Datadog, Inc. (DDOG) Business Profile

What it does

Datadog sells cloud-based software that helps organizations monitor and secure their applications and technology infrastructure. Founded in 2010 and headquartered in New York City, the company is led by cofounder and chief executive Olivier Pomel.

Its platform brings together information about servers, applications, networks, user activity and security. Developers and operations teams can use that information to see how systems are performing, investigate problems and coordinate a response. Security teams can also use the platform to identify vulnerabilities and investigate threats.

Customers can use individual products or combine them. Infrastructure Monitoring tracks the systems on which applications run; Application Performance Monitoring follows application performance; and Log Management collects and analyzes records generated by software and systems. Other products monitor user experiences, cloud costs and security, or help teams manage incidents and automate work.

Datadog serves organizations of different sizes and across industries. Its software is designed to work across public and private clouds, customers’ own data centers, and combinations of those environments. A single agent and more than 1,000 integrations collect information from different technologies and present it through a common platform.

The company also sells tools for organizations building AI applications. LLM Observability traces large language model activity, while GPU monitoring tracks the hardware used for AI workloads. Datadog has introduced Scout, a reasoning model optimized for site reliability engineering tasks, which powers investigations by its Bits AI software.

How it makes money

Datadog generates revenue mainly by selling subscriptions to its cloud platform. Most revenue comes from annual subscriptions, although customers can also enter monthly or multi-year agreements. Professional services are generally not needed to implement the software and have produced immaterial revenue.

Customers can commit to a quantity of usage, pay monthly based on usage, or use a combination of commitments and additional consumption. The unit used to measure consumption differs by product. Customers pay for usage above their contractual commitments, and they can also buy additional products or expand the amount of infrastructure and data they monitor.

The company calls its approach land and expand: it seeks to acquire a customer with one or more products and then grow the relationship as that customer monitors more workloads or adopts other products. Customers can add usage themselves. Datadog also sells through partners, including resellers and managed service providers, and through cloud-provider marketplaces.

Revenue from committed usage that is apportioned over a subscription term is generally recognized over that term. Revenue from usage-based subscriptions, commitments delivered as used and usage above a ratable commitment is recognized as customers use the service. As a result, changes in subscription sales or usage need not appear in revenue at the same time.

Revenue was $3,427.2 million for the fiscal year ended December 31, 2025 and $1.2 billion in Q3 2026.

Datadog also offers Bits AI credits for multiple uses of its AI agent. The company says it prices those credits relatively close to inference cost so it can pass efficiency savings to customers.

Customers and how it sells

Datadog serves organizations ranging from smaller businesses to large enterprises, as well as public-sector customers. Its users include developers, operations engineers, security professionals, product teams and business users. Customers buy the platform for tasks ranging from monitoring applications and infrastructure to investigating security issues and understanding user behavior.

Datadog ended Q3 2026 with about 33.5 thousand customers. About 4.86 thousand customers had annual run-rate revenue of $100 thousand or more, and those customers generated about 91% of the company’s annual run-rate revenue. The company defines that measure as the annualized run rate of subscription agreements at a point in time, not as reported revenue.

Datadog’s largest customer reduced its usage in Q3 2026 but remained above its minimum commitment. The company also said it served over 850 AI customers in Q3 2026. Recent wins included a US Federal Defense Agency and Japanese banks modernizing their financial systems.

As of December 31, 2025, Datadog had approximately 32,700 customers in over 160 countries. Regions outside North America accounted for approximately 29% of revenue for the year ended December 31, 2025, based on customer billing addresses. Sales teams cover the Americas, Asia-Pacific, and Europe, the Middle East and Africa. Datadog reaches customers directly and through resellers, system integrators, referral partners and managed service providers.

Suppliers and costs

Datadog delivers its software through the cloud and pays third-party cloud infrastructure providers to host it. Its cost of revenue also includes staff costs for operations and customer support, payment processing fees, information technology, depreciation and amortization, and allocated facilities costs.

Personnel costs are the largest component of operating expenses. They include salaries, benefits, bonuses, stock-based compensation and sales commissions. Research and development spending supports engineering, product design and the operation of the platform; sales and marketing spending includes personnel, promotional activities, free trials and travel. General and administrative costs include staff and professional services.

Cost of revenue increased by $171.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. Datadog attributed the increase primarily to higher third-party cloud infrastructure hosting and software costs, as well as higher personnel costs. Gross margin decreased by 1% over the same comparison, primarily because of increased third-party cloud infrastructure provider costs.

The company expects to continue investing in platform infrastructure and customer support. It also expects research and development, sales and marketing, and general and administrative expenses to increase in absolute dollars as the business grows.

Competitive position

Datadog competes with different vendors across the categories covered by its platform. In on-premise infrastructure monitoring, it names IBM, Microsoft and SolarWinds. In application performance monitoring, it competes with Cisco, New Relic and Dynatrace; in log management, it names Cisco and Elastic. Cloud monitoring competition includes native services from AWS, Microsoft Azure and Google Cloud Platform. Customers can also use home-grown or open-source technologies.

Competition includes the breadth of products and integrations, ease of deployment, performance, security, reliability and total cost of ownership. Datadog says many competitors have greater financial and technical resources, larger sales and marketing organizations, and broader distribution networks.

Our reading: the integrated platform and its common data model are a meaningful potential source of customer retention because teams can use several products together and examine related data in one place. Product adoption supports that case, although the evidence does not establish what customers would pay to switch.

Our reading: the integration library and ability to operate across cloud and on-premise environments support differentiation, but customers have alternatives from cloud providers, specialist vendors and open-source tools. Datadog’s intellectual property also protects its technology, though the company places more emphasis on its people, new features and frequent platform improvements.

Growth opportunities

Datadog plans to add customers by expanding sales and marketing, and to increase sales to existing customers through broader deployments and additional products. Customers can expand as they move workloads to cloud environments, monitor more data or find new uses for the platform.

Existing customers accounted for approximately 75% of the increase in revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. As of December 31, 2025, approximately 55% of customers used four or more products. Datadog plans to keep investing in new capabilities and to evaluate acquisitions and investments that could extend its products and markets.

The company is also pursuing growth outside North America, particularly in Europe, the Middle East and Africa and in Asia-Pacific. It is investing in government sales and expanding its government platform to support Impact Level 5 workloads.

AI is another area of investment. Datadog is developing AI features that automate work on its platform and products that help customers monitor and secure their own AI systems. In Q3 2026, it said Scout was powering Bits investigations, and that agent observability was available through the Anthropic marketplace and the new OpenAI enterprise marketplace.

Datadog sizes its combined opportunity across the IT operations management, security software, application development and analytics platforms markets at $187 billion in 2029.

Structural risks

• Customer renewals and usage: Datadog depends on existing customers renewing subscriptions and buying additional products. Changes in usage and customer spending can affect revenue; its largest customer reduced usage in Q3 2026 while remaining above its minimum commitment.
• Technology and competition: The company must respond to changing technology, customer needs and industry standards. Competitors include cloud providers, specialist vendors and open-source alternatives, and many have greater resources and broader distribution.
• Cloud infrastructure and service delivery: Datadog relies on third-party cloud infrastructure. Security breaches, technical difficulties or interruptions to its platform could affect the delivery and use of its products.
• Economic and spending conditions: Unfavorable industry or global economic conditions, or reductions in technology spending, could limit growth. Customers may also change the timing of purchases or budgets.
• Costs and investment: Datadog expects substantial spending on infrastructure, product development, sales and marketing, and international expansion. The timing and amount of those investments, and its ability to control costs, can affect results.

Bottom line

Our reading

Our reading: Datadog is a subscription software business whose growth relies on customers using more of its monitoring and security platform over time. Its integrated products and extensive connections to customer systems support that model, while competition limits any conclusion about their durability. Revenue is also exposed to changes in large customers’ usage, and delivering the service requires continued spending on cloud infrastructure and personnel.