Datadog stock tumbles 19% despite earnings beat

Investing.com -- Datadog Inc. (NASDAQ: DDOG) reported third-quarter results that exceeded analyst expectations, but shares fell 19% premarket.

The observability and security platform provider posted adjusted earnings per share of $0.81, beating the analyst consensus of $0.64 by $0.17. Revenue reached $1.20 billion, surpassing the $1.14 billion estimate and representing 35% growth YoY from $885.7 million in the prior-year period.

However, the company's fourth-quarter revenue guidance of $1.19 billion to $1.20 billion disappointed investors. The midpoint of $1.195 billion falls below the current quarter's $1.20 billion, suggesting sequential decline. Analysts expect fourth-quarter revenue of $1.2 billion. The company expects fourth-quarter adjusted EPS of $0.69 to $0.71, above the consensus estimate of $0.64.

For full year 2026, Datadog projects revenue of $4.515 billion to $4.525 billion, with the midpoint of $4.52 billion above the consensus estimate of $4.48 billion. Full-year adjusted EPS guidance of $2.73 to $2.75 also exceeded the $2.53 consensus, with a midpoint of $2.74.

"Datadog delivered a strong third quarter, with 35% year-over-year revenue growth, $290 million in operating cash flow, and $251 million in free cash flow," said Olivier Pomel, co-founder and CEO. "We are seeing strong adoption across our platform as customers scale their digital operations and use of AI."

The company reported approximately 4,860 customers with annual recurring revenue of $100,000 or more, up 20% from about 4,060 customers a year ago. Operating cash flow for the quarter was $290 million, with free cash flow of $251 million.

Datadog's adjusted operating margin reached 28% in the third quarter, compared to 23% in the same period last year.

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