Date: 2026-04-03 Quarter: Q4 FY25 (Dec-2025) Earnings Date: 2026-02-10 Market cap: $41.9B | EV/TTM Rev: 11.2x | Revenue growth: 29.2% YoY
Datadog delivered its best quarter in two years — $953M revenue at 29.2% YoY growth, accelerating for the fourth consecutive quarter, with record bookings of $1.63B (+37% YoY) and record FCF of $291M. The non-AI-native re-acceleration from 20% to 23% in Q4 is the most important signal in the report: this is not a one-dimensional AI story. FY26 guidance of 4.06B−4.10B looks deliberately conservative given the structural 4.3% beat pattern and record bookings pipeline. The stock is mispriced at 11.2x EV/TTM Revenue with accelerating 29% growth.
Conviction: 4/5. Q1 FY26 is the catalyst — a 4%+ beat would imply ~31% YoY growth, the first 30%+ quarter since Q1 FY23. Not 5/5 because of largest-customer concentration opacity and SBC at 22% of revenue growing faster than the topline.
| Criterion | Threshold | DDOG Q4 FY25 | Verdict |
|---|---|---|---|
| Revenue YoY growth | >30% (>40% preferred) | 29.2% (accelerating, 4th straight quarter) | Borderline PASS — trajectory points to 30%+ in Q1 FY26 |
| Gross margin | >60% (>70% preferred) | 80.4% GAAP / 81.4% Non-GAAP | PASS |
| Revenue per quarter | >$50M | $953.2M | PASS |
| Data availability | 4+ quarters in DB | 16 quarters | PASS |
| Share dilution | <10% annual | 1.3% (360.9M -> 365.5M) | PASS |
| GAAP profitability trajectory | Improving or positive | FY25 GAAP net income $108M (+120% YoY) | PASS |
Gate result: PASS. Revenue at 29.2% is 0.8pp below the 30% hard threshold but every leading indicator — bookings, customer adds, NRR, AI adoption — points to imminent crossover. Applying the structural beat pattern to Q1 FY26 guide yields ~31% YoY.
| Factor | Rating | Detail |
|---|---|---|
| Growth | Strong | 29.2% YoY Q4 FY25, accelerating 4 consecutive quarters from 24.6% trough. FY25 $3.43B (+28% YoY). FY26 guide $4.08B midpoint (19%), but structural beats suggest 24-26% actual. |
| Trajectory | Accelerating | YoY: 24.6% -> 28.1% -> 28.4% -> 29.2%. Bookings +37% outpacing revenue by 8pp — classic bullish leading divergence. $1M+ customer growth at 31% YoY, also ahead of revenue. |
| Margins | High | GAAP GM 80.4%, Non-GAAP GM 81.4%, Non-GAAP op margin 24.1%, FCF margin 30.5% (Q4). Rule of 40: 60 (Q4 — 29.2% + 30.5%). TTM FCF $915M at 27% margin. |
| Dominance | Dominant | #1 observability platform. 120% NRR. 84% multi-product adoption. 48% Fortune 500 as customers. 14/20 top AI companies. Forrester Wave Leader. No layoffs in company history. S&P 500 member. |
| Valuation | Fair | EV/TTM Rev 11.2x at 29% growth (0.38x growth-adjusted). EV/TTM FCF 42x. Non-GAAP P/E 58x. Below 2-year average (~15-16x revenue). Cheaper than CRWD (18.8x, 22% growth). |
| Special | Present | (1) Bookings +37% YoY = strongest forward indicator. (2) Structural 4.3% beat pattern on 8 consecutive quarters. (3) FY26 guide de-risks largest customer — any stabilization is free upside. (4) Agentic AI tailwind (MCP server 11x QoQ, AI SRE 2,000+ customers in month 1). |
| | Q223 | Q323 | Q423 | Q124 | Q224 | Q324 | Q424 | Q125 | Q225 | Q325 | Q425 | | | Jun-23 | Sep-23 | Dec-23 | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---|---|---|---| | Revenue ($m) | 510 | 548 | 590 | 611 | 645 | 690 | 738 | 762 | 827 | 886 | 953 | | YoY % | 25.5 | 25.4 | 25.6 | 26.9 | 26.7 | 26.0 | 25.1 | 24.6 | 28.1 | 28.4 | 29.2 | | QoQ % | 5.8 | 7.5 | 7.7 | 3.7 | 5.6 | 6.9 | 6.9 | 3.2 | 8.6 | 7.1 | 7.6 | | Incr Rev QoQ ($m) | 27.8 | 38.0 | 42.1 | 21.7 | 34.0 | 44.7 | 47.7 | 23.9 | 65.2 | 58.9 | 67.5 | | Gross Margin [GAAP] | 80.0% | 81.1% | 82.2% | 82.0% | 80.9% | 80.0% | 80.5% | 79.3% | 79.9% | 80.1% | 80.4% | | Non-GAAP Op Margin | 21.0% | 24.0% | 28.0% | 27.0% | 24.0% | 25.0% | 24.0% | 22.0% | 20.0% | 23.0% | 24.1% | | GAAP Net Income ($m) | -4.0 | 22.6 | 54.0 | 42.6 | 43.8 | 51.7 | 46.9 | 24.6 | 2.6 | 33.9 | 46.6 | | Non-GAAP EPS | -- | -- | -- | -- | $0.43 | $0.46 | $0.49 | $0.46 | $0.46 | $0.55 | 0.59||FCF(m) | 142 | 138 | 201 | 187 | 144 | 204 | 241 | 244 | 165 | 214 | 291 | | FCF Margin | 27.8% | 25.2% | 34.1% | 30.6% | 22.3% | 29.6% | 32.7% | 32.0% | 20.0% | 24.2% | 30.5% | | SBC ($m) | 118 | 123 | 128 | 135 | 135 | 142 | 159 | 164 | 181 | 201 | 205 | | Shares (M) | 322 | 351 | 408 | 356 | 357 | 358 | 361 | 363 | 359 | 362 | 366 |
| FY22 | FY23 | FY24 | FY25 | |
|---|---|---|---|---|
| Revenue ($m) | 1,675 | 2,128 | 2,684 | 3,427 |
| YoY % | -- | 27.1% | 26.1% | 27.7% |
| FCF ($m) | 354 | 598 | 776 | 915 |
| FCF Margin | 21.1% | 28.1% | 28.9% | 26.7% |
| SBC ($m) | 363 | 482 | 570 | 751 |
| SBC % of Rev | 21.7% | 22.6% | 21.2% | 21.9% |
Context: This is Atlas's first earnings-review for DDOG. "Prior Beliefs" are constructed from Q3 FY25 results, Q4 FY25 guidance (912M−916M midpoint), and the established beat pattern.
| Metric | Expected | Actual | Verdict |
|---|---|---|---|
| Revenue | $950-955M | $953.2M (+29.2% YoY) | In-line — structural beat intact at 4.3% |
| Gross margin [GAAP] | ~80-81% | 80.4% | In-line |
| Non-GAAP op margin | 23-24% | 24.1% | In-line, top of range |
| FCF | $240-260M | $291M (30.5%) | Beat — record, well above expectations |
| $100K+ customers | 4,100-4,200 | 4,310 (+19% YoY) | Beat — net adds accelerating (250 vs. 210 in Q3) |
| $1M+ customers | 570-585 | 603 (+31% YoY) | Beat — 31% growth, fastest rate in available history |
| NRR | 118-120% | ~120% | In-line — stable, refuting near-term deflationary thesis |
| FY26 guide | $3.9-4.0B | 4.06B−4.10B ($4.08B mid) | Beat — higher than expected |
| Bookings | No expectation (new disclosure) | $1.63B (+37% YoY, record) | Positive surprise — first disclosure, 8pp ahead of revenue |
| Non-AI-native growth | 20-22% (stable) | 23% (accel from 20%) | Positive surprise — broad-based re-acceleration confirmed |
| AI metrics | Growth expected | 5,500+ AI customers, 650 AI-native, 19 at $1M+, AI SRE 2,000+ in 1 month | Positive surprise — product velocity faster than expected |
Three things surprised me:
Bookings disclosure and magnitude. 1.63Bat + 3710M TCV and 2 deals >$100M TCV show enterprise deal size expansion. This is a durable bookings backlog that de-risks H1 FY26 revenue.
Non-AI-native re-acceleration. Growth in the non-AI customer base jumped from 20% to 23% in one quarter. Management raised this unprompted in prepared remarks — they wanted the market to see it. This rebuts the narrative that DDOG is a one-trick AI pony. The base business is genuinely re-accelerating, likely driven by cloud migration resumption and multi-product expansion within existing accounts.
Customer cohort acceleration. $1M+ customers grew 31% YoY — accelerating sharply from 17% in Q4 FY24. $100K+ net adds hit 250, the highest quarterly add in the dataset. Both cohorts are growing faster than revenue, which means upmarket traction is pulling the average deal size higher. This is the opposite of what a deflationary-architecture narrative predicts.
What did NOT surprise me: Revenue was dead-in-line with the beat pattern. Margins were stable. NRR held. These are signs of consistency, not inertia — the model is predictable and compounding.
| Indicator | Value | vs. Revenue (29.2%) | Direction | Quarters Sustained |
|---|---|---|---|---|
| Bookings | +37% YoY ($1.63B record) | +7.8pp ahead | New disclosure — first data point | 1 (new) |
| $1M+ ARR customers | +31% YoY (603) | +1.8pp ahead | Accelerating (was +17% in Q4 FY24) | 4+ quarters of acceleration |
| $100K+ ARR customer net adds | 250/quarter | Accelerating (210 in Q3, 120 in Q4 FY24) | Accelerating | 3 quarters |
| NRR | ~120% | Stable | Stable — refutes deflationary thesis | At least 1 (first disclosure) |
| AI SRE agent adoption | 2,000+ in month 1 | N/A (new product) | New product signal | 1 (new) |
| MCP server tool calls | 11x QoQ | N/A (new product) | Parabolic early adoption | 1 (new) |
Assessment: Bookings growing 37% vs. revenue 29% is an 8pp gap — a classic leading indicator of sustained revenue acceleration or at minimum revenue growth holding in the high-20s for the next 2-3 quarters.
Nothing in the leading indicators suggests deceleration. The non-AI-native growth re-acceleration from 20% to 23% is especially important — the base business is accelerating independently of the AI narrative.
Scuttlebutt was conducted on 2026-04-02 (see stages/scuttlebutt/DDOG/2026-04-02.md for full sourcing).
| Metric | Current | ~1Y Ago (est.) | Peer Median (est.) | Assessment |
|---|---|---|---|---|
| EV/TTM Revenue | 11.2x | ~16x | ~8-10x (DT/observability) | Fair — premium to point observability, discount to historical |
| EV/TTM Gross Profit | 14.0x | ~20x | ~12-14x | Fair |
| EV/TTM FCF | 42.0x | ~60-70x | ~35-45x | Fair |
| P/E Non-GAAP (TTM) | 58x | ~70-80x | ~40-50x | Slightly rich — improving as earnings grow |
| Market cap | $41.9B | ~$45-50B | -- | Down ~15% from 1Y ago despite acceleration |
Growth-adjusted: EV/Rev / Growth% = 0.38. Rule of 40 (Q4) = 60. PEG = 2.0. Stock at lowest multiple in 2+ years while growth at highest in 2 years. Market pricing the 19% FY26 guide, not the ~25% likely actual.
Secular tailwinds: Cloud migration (48% Fortune 500 at <$500K median — expansion runway), AI/agentic computing (5,500+ AI customers, MCP server 11x QoQ), security convergence (Cloud SIEM, Bits AI Security).
Platform assessment: True platform. Three pillars each >$1B ARR. 20+ products. 84% multi-product. 800+ integrations, OTel, MCP server.
TAM: Observability ~2.9B(2025)−> 6.9B (2031). Realistic TAM $15-20B. Penetration ~15-20%.
Position disclosure: Atlas holds no positions.
Analysis date: 2026-04-03. Data as of Q4 FY25 (Dec-2025). Price ~$119.50.