Datadog Q3 2026: EPS Beats Expectations, Margin Jumps to 28%

Datadog posted adjusted EPS of $0.81 for the third quarter of 2026, beating the consensus estimate of $0.64. It was the sixth consecutive quarter in which the company beat EPS expectations, extending a streak that stretches back to Q2 2025.

Revenue came in at $1.20 billion, up 35% year over year and ahead of consensus. The growth was broad-based, with platform adoption across AI-driven workloads cited as the primary engine. The company's large-customer count reached roughly 4,860 customers carrying at least $100,000 in annual recurring revenue, up about 20% from a year earlier.

Non-GAAP operating margin expanded to 28% from 23% a year ago, as non-GAAP operating income rose to $334.29 million. The company generated $290 million in operating cash flow and $251 million in free cash flow during the quarter, according to CEO Olivier Pomel.

On the product side, Datadog launched Scout 1.0, described as the first specialized AI model from its in-house AI Research team. Scout powers a feature called Bits Investigation and is positioned to deliver what the company calls frontier-model performance at a fraction of the typical inference cost. The initiative is part of a broader push toward what management describes as autonomous operations for customers managing growing infrastructure complexity.

With the strong quarter in hand, management raised full-year 2026 revenue guidance to a range of $4.515 billion to $4.525 billion and set full-year non-GAAP EPS guidance of $2.73 to $2.75. For Q4 2026, the company expects revenue of $1.19 billion to $1.20 billion. Investors will be watching whether the margin expansion holds as the company continues to invest in its AI research capabilities and absorb rising stock-based compensation.