Datadog Q2 revenue jumps 28 per cent to USD $827 million on AI, cloud demand
Datadog has reported its financial results for the second quarter of 2025, posting a 28 per cent year-over-year increase in revenue to USD $827 million.
The company's growth in the quarter was attributed to the expansion of its customer base, particularly among larger organisations. Datadog disclosed that it now has approximately 3,850 customers with annual recurring revenue (ARR) of USD $100,000 or more, up 14 per cent from roughly 3,390 such customers a year ago.
Customer growth
The second quarter saw continued traction among enterprise clients and organisations scaling their use of Datadog's cloud monitoring and security platform. This expansion was reflected not only in revenue growth, but also in key operational metrics.
Highlighting the quarter, Datadog introduced more than 125 new products, capabilities, and features. These were showcased during the company's user conference, DASH.
"Datadog had a strong second quarter, with 28 per cent year-over-year revenue growth, USD $200 million in operating cash flow, and USD $165 million in free cash flow," said Olivier Pomel, Co-Founder and Chief Executive Officer of Datadog.
Pomel also noted, "At our DASH 2025 user conference, we showcased our rapid pace of innovation, announcing over 125 new innovations to help our customers observe, secure, and act on their complex cloud environments and AI tech stacks."
Financial performance
For the three months to June 30, 2025, Datadog's GAAP operating loss was USD $(36) million, with a GAAP operating margin of (4)%. The company reported non-GAAP operating income of USD $164 million and a non-GAAP operating margin of 20 per cent for the quarter. GAAP net income per diluted share stood at USD $0.01, while non-GAAP net income per diluted share reached USD $0.46.
Datadog's operating cash flow for the quarter was USD $200 million, with free cash flow of USD $165 million. The company ended the period with USD $3.9 billion in cash, cash equivalents, and marketable securities.
Product and business highlights
Datadog advanced its offerings with key launches including the roll-out of its full range of products and services in the Amazon Web Services' Asia-Pacific (Sydney) Region, building on its presence in North America, Asia, and Europe. The company introduced three new AI agents - Bits AI SRE, Bits AI Dev Agent, and Bits AI Security Analyst - to support interactive investigations and asynchronous code fixes across operations, development, and security functions.
Additional product releases included Archive Search, FlexFrozen, and CloudPrem in the log management suite. These are aimed at optimising logging costs and meeting stringent data requirements for regulated industries. The Internal Developer Portal was launched as the first developer portal built on live observability data, and new security products - Code Security, Bits AI Security Analyst, and Workload Protection - were introduced to address security across cloud and AI environments.
Datadog also unveiled new capabilities for AI operations, such as AI Agent Monitoring, LLM Experiments, and AI Agents Console, which provide end-to-end visibility and governance of AI agents. From its AI Research division, the company announced Toto, an open-weights model trained with internal observability data, and BOOM, a time series benchmark for observability metrics.
Recognition and compliance
Among other developments during the quarter, Datadog was named a Leader in the Gartner Magic Quadrant for Observability Platforms for the fifth consecutive year. The company also joined the S&P 500 Index and was added to both the Forbes Global 2000 and the Forbes Global 2000 United States Lists for 2025.
In regulatory and compliance moves, Datadog announced progress towards attaining Federal Risk and Authorization Management Program (FedRAMP) High authorisation, which would enable federal agencies to use its monitoring and security products in line with strict compliance standards.
Guidance for 2025
Datadog provided its outlook for the third quarter and the full fiscal year 2025. For the third quarter, the company expects revenue between USD $847 million and USD $851 million, and non-GAAP operating income between USD $176 million and USD $180 million. Full year 2025 revenue is projected to be between USD $3.312 billion and USD $3.322 billion, with non-GAAP operating income in the range of USD $684 million to USD $694 million. Non-GAAP net income per share for the full year is expected to be between USD $1.80 and USD $1.83, based on approximately 364 million weighted average diluted shares outstanding.
