Datadog (DDOG) reported Q3 revenue of $886M, exceeding estimates by $34M, with 28% year-over-year growth and EPS of $0.55 versus an expected $0.46. The company generated $214M in free cash flow and expanded non-GAAP operating margin to 23%, signifying efficient scaling amid heavy AI product investment.

Datadog crushed third-quarter expectations, leading to a 21% surge in pre-market trading. The observability platform reported $0.55 non-GAAP earnings per share, beating the $0.46 consensus estimate, with revenue reaching $886 million versus $852.3 million expected.

The enterprise segment drove much of the upside, with customers with at least $100,000 in annual recurring revenue growing 16% year-over-year to 4,060. Gross margin held steady at around 80%, highlighting the strength of Datadog’s pricing power and product stickiness.

CEO Olivier Pomel emphasized Datadog’s rapid innovation in the AI space, positioning the company to capture observability spending as enterprises scale AI workloads. The company’s product momentum is strong, with customers adopting the unified platform for monitoring, security, and analytics.

Datadog’s fundamentals remain solid, with strong growth, improving profitability, and robust cash generation. The pre-market rally reflects confidence in the company’s execution and market position, though investors should monitor whether the current valuation leaves room for continued appreciation.

Read more at Yahoo Finance: Datadog Surges 21% as Enterprise Growth and Cash Flow Crush Estimates