Robust usage growth to drive solid revenue growth outlook

Robust usage growth to drive solid revenuegrowth outlook Target PriceUS$196.90(Previous TPUS$203.70)Up/Downside72.7%Current PriceUS$114.01 Datadog (DDOG US) released (10FebHKT) its4Q25 results: total revenue wasUS$953.2mn, up29.2% YoY (4Q24:25.1%;3Q25:28.4%),4% better than bothour forecast and Bloomberg consensus, driven byacceleration in revenuegrowthfrom non-AI customers (from 20% YoY in 3Q25 to 23% YoY in 4Q25),and strong demand from AI native customers.During the period,non-GAAP netincome after tax adjustment was US$217.4mn, up22.5% YoY, and was6/7%better than our forecast/consensus, driven bythe beat in revenue andbetter-than-expected unleashing of operating leverage.For 2025,totalrevenue grew27.7% YoY to US$3.4bn, and non-GAAP OPM reached22.4%.Managementnotedthat the acceleration in revenue growth for non-AI customers hascontinued in Jan 2026, and guided for 25-26% YoY growth fortotalrevenue in1Q26E (1Q25: 25%).Taking a conservative approach to full-year guidance,particularly for the AI-native customer cohort, management guided 18-20% YoYrevenue growthand 20-22% non-GAAP OPM for 2026E. We lower our 2026–2027E revenue forecasts by 2-4% to bring estimates in line with guidance, whileremaining confidentin DDOG’supside potentialforrevenue growth. We fine-tuned our TP to US$196.9 (from US$203.7), based on 16.3x 2026E EV/sales(previously 16.6x), in line with the two-year average plus one standard deviation.Maintain BUY. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Robust cross-sell and up-selltrends sustained, with further upsidepotential ahead.By the end of4Q25, Datadog’s platform had over32,700customers, up9% YoY.The number of large customers with an ARR ofUS$1mn/$100k+ reached603/4,310during the same period,up31/19%YoY. Percentage of ARR comprised byUS$100k+customers accounted for90% of the company's total ARRin 4Q25 (4Q24: 88%). As of4Q25, c.84/55/33/18/9% of customers used more than 2/4/6/8/10products of thecompany, upby1/5/7/6/4ppts YoY respectively.Management highlightedthatmedian of DDOG ARR for Fortune500 customers was still less thanhalf a million dollars, which in our view indicatesplenty of room for futurebusinessdevelopment.On key operating metrics: 1) RPO was US$3.46bn,up52% YoY (3Q25:53%; 4Q24:24%) andcurrent RPO was upabout-40sYoY (3Q25: low-50s); 2) net dollar-based retention rate was about120%in4Q25, flat QoQ and up fromhigh-110% in 4Q24. Strong revenue growth trajectory was seen in both AI and non-AIcustomers.Management highlighted that DDOG has accumulated morethan650AI-native companies in its customer base in4Q25(3Q25: 500),amongwhich19are spending more thanUS$1mnannually(3Q25: 15),andcurrently 14 out of Top 20 AI native companies are DDOG’s customers.Revenue excluding AI-native customer group was up 23% YoY in 3Q25,acceleratingfrom 18%/20%YoY in 2Q25/3Q25, and managementnotedthatthe acceleration trend continued inJan2026. Source: FactSet Guided to continue investing for future growth while maintaining goodoperating efficiency.For4Q25, non-GAAP GPM came in at81.4%,down0.3pptsYoYbutup0.2ppts QoQ.Overall non-GAAP OPM came in at24.1%in4Q25(4Q24:24.3%),0.1ppt better than both consensus and our forecast.Management guided to continue investing in enhancing R&D capabilities toenhance long-term growth prospects, whilestill guidedfor 20-22% non-GAAP OPM for 2026E (2025: 22.4%). Management guided for1Q26E: 1) revenue of US$951-961mn, representing 25-26%growth YoY, andthe mid-point of guidancewas2% ahead ofconsensus; and 2) non-GAAPnet income per share of US$0.49-0.51 (consensus: US$0.54).For 2026, management islooking for: 1) revenue of US$4.06bn-4.10bn, representing YoY growth ofc.18-20%(2025:28%YoY); 2) non-GAAP OP of US$840mn-880mn;and 3) netincome per share ofUS$2.08-2.16. Source:Bloomberg,CMBIGM estimates Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in thisreport: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered inthis research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of theHongKong listed companies covered in this report; and (4) have any financial interests