Datadog, Inc. (NASDAQ:DDOG) reported a 35% increase in third-quarter 2026 revenue to $1.20 billion, supported by growing adoption of its observability and security platform as businesses expand their digital infrastructure and artificial intelligence operations.
For the quarter ended September 30, 2026, the company recorded GAAP operating income of $75 million, representing a 6% operating margin. Non-GAAP operating income reached $334 million, with an adjusted operating margin of 28%.
GAAP diluted earnings per share were $0.32, while non-GAAP diluted earnings per share reached $0.81.
Cash Flow and Customer Growth
Datadog generated $290 million in operating cash flow and $251 million in free cash flow during the quarter. Cash, cash equivalents and marketable securities totalled $5.2 billion at September 30.
The company reported approximately 4,860 customers generating annual recurring revenue of at least $100,000, an increase of 20% from approximately 4,060 a year earlier.
“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 chief executive officer.
“We are seeing strong adoption across our platform as customers scale their digital operations and use of AI,” he added.
AI Development and Product Expansion
Datadog continued expanding its artificial intelligence capabilities, introducing Scout 1.0, a specialised AI model designed to investigate production incidents.
The model, currently in preview, supports the company’s Bits Investigation functionality and is intended to improve incident response while reducing computational costs.
Datadog also received a Leader designation in the 2026 Forrester Wave for AIOps Platforms for the second consecutive year and was recognised as the “Company to Beat” in Gartner’s 2026 AI Vendor Race report covering observability platforms.
Fourth-Quarter and Full-Year Outlook
For the fourth quarter of 2026, Datadog expects revenue between $1.19 billion and $1.20 billion, with non-GAAP operating income of $280 million to $290 million.
The company forecasts adjusted diluted earnings per share between $0.69 and $0.71.
For the full year, Datadog expects revenue of $4.515 billion to $4.525 billion and non-GAAP operating income between $1.095 billion and $1.105 billion.
Full-year adjusted diluted earnings per share are projected at $2.73 to $2.75.
The company has not provided GAAP reconciliations for its forward-looking adjusted earnings measures, citing uncertainty surrounding items including stock-based compensation and related payroll taxes.
Outlook for Datadog
Datadog’s third-quarter results reflected continued demand for its monitoring, security and AI-related products, alongside growth in higher-value customer accounts.
The company’s $5.2 billion liquidity position and positive free cash flow provide financial resources to support further investment in product development.
Investors will be monitoring customer expansion, adoption of new AI capabilities and operating margins as Datadog works towards its full-year revenue target of approximately $4.52 billion.