Datadog (NASDAQ:DDOG) shares soared approximately 10% in Tuesday morning trading after the observability and security platform reported fourth-quarter results that decisively cleared Wall Street's bars.
The New York-based company reported quarterly revenue of $953 million, a 29% increase year-over-year, as enterprises accelerated their migration to the cloud to support generative AI workloads.
The highlight of the report was the company’s explosive efficiency.
Datadog reported its first-ever year of $1.05 billion in operating cash flow, with free cash flow reaching $915 million for 2025.
This financial strength was supported by a 31% surge in high-value customers—those with an annual recurring revenue (ARR) of $1 million or more—which climbed to 603 by year-end.
While the company’s full-year 2026 profit outlook leaned slightly conservative, its revenue guidance signaled continued market share gains.
Datadog expects 2026 revenue between $4.06 billion and $4.10 billion, representing roughly 20% growth.
Despite the lighter-than-expected EPS guidance of $2.08 to $2.16—attributed to increased R&D investments in security and AI "Bits" agents—investors focused on the massive beat in the current quarter and an optimistic Q1 revenue forecast that exceeded consensus by over $20 million.