Datadog Shares Surge 23% After Revenue Beat and Strong AI Demand

Datadog shares soared 23% on Thursday, marking the company’s second-best trading day ever, after the cloud software firm posted third-quarter results that exceeded Wall Street expectations and projected robust growth for the final quarter of the year.

The New York-based company reported $885.7 million in Q3 revenue, up 28% year-over-year and well above analyst estimates of $852.8 million, according to LSEG data. For the current quarter, Datadog forecasts between $912 million and $916 million in revenue, surpassing Wall Street’s $887 million projection.

Adjusted earnings reached 55 cents per share, topping FactSet estimates of 45 cents. The company also recorded net income of $33.9 million, or 10 cents per share, compared to $51.7 million, or 14 cents, a year earlier.

CEO Olivier Pomel credited the company’s momentum to continued innovation in artificial intelligence (AI) and cloud security tools. “The Datadog R&D team is innovating rapidly to help our customers solve problems in the AI space,” he said in a statement.

Datadog has rolled out a series of AI-focused products this year, including Bits AI Agents for SRE, which can automatically investigate system alerts and generate response drafts, and expanded features for LLM Observability, designed to monitor large language models. The firm also unveiled its MCP Server, which connects AI agents to enterprise data sources, and TOTO, its proprietary foundation model.

The company said the number of customers generating over $100,000 in annual recurring revenue rose 16% in the quarter, signaling sustained enterprise adoption.