Datadog Posts Strong Q4 2025 Accelerating Revenue Growth; Issues Upbeat 2026 Guidance (DDOG Q4 2025 Earnings Call)
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Datadog (DDOG) delivered a blockbuster fourth quarter for 2025, significantly beating its revenue targets and demonstrating accelerating growth across its broad-based customer portfolio. The cloud observability leader reported Q4 revenue of $953 million, a 29% year-over-year increase, fueled by robust cloud migration trends, a massive inflection in AI usage, and record sales execution. Alongside its strong quarter, Datadog provided robust full-year 2026 guidance, projecting over $4 billion in revenue as it deepens its platform capabilities and capitalizes on the next wave of AI-driven infrastructure scaling.
Accelerating Broad-Based Growth and Massive Landings
Datadog's fourth quarter showcased the mission-critical nature of its platform, as gross revenue retention remained firmly in the mid-to-high 90s and net revenue retention hovered around 120%. Revenue growth for the company's core customer base (excluding AI-native firms) actually accelerated sequentially from 20% in Q3 to 23% in Q4.
This acceleration was accompanied by record go-to-market execution. Total bookings surged 37% year-over-year to a record $1.63 billion. Datadog signed 18 deals worth over $10 million in Total Contract Value (TCV) during the quarter. Most notably, this included two mega-deals exceeding $100 million and an eight-figure new logo land with one of the world's largest AI foundational model companies.
The company ended the year with approximately 32,700 total customers. Crucially, the number of customers generating $100,000 or more in Annual Recurring Revenue (ARR) grew to 4,310 (up from 3,610 a year ago), representing roughly 90% of Datadog's total ARR. The core product pillars continue to scale massively: Infrastructure monitoring surpassed $1.6 billion in ARR, while both Log Management and Application Performance Monitoring (APM) crossed the $1 billion ARR threshold, with APM serving as the fastest-growing core pillar at a mid-30% year-over-year growth rate.
Expanding AI Dominance and Product Platform
Datadog continues to be the observability platform of choice for the AI revolution. CEO Olivier Pomel noted that 14 of the top 20 AI-native companies are now Datadog customers. The company currently counts roughly 650 AI-native customers, with 19 of them spending over $1 million annually.
Datadog is attacking the AI opportunity from two fronts: "AI for Datadog" and "Datadog for AI." On the product side, the newly launched Bits AI SRE Agent—which accelerates root cause analysis and incident response—saw massive adoption, with over 2,000 trial and paying customers running investigations in the past month alone. Furthermore, Datadog's Model Context Protocol (MCP) server usage exploded, with the number of tool calls growing 11-fold in Q4. For observing the AI stack, Datadog's LLM Observability product now supports over 1,000 customers, with usage jumping 10x over the last six months.
Platform consolidation remains a major tailwind. Datadog ended Q4 with 84% of its customers using two or more products, and an impressive 9% utilizing 10 or more products. The company highlighted dozens of competitive displacements across Log Management and Cloud SIEM, noting nearly 100 deals involving the replacement of legacy logging vendors alone.
Strong Profitability and 2026 Outlook
Datadog’s rapid top-line growth continues to translate into massive cash generation. The company generated $291 million in free cash flow during Q4, achieving a robust 31% free cash flow margin. Non-GAAP operating income came in at $230 million for a 24% margin.
Looking ahead, management remains highly optimistic. For the first quarter of 2026, Datadog guided for revenue between $951 million and $961 million, representing 25% to 26% year-over-year growth. For the full fiscal year 2026, the company expects revenue in the range of $4.06 billion to $4.10 billion (18% to 20% growth) and non-GAAP operating income between $840 million and $880 million. The company emphasized that its guidance implies the core business, excluding its largest customer, will grow by at least 20% for the year, underscoring the broad-based health of its software platform.