Datadog Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Appreciate it. Congratulations on the spectacular results and the showing of sequential improvement across the board. Oliver, I had a question for you. We've talked about GPU monetization versus CPU monetization. So how closer are we to the point where you can confidently expand and get your share of the customer wallet when it comes to whether it's training workload, inferencing workload on the GPU clusters, which are becoming more prevalent and increasingly a larger part of the compute build-out in the future? That's it from me.

Question: Raimo Lenschow - Barclays Services Corp - Analyst : Perfect. Congrats from me as well. That sounded like an amazing quarter and nice to see it coming together. The -- on the AI side, and I don't want to talk about the customer, but more the other ones, like 15 customers over 1 million. That's like a big number and 100 over 100,000. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 1:00PM, DDOG.OQ - Q3 2025 Datadog Inc Earnings Call How do we have to think about the nature of those? Is this kind of -- are that kind of especially the bigger ones of those kinds of model builders, but then even 15 is a big number. And over 100 sounds like this whole new application world that we've all been kind of waiting for starting to come together. Is that kind of what's going on there? Because it does sound quite exciting and much more broader than we thought.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : You had mentioned the expansion of the contract with your largest AI native customer. And I believe you said better economics for a higher commitment. Can you speak to that because I would assume a higher commitment would carry a volume-based discount. I'm just trying to understand if for some reason, if that was not the case here, what did you mean by better economics and then I have a quick follow-up.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Okay. And the -- what -- so the better economics part of it is just where it's going to be netting out like 12 months down the road? Is that what you mean?

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Okay. And then as a quick follow-up, Olivier, the acceleration that you saw in the security growth is pretty noticeable too. We recall, I think about six months ago, you had ramped up and engaged a lot more of a channel partners, which is a key ingredient, to grow in the security business. Is there a function of that? Or is there a mindset change happening out there where customers want observability to be the central point of collection so that all the security teams and the ops teams are working with the same set of metrics and logs and tracers?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Olivier, I'll start with you and I have a follow-up for Dave. On the OnCall product, Oli, how do Agentic advancements in general, detract or enhance the value proposition here? And I'm very simplistically thinking about the core nature and value proposition of the OnCall product intelligently routing requests for remediation, right? So how you just broader advancements in AI help beef up and detract your ability to monetize this product? And then just a follow-up for David, please.

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Appreciate that. David, on net retention rates, why aren't we necessarily seeing more upward pressure on the metric, just given the strength of expansionary bookings that you alluded to in the quarter from the installed base. And I mean I suspect it's because it's a trailing 12-month metric. But any directional color you can just share on that. And any high-level commentary on some of the non-AI native net retention rate trend behavior?

Question: Gray Powell - BTIG LLC - Analyst : Congratulations on the great results. So maybe just like taking a step back, if we go back to the beginning of the year, Datadog was expecting 19% revenue growth. It looks like you're tracking to something over 26% growth now, and that's just the high end of your guidance. So I guess my question is, what surprised you the most this year? And then just how do you feel about the sustainability of those drivers as you look forward? .

Question: Koji Ikeda - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Just one from me here. I wanted to ask a question on the inflection in the non-AI native growth and how to think about the area2s of strength in this cohort. Is it coming from your largest enterprises? Is it coming from a certain type of customer? Is there a common theme in the workloads that you're seeing or the products that are being added on that is driving that strength? Or is it just really just broad-based? What I'm trying to get out here is I'm really trying to understand more the durability of this growth of collection.

Question: Ittai Kidron - Oppenheimer & Co Inc - Analyst : Congrats guys. Really great numbers. Oli, your answer to one of the questions and kind of going into the drivers behind the upside. You've talked about sales capacity increase. You didn't talk much about sales efficiency. Is there a way you can give us some color on where do you stand on percent of salespeople that are hitting quota, where does that ratio stand relative to historical patterns for you guys? And as you approach '26 year, do you anticipate any material changes in the comp structure just given the breadth of product and the list of opportunities, how do you get people focused?

Question: Andrew Sherman - Cowen and Company LLC - Analyst : Great. Congrats. I know you have a team focused on the Fortune 500, where there's still a lot of white space for you. Curious to hear how the team is ramping to productivity that help drive some of the strong new logo bookings and can this contribute even more next year?

Question: Alex Zukin - Wolfe Research LLC - Analyst : And congrats on dropping some truly inspiring quotes in the script. Maybe Oli, one for you and then I have a quick follow-up for David. Just the duration of this acceleration of the non-AI cohort. It seems like from all your forward-looking metrics, whether it's billings, RPO, CRPO. Those were, again, really, really strong how long do you think we should think about the duration of this trend of this non-AI acceleration?

Question: Alex Zukin - Wolfe Research LLC - Analyst : Okay. And then maybe, David, for you, look, gross profit dollar acceleration while you're seeing your largest customer kind of get better unit economics is also inspiring to see how should we think about the progression of gross margins and gross profit dollar growth, particularly as you continue to also see the AI cohort acceleration. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 1:00PM, DDOG.OQ - Q3 2025 Datadog Inc Earnings Call

Question: Mike Cikos - Needham & Company LLC - Analyst : I just wanted to come back to it, Oli, for the non-AI native strength, I know we've kind of hit on this a number of times, whether it's road map sales capacity execution, but like kudos on the numbers here? I'm just trying to get a better sense of the why now. Is it just a composite of all those different pieces clicking together this quarter? Or is there anything more to impact there? And then I have a follow-up for David.

Question: Mike Cikos - Needham & Company LLC - Analyst : Awesome. Awesome here. Okay. And then for the follow-up to David. David, I don't want to take anything away from the Q3 results you guys just posted, and we obviously have the strong guide here for Q4. But I just can imagine myself a month from now starting to get inbounds from certain REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2025 / 1:00PM, DDOG.OQ - Q3 2025 Datadog Inc Earnings Call folks asking about the holiday season and the fact that we have the holidays landing on weekdays in Q4 here. Can you just kind of discuss how you thought about constructing guidance for this Q4 year?

Question: Karl Keirstead - UBS AG - Analyst : Okay. Great. I'll ask one for David and one for Olivier. David, first of all, congratulations on the extension of the larger contract, I think everybody on the line is applauding that. I know you're reticent to get into any details, but maybe I could try. Are you able to clarify whether that was a one-year deal or multiyear? And then related to that, David, what is the contribution to CRPO from that deal, which I presume landed in your CRPO number. If it is a one-year deal does the entirety of that contract contribute to the sequential CRPO performance in the quarter? So that's it for you, David. And then Olivier, maybe I'll just ask both at once. Some of the very large AI natives are beginning to diversify to utilizing Oracle's OCI and Stargate. And I'm wondering what's the opportunity for Datadog to essentially follow that behavior and begin scaling on Oracle target or because a lot of what Oracle is doing with the AI native is training clusters, perhaps that near-term opportunity is more limited.

Question: Jake Roberge - William Blair Capital Partners - Analyst : Yes. Just on the recent go-to-market investments, obviously, it seems like there's been a lot of traction thus far with those. So I'm curious if there are any areas like security or the new logos or upmarket that that you could look to lean even deeper into just given the growth that you've seen here.

Question: Jake Roberge - William Blair Capital Partners - Analyst : That's helpful. And then just on the new Bits AI agents, can you just talk about the early feedback that you've gotten for those solutions and maybe how the engagement with those agents as compared to kind of the ramp of security Flex Logs. I know, obviously, much earlier days, but just how it compared when those were still largely in the preview phase?