AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 3/6 · 18/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Unified workflows and broad multi-product adoption support a switching-cost advantage. Expansion results corroborate customer value, but replacement costs and comparative superiority are not directly demonstrated.
durability · 2/4 · Continuing adoption and expanding same-customer ARR support persistence. Integration upkeep, bundled alternatives and historical retention deterioration limit confidence in long-duration protection.
customer dependency · 3/4 · Extensive multi-product adoption, low-120% net retention and existing customers contributing 70% of quarterly revenue growth demonstrate strong engagement. Operational dependency and switching friction are inferred; the largest customer could still reduce consumption.
erosion resilience · 2/4 · Expansion remains strong despite historical retention weakness, but actual customer optimization and experienced outages expose vulnerabilities. Lower-cost and bundled offerings are disclosed potential threats, not demonstrated market-share losses.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Net retention improvement is explicitly attributed to usage growth. The supplied results do not disclose realized unit prices, discounts or repricing outcomes; customer usage reductions establish spending flexibility but not price cuts.
retention · 3/4 · Low-120% dollar-based net retention and broad product adoption demonstrate strong repeat demand and expansion. This is direct net expansion evidence, not a gross renewal or customer retention rate; expansion can offset customer losses.
margin resilience · 2/4 · Gross margins remain substantial, but declined in 2025 and to 79% from 80% in first-half 2026 because of infrastructure costs. Earlier cost savings improved margins, making the record mixed. These outcomes do not independently establish pricing power or a cost advantage.
contractual freedom · — · Committed subscriptions, additional usage and monthly subscriptions establish a mixed revenue structure. They do not establish Datadog's ability to change prices or terms, renewal restrictions, or the extent of negotiated customer protections.
Predictability92
Five consecutive 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
Financial strength—
Missing required inputs: debtFcfGrade, netDebtEbitGrade. 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, or reported pretax profit plus reported interest expense when operating income is unavailable. 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.
- interestCoverageGrade
- 0.00
- currentRatioGrade
- 100.00
- Interest coverage (x)
- -4.01
- Current ratio (x)
- 3.38
Capital allocation—
Missing required inputs: operatingReturn. 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 or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; 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. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 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 operating cash flow rose to $650.5 million and free cash flow to $567.8 million while revenue and operating results improved. Against that, stock-based compensation totaled $433.2 million, weighted-average basic shares increased, and substantial purchase, lease and debt commitments remain. Cash-flow growth partly reflects non-cash charges and working capital; spending efficiency and dilution therefore present a mixed record.
incentive alignment · 2/4 · Actual equity awards were weighted equally between PSUs and RSUs, with PSU conditions tied to revenue and non-GAAP operating income. Adopted bonus metrics and a clawback provide alignment mechanisms. Non-GAAP targets exclude significant compensation expense, while ownership stakes and realized award outcomes are missing; strong alignment is not established.
execution · 3/4 · Revenue rose 36% in second-quarter 2026, first-half operating results turned positive, and cash generation increased alongside broader product adoption and growth in large customers. These are demonstrated operating outcomes, although their attribution to management is indirect. Hosting-cost pressure, outages and the largest customer's usage reduction temper the assessment.
governance · 1/4 · A majority-independent board, CEO recusal on personal compensation and a clawback provide safeguards. Current classified-board, restricted-meeting and supermajority provisions materially constrain shareholder accountability. The grade reflects actual governance terms, without assuming that the simple-majority shareholder proposal passed.
Evidence
Our proprietary platform combines the power of metrics, traces, logs, user sessions, security signals, and other data from a single agent and over 850 integrations to provide a unified view of infrastructure, application performance and the real-time events impacting performance.
Business: unified platform, single agent and integrations · Filed 20/02/2025
Approximately 84% of our customers were using two or more products as of December 31, 2025, consistent with approximately 83% a year earlier.
MD&A: two-or-more-product adoption at December 31, 2025 · Filed 18/02/2026
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.
MD&A: adoption across four or more through ten or more products · Filed 18/02/2026
As of June 30, 2026, our trailing 12-month dollar-based net retention rate was in the low-120%'s.
MD&A: trailing dollar-based net retention at June 30, 2026 · Filed 06/08/2026
Approximately 70% of the increase in revenue was attributable to growth from existing customers, and the remaining 30% was attributable to growth from new customers.
MD&A: contribution of existing customers to second-quarter revenue growth · Filed 06/08/2026
•Incident Response. Incident Response unifies monitoring, paging, and incident management into one seamless workflow.
Business: incident response workflow · 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.
Risk factors: existing integrations and continuing maintenance requirements · 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.
MD&A: usage growth explains net retention improvement · Filed 06/08/2026
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.
MD&A: largest-customer usage reduction beginning in third-quarter 2026 · Filed 06/08/2026
In addition, as our market matures, our products evolve, and competitors introduce lower cost or differentiated products that are perceived to compete with our platform and products, our ability to sell subscriptions for our products could be impaired.
Risk factors: lower-cost and differentiated competing products · 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.
Risk factors: competing features and bundled offerings · Filed 18/02/2026
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.
Risk factors: 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.
MD&A: historical decline in dollar-based net retention · Filed 23/02/2024
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.
MD&A: first-half 2026 gross margin and cost of revenue · 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.
MD&A: hosting costs explain first-half gross-margin decline · Filed 06/08/2026
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.
MD&A: 2023 gross-margin improvement from cloud cost savings · Filed 23/02/2024
MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used and monthly subscriptions.
MD&A: committed amounts, additional usage and monthly subscriptions · 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.
Unaudited statements of operations: revenue, operating results and weighted-average shares · 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.
MD&A: first-half free cash flow · 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.
Liquidity and capital resources: operating cash flow and contributing factors · 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.
Stock-based compensation note: expense and capitalized compensation · 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.
Liquidity and capital resources: non-cancelable purchase and lease commitments · Filed 18/02/2026
The principal and future interest payments related to our 2029 Notes are $1.0 billion.
Liquidity and capital resources: 2029 Notes payment obligations · 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.
Executive compensation: actual long-term equity award weighting · 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.
Executive compensation: granted PSUs and performance conditions · Filed 29/04/2026
The compensation committee determined that the performance metric for our named executive officers for 2025, apart from our Chief Revenue Officer, would be based on the attainment of pre-established levels of net new ARR, with certain decelerators applied if our non-GAAP operating income fell below a target level.
Executive compensation: adopted 2025 executive bonus metrics · 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.
Executive compensation: operative compensation recoupment policy · Filed 29/04/2026
Accordingly, a majority of our directors are independent, as required under applicable Nasdaq rules.
Corporate governance: 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.
Executive compensation: CEO excluded from deliberations on own compensation · 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.
Risk factors: current classified board and supermajority governance provisions · Filed 06/08/2026
•As of December 31, 2025, we had 603 customers with annual recurring revenue (“ARR”) of $1 million or more, an increase of 31% year-over-year, and about 4,310 customers with ARR of $100,000 or more, an increase of 19% year-over-year.
2025 business highlights: growth in customers with large ARR · Filed 29/04/2026
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.
MD&A: net retention includes expansion and deducts contraction and attrition · Filed 06/08/2026
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.
MD&A: 2025 gross-margin decline from third-party infrastructure costs · Filed 18/02/2026
