Datadog Reports 28% Revenue Growth to $826.8 Million in Q2 2025, Net Income Declines

Datadog, Inc. reported significant financial results for the second quarter of 2025, with revenue reaching $826.8 million, a 28% increase from $645.3 million in the same period last year. For the first half of 2025, the company generated $1.59 billion in revenue, up 26% from $1.26 billion in the first half of 2024. Despite this growth, Datadog experienced a net income decline, reporting $2.6 million for the second quarter compared to $43.8 million in the prior year, and $27.3 million for the first half of 2025, down from $86.5 million in 2024. The decrease in profitability was attributed to increased operating expenses, particularly in research and development, sales and marketing, and general and administrative costs.

The company's operating expenses surged to $696.3 million for the second quarter, up from $509.2 million a year earlier, driven by a 41% increase in research and development costs, which totaled $387.5 million. Sales and marketing expenses also rose by 28% to $239 million, reflecting the company's strategy to enhance its market presence and customer engagement. General and administrative expenses increased by 47% to $69.8 million, primarily due to higher personnel costs. The gross margin slightly decreased to 80% from 81% year-over-year, largely due to rising costs associated with third-party cloud infrastructure.

Datadog's customer base expanded to approximately 31,400 as of June 30, 2025, up from 28,700 a year prior. The company reported that about 3,850 customers had an annual run-rate revenue (ARR) of $100,000 or more, representing 89% of its total ARR, an increase from 87% in the previous year. The dollar-based net retention rate improved to approximately 120%, indicating strong growth in existing customer spending. The company also noted that 83% of its customers utilized more than one product, consistent with the previous year, demonstrating effective cross-selling strategies.

In terms of strategic developments, Datadog completed three acquisitions during the quarter, totaling approximately $178.4 million, which included cash payments and the issuance of restricted shares. The company continues to invest in expanding its product offerings and geographic reach, particularly in the EMEA and APAC regions. As of June 30, 2025, Datadog held $489 million in cash and cash equivalents, alongside $3.4 billion in marketable securities, providing a solid financial foundation for future growth initiatives.

Looking ahead, Datadog remains cautious about potential macroeconomic challenges that could impact its growth trajectory. The company plans to continue investing in sales and marketing to drive customer acquisition and product adoption while navigating the uncertainties in the global economy. The management expressed confidence in the long-term growth potential of its platform, emphasizing the importance of innovation and customer satisfaction in sustaining its competitive advantage.