Datadog Reports 35% Revenue Growth to $1.2 Billion in Q3, Launches First Specialized AI Model Scout 1.0
US-based observability platform Datadog reported Q3 financials showing 35% year-over-year revenue growth and $251 million in free cash flow, while introducing Scout 1.0, a new AI model designed to lower inference costs.
Datadog, Inc. (NASDAQ: DDOG), a US-based observability and security platform, announced its financial results for the third quarter ended September 30, 2026, on November 4, 2026. The company reported revenue of $1.20 billion, representing a 35% increase year-over-year. GAAP operating income was $75 million, while non-GAAP operating income reached $334 million, corresponding to a 28% non-GAAP operating margin.
Cash flow metrics remained robust, with operating cash flow at $290 million and free cash flow at $251 million for the quarter. As of September 30, 2026, Datadog held $5.2 billion in cash, cash equivalents, and marketable securities. This performance highlights the company's ability to generate significant liquidity while maintaining high growth rates.
Customer expansion continued among larger enterprises. As of the end of Q3 2026, Datadog had approximately 4,860 customers with annual recurring revenue (ARR) of $100,000 or more, up 20% from about 4,060 such customers a year prior. This growth reflects sustained demand for unified monitoring solutions as companies scale their digital operations and AI deployments.
In addition to financial results, Datadog introduced Scout 1.0, its first specialized AI model developed by the Datadog AI Research team. Now powering Bits Investigation, Scout 1.0 is claimed to achieve frontier-model performance at a fraction of the inference cost, enabling more frequent and earlier investigations into production issues to reduce on-call burden and accelerate incident response.
For guidance, Datadog expects fourth-quarter 2026 revenue between $1.19 billion and $1.20 billion, with non-GAAP earnings per share between $0.69 and $0.71. Full-year 2026 revenue is projected to be between $4.515 billion and $4.525 billion.