Datadog Shares Fall After Q3 Earnings and Weak Sales Outlook

Datadog (DDOG) shares fell significantly on Wednesday after the enterprise software maker reported third-quarter earnings and revenue that exceeded Wall Street estimates, but provided a December quarter sales guidance that fell short of views and signaled flat sequential growth, according to Investor's Business Daily.

Third Quarter Financial Results

Datadog reported earnings for the September quarter of 81 cents per share on an adjusted basis, which was an increase of approximately 47% from a year earlier. The company's revenue for the quarter climbed 35% to $1.2 billion. These results surpassed the Zacks Consensus Estimate, which had pegged third-quarter revenues at $1.14 billion and earnings at 64 cents per share.

According to Investor's Business Daily, analysts had expected Datadog to report an adjusted profit of 64 cents a share on revenue of $1.146 billion. Datadog had previously surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, delivering an average surprise of 15.39%.

Sales Guidance and Market Reaction

Despite the quarterly beat, Datadog's outlook for the current quarter ending in December led to a decline in stock price. Datadog forecast revenue of $1.195 billion at the midpoint of guidance, while Wall Street analysts had modeled sales of $1.2 billion.

Following the report, Datadog stock dived 19% to 179 in early trading, which signaled a gap below its 200-day moving average, according to Investor's Business Daily. The stock had jumped 61% in 2026 prior to the report, though it had previously tanked in August due to updated full-year guidance.

Business Operations and AI Trends

Datadog, which started in 2010, operates a monitoring and analytics (observability) platform for information technology departments and software developers. The company maintains a sales channel partnership with Amazon Web Services, the cloud computing unit of Amazon.com.

As large companies develop AI-based business products, investors have increasingly viewed Datadog's software as a key component for monitoring AI infrastructure and applications. According to Zacks Equity Research, Datadog ended the second quarter with more than 750 AI customers, including hyperscalers using the platform for in-house AI labs.

However, Zacks Equity Research noted that reduced consumption by Datadog's largest customer was expected to weigh on third-quarter revenue momentum. This customer, described as a leading AI company using 17 Datadog products, renewed a nine-figure agreement but began reducing usage in the third quarter of 2026. Datadog stated it incorporated this decline into its outlook.

Why it matters

Datadog's performance highlights the shifting spending patterns among major AI accounts. While the company's AI-native cohort contributed high-single-digit percentage points to companywide year-over-year revenue growth in the second quarter, the usage pullback from a major client may offset broader demand benefits.

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Sources

• investors.com: Datadog Stock: Datadog Earnings Top Views. Shares Plunge On Weak Sales Outlook. | Investor's Business Daily
• finance.yahoo.com: Datadog Before Q3 Earnings: What's in the Cards for the Stock?

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.