---
title: "Datadog grew revenue 35%, beat every line, and still lost 11% on a flat December guide"
description: "A 35% growth quarter and an 81-cent beat could not survive a December outlook of flat revenue at a thinner margin. The unnamed AI whale that renewed a nine-figure contract and then cut its usage is the number doing the damage."
publisher: "The Inference"
section: "Platforms"
published: 2026-11-04T15:02:20.113Z
modified: 2026-11-04T15:02:20.113Z
canonical: https://theinference.org/article/datadog-grew-revenue-35-beat-every-line-and-still-lost-11-on-a-flat-december-guide
language: en
keywords: "Earnings, Guidance, Observability, Cloud Software, Stock Moves"
---

# Datadog grew revenue 35%, beat every line, and still lost 11% on a flat December guide

> A 35% growth quarter and an 81-cent beat could not survive a December outlook of flat revenue at a thinner margin. The unnamed AI whale that renewed a nine-figure contract and then cut its usage is the number doing the damage.

## Every line beat, and the ticker fell anyway

[Datadog](https://theinference.org/markets/companies/datadog), the New York company whose software watches everyone else's software, [filed third-quarter results](https://www.sec.gov/Archives/edgar/data/1561550/000162828026069792/0001628280-26-069792-index.htm) before the open on November 4 and beat on everything that counts [1][2]. Revenue of $1.20 billion grew 35% from a year earlier [3]. Adjusted earnings of 81 cents a share cleared the 64 cents that 11 analysts polled by Zacks Investment Research expected, and revenue topped the $1.14 billion forecast [3].

Free cash flow was $251 million, up from $214 million a year earlier, and the count of customers spending $100,000 or more a year rose to about 4,860 from about 4,060 [1]. By 7:25 that morning the stock was down 10.9% [3].

## The raise nobody counted

Datadog [lifted full-year revenue guidance to $4.515–4.525 billion from $4.45–4.47 billion](https://www.tikr.com/blog/datadog-fell-nearly-12-in-a-week-wedbush-still-expects-a-beat-and-raise-on-november-4), about $65 million more at the midpoints [1][4]. On its own terms, that is the beat-and-raise the sell side asked for.

## The December guide is the flat line

Then came the December quarter: [revenue of $1.19–1.20 billion, level with the $1.197 billion just reported, and adjusted operating income of $280–290 million](https://www.globenewswire.com/news-release/2026/11/04/3395166/0/en/datadog-announces-third-quarter-2026-financial-results.html), a margin of about 24% on the guide's midpoints against the 28% just delivered [1]. [Investor's Business Daily read the quarter as a beat with flat sequential growth ahead](https://finance.yahoo.com/m/0385e72d-8516-3776-8039-5718d51dd27b/datadog-earnings-top-views-.html), and that is exactly what the market sold [5].

*Chart: **The December quarter Datadog guided stops the revenue climb flat** Column chart of Datadog quarterly revenue from Q4 2025 through the Q4 2026 guidance midpoint, rising from $0.953B to $1.197B and then flattening at the guided $1.195B midpoint.*

*Quarterly revenue from Datadog's SEC filings; the Q4 2026 figure is the midpoint of the guided $1.19–1.20 billion range, shown as a company projection. Sources: Datadog 8-K and quarterly filings, November 4, 2026. [1][7]*

*Chart: **The margin inside the December guide is thinner than the margin the release touts** Bars chart on one adjusted basis ranking Datadog non-GAAP operating margin: 23% in Q3 2025, 28% in Q3 2026, and about 23.8% implied by the Q4 2026 guidance midpoints, the guided figure marked as an estimate.*

*All three bars are non-GAAP operating margin. Q3 2025 and Q3 2026 are reported. The Q4 2026 figure is computed from the guided ranges: the $285 million midpoint of the guided $280–290 million non-GAAP operating income divided by the $1,195 million midpoint of the guided $1.19–1.20 billion revenue, 285 ÷ 1,195 = 23.8%. Source: Datadog 8-K, November 4, 2026. [1]*

## The margin the highlights skip

The 8-K tables carry what the release's highlights do not [1]. GAAP operating income was $75 million, a 6% margin, against $334 million, or 28%, on the adjusted basis; the gap is mostly $237 million of stock compensation in the quarter, after a $750.7 million bill for all of 2025 [1][4]. Cash generation still works but is cooling: free cash flow margin was 21% in the quarter, down from 24% a year earlier [1].

*Chart: **Free cash flow rose for two years; the last two quarters are flat** Line chart of Datadog quarterly free cash flow from Q2 2024 through Q3 2026, rising from $144 million to about $291 million in Q4 2025 and easing to $251 million in Q3 2026.*

*Quarterly free cash flow from Datadog's SEC filings, in billions of dollars. Sources: Datadog quarterly filings, retrieved November 4, 2026; Datadog 8-K, November 4, 2026. [10]*

## The customer Datadog will not name

The company knows who flattens a guide and does not name it. Its largest customer, a leading AI company that uses 17 Datadog products, [renewed a nine-figure contract and then began cutting usage in the third quarter](https://finance.yahoo.com/markets/stocks/articles/datadog-q3-earnings-whats-cards-170300368.html), and that decline is already inside the December number [6].

The rest of the book is speeding up around it: revenue from customers outside AI-native companies, meaning firms that do not build their own products on AI models, grew from 18% a year earlier to the high 20s in the second quarter [4]. So the plain fact under the selling is this: Datadog's largest customer is cutting usage while every other group of its customers is accelerating.

## Conservatism or ceiling

Wedbush, the analyst firm that covers Datadog, went into the print expecting another beat-and-raise after a week in which the stock fell nearly 12% on AI-spending fears and not one analyst estimate moved [4]. The beat arrived, the raise arrived, and the stock still answered the bears [3]. [Palantir](https://theinference.org/markets/companies/palantir), the data-analytics software maker, fell 6% a day earlier on the same shape of quarter, a beat and a raised outlook sold down on slowing sequential growth [9].

The bulls' case: the big customer's cut is already in the number, and Datadog has beaten the top of its own revenue guidance by $37 million to $45 million in each of the last three quarters [4]. The bears' case: the flat line itself, at about 82 times forward earnings, below a five-year average of 104 but priced for acceleration all the same [4].

## What settles it

The December-quarter report, due in early February, and one number inside it: whether growth from customers outside AI-native companies holds in the high 20s [4]. Watch the sector too, because [Oracle](https://theinference.org/markets/companies/oracle)'s $20 billion financing filing and data-center bills compressing free cash flow at [Alphabet](https://theinference.org/markets/companies/alphabet) and [Amazon](https://theinference.org/markets/companies/amazon) set the mood Datadog trades in [8].

A quarter that beats on every line and still drops 11% is the market saying the story has changed: the whale is cut, the base has to carry the multiple, and the December guide says it is not carrying it yet [3][4].

## Takeaway

Datadog beat every line and raised the full year, but a December guide of flat revenue at a thinner margin, shaped by its largest AI customer cutting usage, was what the market priced.

## Sources

1. [SEC EDGAR, Datadog, Inc. Form 8-K with Exhibit 99.1 press release, 4 November 2026](https://www.sec.gov/Archives/edgar/data/1561550/000162828026069792/0001628280-26-069792-index.htm)
2. [GlobeNewswire, Datadog Announces Third Quarter 2026 Financial Results, 4 November 2026](https://www.globenewswire.com/news-release/2026/11/04/3395166/0/en/datadog-announces-third-quarter-2026-financial-results.html)
3. [Associated Press via Yahoo Finance, Datadog: Q3 Earnings Snapshot, 4 November 2026](https://finance.yahoo.com/markets/stocks/articles/datadog-q3-earnings-snapshot-121256404.html)
4. [TIKR.com, Datadog Fell Nearly 12% in a Week. Wedbush Still Expects a Beat-and-Raise on November 4, 3 November 2026](https://www.tikr.com/blog/datadog-fell-nearly-12-in-a-week-wedbush-still-expects-a-beat-and-raise-on-november-4)
5. [Investor's Business Daily via Yahoo Finance, Datadog Earnings Top Views. Shares Plunge On Weak Sales Outlook., 4 November 2026](https://finance.yahoo.com/m/0385e72d-8516-3776-8039-5718d51dd27b/datadog-earnings-top-views-.html)
6. [Zacks Equity Research via Yahoo Finance, Datadog Before Q3 Earnings: What's in the Cards for the Stock?, 2 November 2026](https://finance.yahoo.com/markets/stocks/articles/datadog-q3-earnings-whats-cards-170300368.html)
7. [Datadog quarterly revenue and free cash flow from its SEC filings, retrieved 4 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001561550)
8. [Upside via Yahoo Finance, Cloudflare, MongoDB, Datadog, JFrog, and Elastic shares plummet, what you need to know, 3 November 2026](https://upside.pandobit.com/en/news/2026/11/cloudflare-mongodb-datadog-jfrog-and-elastic-shares-plummet-what-you-need-to-1128357/)
9. [24/7 Wall St., Palantir Falls 6% Despite Earnings Beat and Raised Outlook; Datadog Drops 3%, Snowflake Slides 2%, 3 November 2026](https://247wallst.com/investing/2026/11/03/palantir-falls-6-despite-earnings-beat-and-raised-outlook-datadog-drops-3-snowflake-slides-2/)
10. [Datadog, quarterly figures from its SEC filings, retrieved 4 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001561550)


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Datadog grew revenue 35%, beat every line, and still lost 11% on a flat December guide — The Inference. Canonical: https://theinference.org/article/datadog-grew-revenue-35-beat-every-line-and-still-lost-11-on-a-flat-december-guide