AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 29/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Deepening multi-product adoption and issuer-described cross-correlation support an inferred replacement burden across monitoring workflows. This is a credible switching-cost foundation, but migration friction is unmeasured. Standalone capabilities and deployment without heavy implementation limit claims of unavoidable customer lock-in.
durability · 2/4 · Increasing adoption depth and low-120% trailing net retention at June 2026 support persistence. Historical retention deterioration and the largest customer's subsequent usage reduction show spending remains adjustable. Short subscriptions and continuing integration maintenance constrain durability; no supplied evidence establishes protection over an exceptional horizon.
customer dependency · 3/4 · At December 31, 2025, approximately 55% of customers used at least four products and 33% used at least six. Low-120% same-cohort net retention adds strong demonstrated engagement. Operational dependency is inferred from adoption and correlated workflows, rather than directly measured; the largest customer's usage reduction demonstrates flexibility.
erosion resilience · 2/4 · Deeper adoption and renewed usage-led expansion show continued engagement despite historical retention deterioration. Actual outages and the largest customer's usage reduction reveal vulnerabilities. Bundled substitution remains a prospective threat: the passages establish neither broad competitive displacement nor immunity to it, supporting mixed resilience.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · The catalog does not isolate realized price changes, discounts or comparable unit prices. Net retention improvement is explicitly usage-led; revenue growth and enterprise negotiations do not establish achieved pricing in either direction. The largest customer's consumption reduction likewise measures usage, so no realized-pricing grade is supportable.
retention · 3/4 · Trailing 12-month dollar-based net retention in the low-120%'s at June 30, 2026 demonstrates strong existing-cohort expansion, reinforced by broad product adoption. The weighted measure includes expansion net of contraction and attrition, so it is not gross renewal retention. Improvement reflects usage; the subsequent largest-customer reduction tempers persistence.
margin resilience · 2/4 · Infrastructure savings improved gross margin in 2023, but infrastructure costs pressured it in 2025 and first-half 2026, when gross margin fell from 80% to 79%. First-half operating income nevertheless improved from a loss. These mixed outcomes demonstrate operating resilience without establishing price-based cost recovery or a moat from margins.
contractual freedom · 2/4 · Primarily monthly or annual agreements provide frequent occasions to negotiate terms, while customers have no renewal obligation. Large enterprises explicitly demand pricing negotiations, limiting unilateral discretion. This supports mixed commercial freedom; automatic escalators, unilateral repricing rights and protected renewal economics are not established by the supplied terms.
Predictability92
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 15.54
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.89
- observedAnnualPeriods
- 5.00
Financial strength50
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 0.00
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 0.98
- Interest coverage (x)
- -4.01
- Current ratio (x)
- 3.38
Capital allocation34
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- -0.27
- 3-year average dilution (%)
- 3.26
- 3-year average SBC / revenue (%)
- 21.94
- cashConversionGrade
- 100.00
Management50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 free cash flow of $567.8 million and higher operating cash flow demonstrate funding capacity, although non-cash charges and working capital contributed. Total stock compensation of $433.2 million, higher average basic shares, and substantial purchase, lease and debt commitments temper evidence of disciplined spending and dilution.
incentive alignment · 2/4 · Granted long-term equity combines PSUs and RSUs equally, with revenue and non-GAAP operating-income conditions and an adopted clawback. Actual certification links awards to performance, but 104% revenue-target achievement earned the capped 200% PSU outcome. This supports mixed alignment rather than exceptional incentive stringency; earned awards are not assumed fully vested.
execution · 3/4 · Second-quarter revenue grew approximately 36%, first-half operating results turned positive, free cash flow increased and customers with ARR of at least $100,000 grew 23% year over year. These outcomes indirectly support strong management execution. The 2025 operating loss, infrastructure pressure, outages and subsequent largest-customer usage reduction temper that judgment.
governance · 1/4 · Majority-independent directors, CEO compensation recusal and a clawback provide safeguards. Ten-vote Class B shares, staggered terms, restricted shareholder action and supermajority provisions weaken accountability. The simple-majority proposal failed in June 2026. Redomiciliation was completed in April; the grade rests on disclosed provisions, without assuming additional Nevada-law consequences.
Evidence
Additionally, as of December 31, 2025, approximately 55% of our customers were using four or more products, up from approximately 50% a year earlier; approximately 33% of our customers were using six or more products, up from approximately 26% a year earlier; approximately 18% of our customers were using eight or more products, up from approximately 13% a year earlier; and approximately 9% of our customers were using ten or more products, up from 5% a year earlier.
2025 Form 10-K, filed 2026-02-18; multi-product adoption at December 31, 2025 and prior-year comparison · Filed 18/02/2026
When deployed together, our products automatically enable cross-correlation, which in turn allows customers to gain greater levels of visibility across their infrastructure and applications to more rapidly troubleshoot problems.
2026 proxy statement, filed 2026-04-29; business description, automatic product cross-correlation · Filed 29/04/2026
Many of our products are fully capable stand-alone so clients can choose to use different capabilities incrementally or deploy many at once.
2026 proxy statement, filed 2026-04-29; business description, standalone product capabilities · Filed 29/04/2026
Users can derive value from our platform within minutes without any specialized training or heavy implementation or customization.
2026 proxy statement, filed 2026-04-29; business description, deployment and training requirements · Filed 29/04/2026
As of June 30, 2026, our trailing 12-month dollar-based net retention rate was in the low-120%'s.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; trailing 12-month dollar-based net retention at June 30, 2026 · Filed 06/08/2026
The increase in our trailing 12-month dollar-based net retention rate was attributable to increased usage growth from existing customers.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; usage-growth explanation of net retention improvement · Filed 06/08/2026
We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; net retention cohort definition · Filed 06/08/2026
Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; net retention expansion, contraction, attrition and new-customer scope · Filed 06/08/2026
We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net retention rates, to arrive at the trailing 12-month dollar-based net retention rate.
2025 Form 10-K, filed 2026-02-18; trailing 12-month net retention weighted-average methodology · Filed 18/02/2026
We saw a reduction in usage from our largest customer starting in the third quarter of 2026, which may cause a deceleration in revenue growth.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; observed largest-customer usage reduction starting third-quarter 2026 · Filed 06/08/2026
The terms of our subscription agreements are primarily monthly or annual, with some quarterly, semiannual and multi-year.
2025 Form 10-K, filed 2026-02-18; subscription agreement durations · Filed 18/02/2026
Our customers have no obligation to renew their subscriptions for our products after the expiration of their subscription period.
2025 Form 10-K, filed 2026-02-18; absence of customer renewal obligation · Filed 18/02/2026
Moreover, large enterprise customers often begin to deploy our products on a limited basis, but nevertheless demand configuration, integration services and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough across their organization to justify our substantial upfront investment.
2025 Form 10-K, filed 2026-02-18; enterprise deployment requirements and pricing negotiations · Filed 18/02/2026
Similarly, our subscription sales could be adversely affected if customers or users within these organizations perceive that features incorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled with solutions offered by other companies that operate in adjacent markets and compete with our products.
2025 Form 10-K, filed 2026-02-18; risk of competing features and bundled alternatives · Filed 18/02/2026
We currently offer more than 1,000 out-of-the-box integrations to assist customers in deploying Datadog, and we need to continuously modify and enhance our products to adapt to changes and innovation in existing and new technologies to maintain and grow our integrations.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; integration breadth and continuing maintenance requirements · Filed 06/08/2026
We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our products and platform capabilities simultaneously, denial of service attacks, or other security-related incidents.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; experienced disruptions, outages and performance problems · Filed 06/08/2026
As the growth of our business has decelerated in recent quarters, our trailing 12-month dollar-based net retention rate has declined.
2023 Form 10-K, filed 2024-02-23; historical decline in trailing net retention · Filed 23/02/2024
Our gross margin increased by 2% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily as the result of revenue growth exceeding the growth of third-party cloud infrastructure provider costs due to cost savings.
2023 Form 10-K, filed 2024-02-23; 2023 gross margin improvement and infrastructure cost savings · Filed 23/02/2024
Our gross margin decreased by 1% for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as the result of increased in third-party cloud infrastructure provider costs.
2025 Form 10-K, filed 2026-02-18; 2025 gross margin decline and infrastructure costs · Filed 18/02/2026
Cost of Revenue and Gross Margin Six Months Ended June 30, 2026 2025 Change % Change (dollars in thousands) Cost of revenue $ 449,341 $ 323,606 $ 125,735 39 % Gross margin 79 % 80 % Cost of revenue increased by $125.7 million, or 39%, in the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; six-month cost of revenue and gross margin, including dates and units · Filed 06/08/2026
Our gross margin decreased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily as a result of increased spend with our third-party cloud infrastructure provider costs.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; infrastructure-cost explanation of six-month gross margin decline · Filed 06/08/2026
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue $ 1,121,454 $ 826,760 $ 2,127,880 $ 1,588,313 Cost of revenue 240,113 165,978 449,341 323,606 Gross profit 881,341 660,782 1,678,539 1,264,707 Operating expenses: Research and development 477,968 387,482 913,266 728,543 Sales and marketing 311,519 239,026 591,342 453,317 General and administrative 86,399 69,774 161,149 130,767 Total operating expenses 875,886 696,282 1,665,757 1,312,627 Operating income (loss) 5,455 (35,500) 12,782 (47,920) Other income: Interest expense (3,255) (3,075) (6,374) (6,038) Interest income and other income, net 49,533 44,663 104,255 91,842 Other income, net 46,278 41,588 97,881 85,804 Income before provision for income taxes 51,733 6,088 110,663 37,884 Provision for income taxes 7,175 3,441 13,531 10,595 Net income $ 44,558 $ 2,647 $ 97,132 $ 27,289 Net income attributable to common stockholders $ 44,558 $ 2,647 $ 97,132 $ 27,289 Basic net income per share $ 0.13 $ 0.01 $ 0.27 $ 0.08 Diluted net income per share $ 0.12 $ 0.01 $ 0.27 $ 0.08 Weighted average shares used in calculating basic net income per share: 356,253 346,185 354,771 344,650 Weighted average shares used in calculating diluted net income per share: 371,023 358,725 368,271 361,289 See accompanying notes to condensed consolidated financial statements.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; unaudited statements of operations, three and six months ended June 30, 2026 and 2025, in thousands · Filed 06/08/2026
Our free cash flow was $567.8 million and $409.7 million for the six months ended June 30, 2026 and 2025, respectively.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; six-month free cash flow comparison · Filed 06/08/2026
Cash Flows The following table shows a summary of our cash flows for the periods presented: Six Months Ended June 30, 2026 2025 (in thousands) Cash provided by operating activities $ 650,495 $ 471,596 Cash used in investing activities (664,677) (634,475) Cash provided by (used in) financing activities 51,532 (603,801) Operating Activities Net cash provided by operating activities for the six months ended June 30, 2026 increased by $178.9 million compared to the six months ended June 30, 2025, primarily driven by an increase in net income of $69.8 million, an increase in non-cash charges of $97.0 million, an increase in accounts payable of $69.5 million, and an increase in deferred revenue of $67.9 million.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; six-month operating cash flow and drivers of its increase · Filed 06/08/2026
Stock-based compensation expense was included in the condensed consolidated statement of operations as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Cost of revenue $ 9,256 $ 6,783 $ 17,815 $ 13,434 Research and development 131,682 112,445 255,353 218,180 Sales and marketing 47,098 37,442 89,396 71,567 General and administrative 32,215 23,792 54,529 41,546 Stock-based compensation, net of amounts capitalized 220,251 180,462 417,093 344,727 Capitalized stock-based compensation expense 6,882 5,957 16,071 11,619 Total stock-based compensation expense $ 227,133 $ 186,419 $ 433,164 $ 356,346 13.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; stock compensation including capitalized amounts, dates and units · Filed 06/08/2026
Non-cancelable purchase commitments for business operations and operating lease obligations total $1.4 billion and $375.2 million, respectively, as of December 31, 2025, due primarily over the next five years.
2025 Form 10-K, filed 2026-02-18; purchase and lease commitments at December 31, 2025 and payment horizon · Filed 18/02/2026
The principal and future interest payments related to our 2029 Notes are $1.0 billion.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; principal and future interest obligations on 2029 Notes · Filed 06/08/2026
Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any.
Second-quarter 2026 earnings release, filed 2026-08-06; free cash flow definition · Filed 06/08/2026
The target grant value of long-term equity incentive compensation was weighted 50% in the form of performance stock unit (“PSU”) awards and 50% in the form of restricted stock unit (“RSU”) awards.
2026 proxy statement, filed 2026-04-29; granted long-term equity incentive mix · Filed 29/04/2026
(2)Represents the number of Class A common shares subject to PSUs granted to our named executive officers, which are earned based on the Company’s achievement of a pre-established amount of revenue and non-GAAP operating income.
2026 proxy statement, filed 2026-04-29; granted PSU performance conditions · Filed 29/04/2026
Based on our actual performance, the compensation committee determined that the non-GAAP operating income target was met and the revenue performance target was achieved at 104% of target, which exceeded the maximum level of achievement and as a result the PSUs award earned by each executive officer was capped at 200% of the target performance level.
2026 proxy statement, filed 2026-04-29; actual performance certification and earned PSU multiplier · Filed 29/04/2026
Under our clawback policy, if we are required to prepare an accounting restatement, we must reasonably promptly recoup from any current or former covered executive officer, including our named executive officers, the amount of incentive-based compensation received by such covered executive officer in excess of the amount of incentive based compensation that would have been received had such amount been determined based on the accounting restatement.
2026 proxy statement, filed 2026-04-29; adopted compensation clawback policy · Filed 29/04/2026
•As of June 30, 2026, we had about 4,720 customers with ARR of $100,000 or more, an increase of 23% from about 3,850 as of June 30, 2025.
Second-quarter 2026 earnings release, filed 2026-08-06; customers with ARR of at least $100,000 at June 30, 2026 and 2025 · Filed 06/08/2026
•GAAP operating loss was $(44) million; GAAP operating margin was (1)%.
2026 proxy statement, filed 2026-04-29; fiscal 2025 GAAP operating loss and margin · Filed 29/04/2026
Accordingly, a majority of our directors are independent, as required under applicable Nasdaq rules.
2026 proxy statement, filed 2026-04-29; majority-independent board · Filed 29/04/2026
While the Chief Executive Officer discusses his recommendations with the compensation committee, he does not participate in the deliberations concerning, or the determination of, his own performance and compensation.
2026 proxy statement, filed 2026-04-29; CEO exclusion from deliberations on his own compensation · Filed 29/04/2026
The holders of our Class B common stock are entitled to ten votes per share, and holders of our Class A common stock are entitled to one vote per share.
2026 proxy statement, filed 2026-04-29; Class B and Class A voting rights · Filed 29/04/2026
Our articles of incorporation and bylaws include provisions that: •authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; •require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; 63 •specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; •establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; •establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; •prohibit cumulative voting in the election of directors; •provide that our directors may be removed with or without cause upon the vote of at least 66 2/3% of our outstanding shares of voting stock entitled to vote thereon; •provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and •require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock entitled to vote thereon to amend our bylaws and certain provisions of our articles of incorporation.
Second-quarter 2026 Form 10-Q, filed 2026-08-06; current charter and bylaw restrictions on shareholder action · Filed 06/08/2026
Stockholders did not approve a shareholder proposal regarding the adoption of a simple majority voting provision, by the following votes:
Votes For
Votes Against
Votes Abstain
Broker Non-Votes
217,163,770
296,078,084
489,664
27,229,324
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Annual-meeting results Form 8-K, filed 2026-06-16; rejection of simple-majority voting proposal · Filed 16/06/2026
At 11:59 p.m., Eastern Time, on April 21, 2026 (the “Effective Time”):
•
the Company’s domicile changed from the State of Delaware to the State of Nevada;
•
the internal affairs of the Company ceased to be governed by the laws of the State of Delaware and instead became governed by the laws of the State of Nevada; and
•
the Company ceased to be governed by the Company’s existing amended and restated certificate of incorporation and amended bylaws and instead became governed by the Nevada Charter and the Nevada Bylaws.
Redomiciliation Form 8-K, filed 2026-04-22; effective April 21, 2026 change to Nevada domicile, charter and bylaws · Filed 22/04/2026
