of the dollar-based net retention rate and its revenue comparisons for the quarter and the half, management states that Datadog saw a reduction in usage from its largest customer, which it identifies as part of its AI-native cohort, starting in the third quarter of 2026, and that this may cause a deceleration in revenue growth.

Guidance for the third quarter and full year 2026, issued August 6, 2026. For the third quarter of 2026, revenue of $1.135 billion to $1.145 billion, non-GAAP operating income of $260 million to $270 million, and non-GAAP net income per share of $0.63 to $0.65 on approximately 378 million weighted average diluted shares. For the full year 2026, revenue of $4.45 billion to $4.47 billion, non-GAAP operating income of $1.01 billion to $1.03 billion, and non-GAAP net income per share of $2.50 to $2.54 on approximately 376 million weighted average diluted shares. The company did not reconcile the non-GAAP guidance to GAAP, citing the variability of stock-based compensation and employer payroll taxes on equity awards (Form 8-K dated August 6, 2026, accession 0001628280-26-053829).

Convertible notes. The conditional conversion features of the 2029 Notes were not triggered during the quarter ended June 30, 2026, so the notes are not convertible at holders' option from July 1 through September 30, 2026 and were classified as non-current liabilities at June 30, 2026. The company may not redeem the notes before December 6, 2027.

Litigation. The company reports no current legal proceeding it believes will have a material adverse effect on its financial position or results of operations, and discloses no post-period litigation outcome.

No acquisition or divestiture agreement, financing, borrowing or litigation settlement is disclosed as having been entered into after June 30, 2026.