A month has gone by since the last earnings report for Datadog (DDOG Quick QuoteDDOG - Free Report) . Shares have added about 0.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Datadog due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

Datadog Q4 Earnings & Revenues Surpass Estimates, Both Increase Y/Y

Datadog reported fourth-quarter 2025 non-GAAP earnings per share (EPS) of 59 cents, which increased 20.4% from the year-ago quarter and beat the Zacks Consensus Estimate by 7.27%.

The company’s net revenues of $953.19 million rose 29.2% year over year and beat the consensus estimate by 4.22%.

Q4 Details of DDOG

The company ended the fourth quarter with 32,700 customers, up from about 30,000 in the prior-year period.

In the quarter under review, Datadog had 4,310 customers with an Annualized Run Rate (ARR) of $100,000 or more, up from about 3,610 in the year-ago quarter. These customers generated about 90% of the total ARR.

Additionally, the company reported 603 customers with ARR of $1 million or more, representing a 30.5% increase from 462 in the year-ago period.

As of the end of the fourth quarter, 84% of customers used two or more products, up from 83% in the year-ago period. Additionally, 55% of customers utilized four or more products, up from 50% in the year-ago quarter. Furthermore, 33% of customers used six or more products, up from 26% a year ago, while 18% used eight or more products, up from 12% in the prior-year quarter. Datadog reported a trailing 12-month net revenue retention rate of approximately 120% in the fourth quarter, up from the high-110% range in the prior-year quarter.

Operating Details of DDOG

In the fourth quarter, non-GAAP gross profit increased 28.8% year over year, reaching $776.3 million. Datadog's adjusted gross margin declined 100 basis points on a year-over-year basis to 81%. 

Research & development expenses grew 32.5% on a year-over-year basis to $280.3 million. Research & development, as a percentage of revenues, expanded 70 basis points to 29.4%. 

Sales and marketing expenses rose 26.5% year over year to $219.1 million. Sales and marketing expenses, as a percentage of revenues, contracted 50 basis points to 23%. 

General & administrative expenses increased 21% year over year, reaching $46.8 million in the reported quarter. General and administrative expenses, as a percentage of revenues, contracted 30 basis points to 4.9%.

Datadog reported a non-GAAP operating income of $230.1 million, up 28.4% year over year. However, its non-GAAP operating margin of 24% remained flat compared to the prior year.

Datadog's Balance Sheet & Cash Flow

As of Dec. 31, 2025, Datadog had cash, cash equivalents and marketable securities of $4.5 billion compared with $4.1 billion as of Sept. 30, 2025. Operating cash flow was $327 million in the reported quarter, up from $251 million reported in the previous quarter. Free cash flow during the quarter was $291 million compared with $214 million in the prior quarter, with a free cash flow margin of 30.5%.

Datadog's Guidance for First Quarter 2026 & Fiscal Year 2026

For the first quarter of 2026, Datadog anticipates revenues between $951-$961 million. Non-GAAP EPS is expected in the range of 49-51 cents. Non-GAAP operating income is expected in the band of $195-$205 million.

For fiscal 2026, Datadog anticipates revenues between $4.06 billion and $4.10 billion. Non-GAAP EPS is projected to be between $2.08 and $2.16. Non-GAAP operating income is expected in the range of $840-$880 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -23.43% due to these changes.

VGM Scores

Currently, Datadog has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock has a score of F on the value side, putting it in the lowest quintile for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Datadog has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Datadog belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV Quick QuoteFFIV - Free Report) , has gained 2.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

F5 reported revenues of $822.47 million in the last reported quarter, representing a year-over-year change of +7.3%. EPS of $4.45 for the same period compares with $3.84 a year ago.

For the current quarter, F5 is expected to post earnings of $3.44 per share, indicating a change of +0.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of C.