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10-Q – 2026-05-07 – ddog-20260331.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39051
_________________________________________________________
Datadog, Inc.
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________
Nevada
27-2825503
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
620 8th Avenue , 45th Floor
New York , New York 10018
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: ( 866 ) 329-4466
_________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, par value $0.00001 per share DDOG The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐ Small reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2026, there were 330,825,798 shares of the registrant’s Class A common stock and 25,134,391 shares of the registrant’s Class B common stock, each with a par value of $0.00001 per share, outstanding.
TABLE OF CONTENTS
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements
3
Condensed Consolidated Balance Sheets as of March 31 , 202 6 and December 31, 202 5 (unaudited)
3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 202 5 (unaudited)
4
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 202 5 (unaudited)
5
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and 202 5 (unaudited)
6
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 202 5 (unaudited)
7
Notes to Condensed Consolidated Financial Statements (unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
Item 4.
Controls and Procedures
34
PART II.
OTHER INFORMATION
35
Item 1.
Legal Proceedings
35
Item 1A.
Risk Factors
35
Item 2.
Unregistered Sales of Equity Securities
62
Item 3.
Defaults Upon Senior Securities
63
Item 4.
Mine Safety Disclosures
63
Item 5.
Other Information
63
Item 6.
Exhibits
64
Signatures
65
1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
• our expectations regarding our revenue, expenses and other operating results;
• our ability to acquire new customers and successfully retain existing customers;
• our ability to increase usage of our platform and upsell and cross sell additional products;
• our ability to sustain our profitability;
• future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
• the costs and success of our sales and marketing efforts, and our ability to promote our brand;
• our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
• our ability to effectively manage our growth, including any international expansion;
• our ability to protect our intellectual property rights and any costs associated therewith;
• our ability to compete effectively with existing competitors and new market entrants;
• the growth rates of the markets in which we compete; and
• the potential impact of general market, political, economic, and business conditions in our industry, or reductions in information technology spending, on our business, results of operations and financial condition.
You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the header “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
Unless the context otherwise indicates, references in this report to the terms “Datadog”, “the Company,” “we,” “our” and “us” refer to Datadog, Inc. and its subsidiaries. “Datadog” and other trade names and trademarks of ours appearing in this report are our property. This report contains trade names and trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
We may announce material business and financial information to our investors using our investor relations website (www.investors.datadoghq.com). We therefore encourage investors and others interested in Datadog to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or the SEC, webcasts, press releases and conference calls.
2
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATADOG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
March 31,
2026 December 31,
2025
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 426,360 $ 401,305
Marketable securities 4,332,257 4,073,531
Accounts receivable, net of allowance for credit losses of $ 21,188 and $ 19,292 as of March 31, 2026 and December 31, 2025, respectively
680,434 741,262
Deferred contract costs, current 81,687 76,022
Prepaid expenses and other current assets 104,468 90,160
Total current assets 5,625,206 5,382,280
Property and equipment, net 378,944 338,093
Operating lease assets
213,260 214,674
Goodwill 540,543 530,568
Intangible assets, net 14,929 14,968
Deferred contract costs, non-current 136,264 126,708
Other assets 42,866 36,553
TOTAL ASSETS $ 6,952,012 $ 6,643,844
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 174,801 $ 148,791
Accrued expenses and other current liabilities 208,549 209,595
Operating lease liabilities, current 41,401 39,369
Deferred revenue, current 1,231,152 1,193,646
Total current liabilities 1,655,903 1,591,401
Operating lease liabilities, non-current 259,155 256,187
Convertible senior notes, net, non-current
984,496 983,449
Deferred revenue, non-current 50,918 68,711
Other liabilities 13,318 11,890
Total liabilities 2,963,790 2,911,638
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY:
Class A common stock, $ 0.00001 par value per share; 2,000,000,000 shares authorized as of March 31, 2026 and December 31, 2025; 330,573,793 and 328,117,781 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
3 3
Class B common stock, $ 0.00001 par value per share; 310,000,000 shares authorized as of March 31, 2026 and December 31, 2025; 25,271,775 and 24,408,190 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
— —
Additional paid-in capital 3,801,272 3,579,010
Accumulated other comprehensive (loss) income ( 3,416 ) 15,404
Retained earnings
190,363 137,789
Total stockholders’ equity 3,988,222 3,732,206
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,952,012 $ 6,643,844
See accompanying notes to condensed consolidated financial statements.
3
DATADOG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
Three Months Ended
March 31,
2026 2025
Revenue $ 1,006,426 $ 761,553
Cost of revenue 209,228 157,628
Gross profit 797,198 603,925
Operating expenses:
Research and development 435,298 341,061
Sales and marketing 279,823 214,291
General and administrative 74,750 60,993
Total operating expenses 789,871 616,345
Operating income (loss) 7,327 ( 12,420 )
Other income:
Interest expense ( 3,119 ) ( 2,963 )
Interest income and other income, net 54,722 47,179
Other income, net 51,603 44,216
Income before provision for income taxes 58,930 31,796
Provision for income taxes 6,356 7,154
Net income $ 52,574 $ 24,642
Net income attributable to common stockholders $ 52,574 $ 24,642
Basic net income per share $ 0.15 $ 0.07
Diluted net income per share $ 0.15 $ 0.07
Weighted average shares used in calculating basic net income per share: 353,272 343,097
Weighted average shares used in calculating diluted net income per share: 364,731 363,078
See accompanying notes to condensed consolidated financial statements.
4
DATADOG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
March 31,
2026 2025
Net income $ 52,574 $ 24,642
Other comprehensive (loss) income:
Foreign currency translation adjustments ( 4,032 ) 3,106
Unrealized (loss) gain on available-for-sale marketable securities ( 11,761 ) 2,933
Unrealized loss on cash flow hedges
( 3,027 ) —
Other comprehensive (loss) income ( 18,820 ) 6,039
Comprehensive income $ 33,754 $ 30,681
See accompanying notes to condensed consolidated financial statements.
5
DATADOG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Class A and Class B
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total
Stockholders' Equity
Shares Amount
BALANCE—December 31, 2025 352,525,971 $ 3 $ 3,579,010 $ 15,404 $ 137,789 $ 3,732,206
Issuance of common stock upon exercise of stock options 1,293,916 — 9,715 — — 9,715
Vesting of restricted and performance stock units 1,891,445 — — — — —
Issuance of restricted shares of common stock from acquisitions 134,236 — 6,517 — — 6,517
Stock-based compensation — — 206,030 — — 206,030
Change in accumulated other comprehensive loss
— — — ( 18,820 ) — ( 18,820 )
Net income — — — — 52,574 52,574
BALANCE—March 31, 2026 355,845,568 $ 3 $ 3,801,272 $ ( 3,416 ) $ 190,363 $ 3,988,222
Class A and Class B
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total
Stockholders' Equity
Shares Amount
BALANCE—December 31, 2024 342,118,782 $ 3 $ 2,689,013 $ ( 4,701 ) $ 30,048 $ 2,714,363
Issuance of common stock upon exercise of stock options 1,316,133 — 1,703 — — 1,703
Vesting of restricted and performance stock units 1,475,894 — — — — —
Stock-based compensation — — 169,927 — — 169,927
Change in accumulated other comprehensive income — — — 6,039 — 6,039
Net income — — — — 24,642 24,642
BALANCE—March 31, 2025 344,910,809 $ 3 $ 2,860,643 $ 1,338 $ 54,690 $ 2,916,674
6
DATADOG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
2026 2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 52,574 $ 24,642
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,923 11,255
Accretion of discounts on marketable securities ( 11,880 ) ( 10,370 )
Amortization of issuance costs 1,047 1,819
Amortization of deferred contract costs 20,325 14,853
Stock-based compensation, net of amounts capitalized 196,841 164,265
Non-cash lease expense 9,073 8,389
Allowance for credit losses on accounts receivable 4,953 4,520
Loss on disposal of property and equipment
1,134 ( 145 )
Changes in operating assets and liabilities:
Accounts receivable, net 55,874 104,227
Deferred contract costs ( 35,545 ) ( 21,519 )
Prepaid expenses and other current assets ( 14,445 ) ( 10,263 )
Other assets ( 522 ) ( 1,217 )
Accounts payable 21,500 ( 10,712 )
Accrued expenses and other liabilities ( 3,877 ) 5,648
Deferred revenue 19,647 ( 13,851 )
Net cash provided by operating activities 334,622 271,541
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities ( 1,304,965 ) ( 970,302 )
Maturities of marketable securities 1,046,415 555,938
Proceeds from sale of marketable securities ( 57 ) ( 76 )
Purchases of property and equipment ( 11,358 ) ( 8,748 )
Capitalized software development costs ( 34,173 ) ( 18,402 )
Cash paid for acquisition of businesses; net of cash acquired ( 10,660 ) ( 1,818 )
Net cash used in investing activities ( 314,798 ) ( 443,408 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 9,711 1,673
Repayments of 2025 Convertible Senior Notes — ( 20 )
Net cash provided by financing activities 9,711 1,653
Effect of exchange rate changes on cash and cash equivalents
( 4,480 ) 3,085
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,055 ( 167,129 )
CASH AND CASH EQUIVALENTS—Beginning of period
401,305 1,246,983
CASH AND CASH EQUIVALENTS—End of period
$ 426,360 $ 1,079,854
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 17,172 $ 3,658
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued property and equipment purchases $ 8,963 $ 4,542
Stock-based compensation included in capitalized software development costs $ 9,189 $ 5,662
Issuance of restricted shares of common stock for the acquisition of businesses $ 6,517 $ —
Acquisition holdback $ 1,614 $ 50
See accompanying notes to condensed consolidated financial statements.
7
DATADOG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
Datadog, Inc. (“Datadog” or the “Company”) was incorporated in the State of Delaware on June 4, 2010. On April 21, 2026, the Company completed its conversion from a corporation organized under the laws of the State of Delaware to a corporation organized under the laws of the State of Nevada.
The Company is the AI-powered observability and security platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security, service management, and many other capabilities to provide unified, real-time observability and security of its customers’ entire technology stack. The Company is headquartered in New York City and has various other global office locations.
2. Basis of Presentation and Summary of Significant Accounting Policies
Unaudited Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2026 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 18, 2026 (the “Annual Report”).
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for credit losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software and finite lived intangibles, stock-based compensation, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate for operating leases, estimated expected period of benefit for deferred contract costs, fair value of the liability component of the convertible debt, realization of deferred tax assets and uncertain tax positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.
8
Derivative Financial Instruments
The Company utilizes foreign currency forward contracts to reduce the volatility in cash flows associated with forecasted operating expenses denominated in currencies other than the U.S. dollar. These foreign currency forward contracts are designated as cash flow hedges. The Company does not enter into derivative instruments for trading or speculative purposes. Changes in the fair value of these instruments are recorded in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the same period in which the underlying hedged transactions affect earnings, generally within operating expenses. In the event the underlying forecasted transactions do not occur, or it becomes probable that they will not occur within the designated hedge period, the related gains or losses are reclassified into earnings. The Company formally designates and documents hedging relationships at inception and assesses hedge effectiveness at inception and on a quarterly basis thereafter. Cash flows at settlement of such foreign currency forward contracts are classified in the same category as the cash flows from the underlying hedged forecasted transactions.
Accounting Pronouncements Recently Adopted
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ( "ASU No. 2025-05" ) , which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance is effective for annual periods, including interim reporting periods, beginning after December 15, 2025, on a prospective basis, with early adoption permitted. The Company adopted this standard on a prospective basis for interim and annual periods beginning January 1, 2026. The adoption of this guidance did not have a material impact on the consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU No. 2024-03"), which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. For public business entities, it is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments in this ASU should be applied prospectively, however, public business entities are permitted to apply the amendments in the ASU retrospectively. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU No. 2025-06"), to modernize the accounting for software costs that are accounted for under Subtopic 350-40. The ASU removes all references to software development stages and allows software development costs to be capitalized once management commits to funding the project and it is probable that the project will be completed and used as intended. The ASU also introduces the concept of "significant development uncertainty," which, if present, prevents capitalization. The guidance is effective for annual reporting periods, including interim reporting periods, beginning after December 15, 2027. The guidance may be applied prospectively, retrospectively, or via a modified prospective transition method. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topics 270): Narrow-Scope Improvements ("ASU No. 2025-11"), which amends guidance related to interim financial reporting. The guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
9
3. Marketable Securities
The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025 (in thousands):
March 31, 2026
Amortized
Cost Unrealized
Gain Unrealized
Losses
Fair
Value
Corporate debt securities $ 2,386,236 $ 1,630 $ ( 3,751 ) $ 2,384,115
Commercial paper 817,510 77 ( 506 ) 817,081
U.S. government treasury securities 803,020 560 ( 1,334 ) 802,246
Certificates of deposit 327,392 70 ( 138 ) 327,324
U.S. government agency securities 1,490 1 — 1,491
Marketable securities $ 4,335,648 $ 2,338 $ ( 5,729 ) $ 4,332,257
December 31, 2025
Amortized
Cost Unrealized
Gain Unrealized
Losses
Fair
Value
Corporate debt securities $ 2,577,421 $ 6,103 $ ( 131 ) $ 2,583,393
U.S. government treasury securities 693,907 1,993 ( 6 ) 695,894
Commercial paper 599,663 304 — 599,967
Certificates of deposit 192,685 99 — 192,784
U.S. government agency securities 1,490 3 — 1,493
Marketable securities $ 4,065,166 $ 8,502 $ ( 137 ) $ 4,073,531
As of March 31, 2026, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):
Due within one year $ 2,902,501
Due in one year through five years 1,429,756
Total $ 4,332,257
The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses on marketable securities are presented net of tax.
10
4. Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
Fair Value Measurement as of March 31, 2026
Level 1 Level 2 Level 3 Total
Financial Assets:
Cash equivalents:
Money market funds $ 369,785 $ — $ — $ 369,785
Commercial paper — 15,058 — 15,058
Corporate debt securities — 4,442 — 4,442
Marketable securities:
Corporate debt securities — 2,384,115 — 2,384,115
Commercial paper
— 817,081 — 817,081
U.S. government treasury securities — 802,246 — 802,246
Certificates of deposit — 327,324 — 327,324
U.S. government agency securities — 1,491 — 1,491
Derivative assets—included in prepaid expenses and other current assets:
Cash flow hedges
— 39 — 39
Total financial assets $ 369,785 $ 4,351,796 $ — $ 4,721,581
Liabilities:
Derivative liabilities—included in accrued expenses and other current liabilities:
Cash flow hedges
$ — $ 3,067 $ — $ 3,067
Total liabilities
$ — $ 3,067 $ — $ 3,067
Fair Value Measurement as of December 31, 2025
Level 1 Level 2 Level 3 Total
Financial Assets:
Cash equivalents:
Money market funds $ 311,106 $ — $ — $ 311,106
Commercial paper
— 29,879 — 29,879
Corporate debt securities
— 1,524 — 1,524
Marketable securities:
Corporate debt securities — 2,583,393 — 2,583,393
U.S. government treasury securities
— 695,894 — 695,894
Commercial paper
— 599,967 — 599,967
Certificates of deposit
— 192,784 — 192,784
U.S. government agency securities — 1,493 — 1,493
Total financial assets $ 311,106 $ 4,104,934 $ — $ 4,416,040
The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents. The Company uses quoted prices in active markets for assets to determine the fair value of its Level 1 investments in money market funds. The Company classifies its commercial paper, corporate debt securities, certificates of deposit, U.S. government treasury securities, Non-U.S. government securities, and cash flow hedges within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.
11
In addition to its cash equivalents and marketable securities, the Company measures the fair value of its outstanding convertible senior notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the convertible senior notes to be a Level 2 measurement due to limited trading activity of the convertible senior notes. Refer to Note 8, Convertible Senior Notes , to the condensed consolidated financial statements for further details.
5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
March 31,
2026 December 31,
2025
Computers and equipment $ 67,484 $ 63,146
Furniture and fixtures 28,804 28,319
Leasehold improvements 108,381 99,009
Capitalized software development costs 376,290 329,117
Total property and equipment $ 580,959 $ 519,591
Less: accumulated depreciation and amortization ( 202,015 ) ( 181,498 )
Total property and equipment, net $ 378,944 $ 338,093
The Company capitalizes costs related to the development of computer software for internal use and is included in capitalized software development costs within property and equipment, net.
Depreciation and amortization expense was approximately $ 16.3 million and $ 10.1 million for the three months ended March 31, 2026 and 2025, respectively.
6. Acquisitions, Intangible Assets and Goodwill
2026 Acquisitions
During the quarter ended March 31, 2026, the Company entered into two purchase agreements for acquisitions of businesses, each of which was accounted for as a business combination in accordance with ASC 805, Business Combinations . The Company does not consider the acquisitions to be material, individually or in aggregate. The resulting goodwill from each of the agreements is not deductible for income tax purposes. Pro forma results of operations from these acquisitions have not been presented because they were not material to the consolidated results of operations.
2025 Acquisitions
During the year ended December 31, 2025, the Company entered into three purchase agreements for acquisitions of businesses, each of which was accounted for as a business combination in accordance with ASC 805, Business Combinations . The Company does not consider the acquisitions to be material, individually or in aggregate. The total purchase price in aggregate of $ 178.4 million consisted of $ 109.3 million in cash payments, net of cash acquired, $ 16.1 million of deferred acquisition holdback payments and the issuance of 770,044 restricted shares of Class A common stock. The total purchase price was allocated to intangible assets in the amount of $ 17.6 million and goodwill in the amount of $ 163.1 million based on the respective estimated fair values. The purchase price allocations are preliminary. The Company continues to collect information with regard to its estimates and assumptions, including potential liabilities and contingencies. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the 12 month measurement period, if necessary. The resulting goodwill from the agreements is not deductible for income tax purposes. Pro forma results of operations from the acquisitions have not been presented because they were not material to the consolidated results of operations.
2024 Acquisitions
During the year ended December 31, 2024, the Company entered into one purchase agreement for an acquisition of a business, which was accounted for as a business combination in accordance with ASC 805, Business Combinations . The Company does not consider this acquisition to be material. The total purchase price was allocated to intangible assets in the amount of $ 0.7 million and goodwill in the amount of $ 10.2 million based on the respective estimated fair values. The resulting goodwill from the agreements is not deductible for income tax purposes. Pro forma results of operations from the acquisition have not been presented because they were not material to the consolidated results of operations.
12
Intangible Assets
Intangible assets, net consisted of the following (in thousands):
March 31, 2026
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Amortization
Period
Developed technology $ 16,139 $ ( 5,701 ) $ 10,438 3 years
Customer relationships 5,800 ( 1,309 ) 4,491 4 years
Total $ 21,939 $ ( 7,010 ) $ 14,929
December 31, 2025
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Amortization
Period
Developed technology $ 14,539 $ ( 4,420 ) $ 10,119 3 years
Customer relationships 5,800 ( 951 ) 4,849 4 years
Total $ 20,339 $ ( 5,371 ) $ 14,968
Intangible amortization expense was approximately $ 1.6 million and $ 1.1 million for the three months ended March 31, 2026 and 2025, respectively.
As of March 31, 2026, future amortization expense by year is expected to be as follows (in thousands):
Amount
Remainder of 2026 $ 4,976
2027 6,117
2028 3,292
2029 544
Total $ 14,929
Goodwill
The changes in the carrying amount of goodwill were as follows (in thousands):
Amount
Balance as of December 31, 2025 $ 530,568
2026 acquisitions
11,289
Foreign currency translation adjustments ( 1,314 )
Balance as of March 31, 2026 $ 540,543
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7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
March 31,
2026 December 31,
2025
Accrued compensation and commissions $ 105,988 $ 109,765
Other tax liability and sales tax 51,156 52,934
Other accrued expenses 51,405 46,896
Total accrued expenses and other current liabilities $ 208,549 $ 209,595
D ue to the timing of when invoices are received, payables for cloud hosting and infrastructure expenses are included within accounts payable on the condensed consolidated balance sheets, amounting to $ 96.3 million and $ 122.7 million as of March 31, 2026 and December 31, 2025, respectively.
8. Convertible Senior Notes
2025 Convertible Senior Notes
On June 2, 2020, the Company issued $ 747.5 million aggregate principal amount of the “2025 Notes.” The 2025 Notes bore interest at a rate of 0.125 % per year. The total net proceeds from the sale of the 2025 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $ 730.2 million. The 2025 Notes matured on June 15, 2025. The remaining $ 634.1 million aggregate principal amount of the 2025 Notes were converted prior to maturity and in connection with such conversions, the Company delivered $ 634.1 million in cash and issued 1,354,569 shares of the Company's Class A common stock to converting note holders.
2029 Convertible Senior Notes
On December 12, 2024, the Company issued $ 1.0 billion aggregate principal amount of 0.00 % Convertible Senior Notes due 2029 (the “2029 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net proceeds from the sale of the 2029 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $ 979.1 million. The 2029 Notes do not bear interest and the principal amount of the 2029 Notes will not accrete. The 2029 Notes will mature on December 1, 2029, unless earlier converted, redeemed or repurchased.
Holders may convert their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding September 1, 2029 only under the following circumstances:
(1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2025 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Notes on each applicable trading day;
(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 principal amount of 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;
(3) if the Company calls such 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events, as set forth in the indenture governing the 2029 Notes (the “2029 Indenture”).
On or after September 1, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date for the 2029 Notes, holders may convert all or any portion of their 2029 Notes, in integral multiples of $ 1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The conversion rate for the 2029 Notes is initially 4.5955 shares of Class A common stock per $1,000 principal amount of 2029 Notes (equivalent to an initial conversion price for the 2029 Notes of approximately $ 217.60 per share of Class A common stock), subject to adjustment as set forth in the 2029 Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A
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common stock or a combination of cash and shares of Class A common stock, at the Company’s election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of Class A common stock, the amount of cash and shares of Class A common stock, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 20 trading day observation period as described in the 2029 Indenture. In addition, if specific corporate events occur prior to the applicable maturity date for the 2029 Notes, or if the Company elects to redeem the 2029 Notes, the Company will increase the conversion rate for the 2029 Notes for a holder who elects to convert their 2029 Notes in connection with such a corporate event or redemption in certain circumstances.
During the three months ended March 31, 2026, the conditional conversion features of the 2029 Notes were not triggered. Therefore the 2029 Notes are not convertible, in whole or in part, at the option of the holders between April 1, 2026 through June 30, 2026. As of March 31, 2026, the 2029 Notes were classified as non-current liabilities on the Company's condensed consolidated balance sheet.
The Company may not redeem the 2029 Notes prior to December 6, 2027. The Company may redeem for cash all or any portion of the 2029 Notes, at its option, on or after December 6, 2027 if the last reported sale price of its Class A common stock was at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100 % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.
The net carrying amount of the 2029 Notes was as follows (in thousands):
March 31,
2026 December 31,
2025
Convertible senior notes, net:
Principal $ 1,000,000 $ 1,000,000
Unamortized debt issuance costs ( 15,504 ) ( 16,551 )
Net carrying amount $ 984,496 $ 983,449
As of March 31, 2026, the total estimated fair value of the 2029 Notes was approximately $ 969.5 million. The fair value was determined based on the closing trading price or quoted market price per $ 100 of the 2029 Notes as of the last day of trading for the period. The fair value of the 2029 Notes is primarily affected by the trading price of the Company’s Class A common stock and market interest rates and has been classified as level 2 in the fair value hierarchy.
Issuance costs were being amortized to interest expense over the contractual terms of the 2025 Notes at an effective interest rate of 0.59 %. Issuance costs are being amortized to interest expense over the contractual terms of the 2029 Notes at an effective interest rate of 0.43 %.
The following table sets forth the interest expense related to the 2025 and 2029 Notes for the three months ended March 31, 2026 and 2025 (in thousands):
Three Months Ended
March 31,
2026 2025
Contractual interest expense $ — $ 199
Amortization of issuance costs 1,047 1,819
Total $ 1,047 $ 2,018
Capped Calls
In connection with the pricing of the 2029 Notes, the Company entered into privately negotiated capped call transactions with certain option counterparties (the “Capped Calls”). The initial strike price of each of the Capped Calls corresponds to the initial conversion price of the 2029 Notes. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the 2029 Notes, with such offset subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the 2029 Notes. As these transactions
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meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital and will not be remeasured.
The following table sets forth key terms and costs incurred for the Capped Calls related to the 2029 Notes (in millions, except per share amounts):
2029 Notes
Initial strike price per share, subject to certain adjustments $ 217.60
Initial cap price per share, subject to certain adjustments $ 322.38
Net cost incurred $ 100.9
Common stock covered, subject to anti-dilution adjustments 4.6
In connection with the maturity of the 2025 Notes, the Company issued 1,354,569 shares to holders of the 2025 Notes that converted prior to maturity and received 1,360,738 shares from the relevant option counterparties upon settlement of the Capped Calls relating to the 2025 Notes.
9. Commitments and Contingencies
Non-cancelable Material Commitments— During the three months ended March 31, 2026, other than certain non-cancelable operating leases described in Note 10, Leases , there have been no other material changes outside the ordinary course of business to the Company’s contractual obligations and commitments from those disclosed in the Annual Report.
401(k) Plan —The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. The Company is responsible for administrative costs of the 401(k) plan and makes matching contributions to the 401(k) plan. For the three months ended March 31, 2026 and 2025, the Company incurred expense of $ 2.5 million and $ 2.1 million, respectively, for matching contributions.
Legal Matters —The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.
Indemnification —The Company enters into indemnification provisions under some agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s condensed consolidated statements of operations in connection with the indemnification provisions have not been material.
10. Leases
The Company has entered into various non-cancelable operating leases for its facilities expiring between 2026 and 2036. Certain lease agreements contain an option for the Company to renew a lease for a term of up to three years or an option to terminate a lease early within one year . The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis.
Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.
The components of lease cost recognized within the Company’s condensed consolidated statements of operations were as follows (in thousands):
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Three Months Ended
March 31,
2026 2025
Operating lease cost (1)
$ 14,175 $ 13,055
Short-term lease cost 4,589 2,757
1) Includes non-cash lease expense of $ 9.1 million and $ 8.4 million for the three months ended March 31, 2026 and 2025, respectively.
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):
Three Months Ended
March 31,
2026 2025
Cash paid for amounts included in measurement of lease liabilities $ 12,937 $ 10,611
Operating lease assets obtained in exchange for new lease liabilities 8,914 37,769
Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):
Amount
Remainder of 2026 $ 44,313
2027 59,568
2028 51,685
2029 48,792
2030 49,097
Thereafter 128,348
Total lease payments $ 381,803
Less: imputed interest ( 81,247 )
Present value of lease liabilities $ 300,556
As of March 31, 2026, the Company had various operating leases that had not yet commenced, which are excluded from the table above. The operating leases will commence between fiscal years 2026 and 2027 with total undiscounted future payments of $ 221.6 million and a weighted-average lease term of 9.1 years.
Weighted average remaining lease term and discount rate for the Company’s operating leases are as follows:
March 31,
2026
Weighted-average remaining lease term (years) 6.9
Weighted-average discount rate 6.67 %
11. Revenue
Geographical Information
Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):
Three Months Ended
March 31,
2026 2025
North America (1)
$ 723,933 $ 533,815
International 282,493 227,738
Total $ 1,006,426 $ 761,553
1) Includes revenue from the United States of $ 692.7 million and $ 508.5 million for the three months ended March 31, 2026 and 2025, respectively.
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Deferred Revenue and Remaining Performance Obligations
Certain of the Company’s customers pay in advance of satisfaction of performance obligations and other customers with monthly contract terms are billed in arrears on a monthly basis. The Company records contract liabilities to deferred revenue when customers are billed or when the Company receives customer payments in advance of the performance obligations being satisfied on the Company’s contracts.
Revenue recognized during the three months ended March 31, 2026 and 2025, which was included in the deferred revenue balances at the beginning of each such period, was $ 560.3 million and $ 425.3 million, respectively.
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. As of March 31, 2026 and December 31, 2025, the aggregate transaction price allocated to remaining performance obligations was $ 3,484.4 million and $ 3,461.2 million, respectively. There is uncertainty in the timing of revenues associated with the Company’s drawdown contracts, as future revenue can often vary significantly from past revenue. However, the Company expects to recognize substantially all of the remaining performance obligations over the next 24 months.
Accounts Receivable
Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. During the three months ended March 31, 2026 and 2025, the Company charged $ 3.3 million and $ 3.1 million, respectively, of accounts receivable deemed uncollectible against the allowance for credit losses.
Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date. The unbilled accounts receivable balance is due within one year. As of March 31, 2026 and December 31, 2025, unbilled accounts receivable of approximately $ 134.1 million and $ 127.0 million, respectively, was included in accounts receivable on the Company’s condensed consolidated balance sheets.
Deferred Contract Costs
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit, which is determined to be four years . Amounts expected to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current; the remaining portion is recorded as deferred contract costs, non-current, in the condensed consolidated balance sheets.
Deferred contract costs on the Company’s condensed consolidated balance sheets were $ 218.0 million and $ 202.7 million as of March 31, 2026 and December 31, 2025, respectively. Amortization expense was $ 20.3 million and $ 14.9 million for the three months ended March 31, 2026 and 2025, respectively.
12. Stockholders’ Equity
Class A and Class B Common Stock
The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder and are automatically converted to Class A common stock upon sale or transfer, subject to certain limited exceptions.
During the three months ended March 31, 2026, 304,491 shares of Class B common stock were converted into Class A common stock.
As of March 31, 2026, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each with a par value of $ 0.00001 per share, of which 330,573,793 shares of Class A common stock and 25,271,775 shares of Class B common stock were issued and outstanding.
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Equity Incentive Plans
The Company has two equity incentive plans, the 2012 Equity Incentive Plan (the “2012 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”). In connection with the Company’s initial public offering of Class A common stock (the “IPO”), the Company ceased granting awards under the 2012 Plan, and all shares that remained available for issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Additionally, as of March 31, 2026, there were 2,166,251 shares of Class A common stock issuable upon conversion of Class B common stock underlying options outstanding under the 2012 Plan. Under the 2019 Plan, the Board and any committee or subcommittee of the Board may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance stock units (“PSUs”) and other awards, each equity award valued or based on the Company’s Class A common stock, to employees, directors, consultants and advisors of the Company. As of March 31, 2026, there were 108,289,634 shares available for grant under the 2019 Plan.
Stock Options
The following table summarizes the Company’s stock option activity and weighted-average exercise prices:
Number of
Options
Outstanding
Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual
Life (in Years) Aggregate
Intrinsic Value
(in thousands)
Balance—December 31, 2025 3,474,619 $ 7.26 3.0 $ 447,294
Options granted — —
Options exercised ( 1,293,916 ) 7.34
Options forfeited or expired — —
Balance—March 31, 2026 2,180,703 $ 7.21 2.8 $ 241,704
Exercisable—March 31, 2026
2,180,703 $ 7.21 2.8 $ 241,704
As of March 31, 2026, there were 14,452 shares of Class A common stock and 2,166,251 shares of Class B common stock issuable upon the exercise of options outstanding. As of December 31, 2025, there were 14,452 shares of Class A common stock and 3,460,167 shares of Class B common stock issuable upon the exercise of options outstanding.
There were no options granted during the three months ended March 31, 2026 and 2025. The Company received approximately $ 9.7 million and $ 1.7 million in cash proceeds from options exercised during the three months ended March 31, 2026 and 2025, respectively. The intrinsic value of options exercised during the three months ended March 31, 2026 and 2025 was approximately $ 127.5 million and $ 168.4 million, respectively.
Restricted Stock Units, Restricted Stock and Performance Stock Units
The following table summarizes the activity for the Company’s unvested RSUs and PSUs:
Shares Weighted-
Average Grant Date
Fair Value
Unvested and outstanding balance as of December 31, 2025 16,700,043 $ 124.10
Awarded 2,602,673 121.33
Vested ( 1,891,445 ) 108.10
Forfeited/canceled ( 376,799 ) 127.67
Unvested and outstanding balance as of March 31, 2026 17,034,472 125.38
The Company granted 134,236 restricted shares of Class A common stock in connection with acquisitions during the three months ended March 31, 2026.
Total compensation cost related to unvested RSUs and restricted shares of common stock not yet recognized was approximately $ 1,817.0 million and $ 1,717.2 million as of March 31, 2026 and December 31, 2025, respectively. The weighted-average period over which this compensation cost related to unvested RSUs and restricted shares of common stock will be recognized is 2.9 years and 2.8 years as of March 31, 2026 and December 31, 2025, respectively.
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Total compensation cost related to unvested PSUs not yet recognized was approximately $ 63.2 million and $ 82.8 million as of March 31, 2026 and December 31, 2025, respectively. The weighted-average period over which this compensation cost related to unvested PSUs will be recognized is 1.4 years and 1.3 years as of March 31, 2026 and December 31, 2025, respectively.
Employee Stock Purchase Plan
In September 2019, the Board adopted and approved the 2019 Employee Stock Purchase Plan (the “ESPP”).
The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Historically offering periods have been approximately 6 months. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85 % of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.
The Company recognized $ 7.2 million of stock-based compensation expense related to the ESPP during the three months ended March 31, 2026. As of March 31, 2026, $ 31.6 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. There were no purchases related to ESPP in the three months ended March 31, 2026. As of March 31, 2026, 26,719,708 shares of Class A common stock remain available for grant under the ESPP.
Stock-Based Compensation
The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors and nonemployees, including stock options, restricted stock units (“RSUs”), performance-based awards (“PSUs”), and the employee stock purchase plan (the “ESPP”) based on the fair value of the awards on the date of grant. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs and PSUs is determined by the closing price on the date of grant of the Company’s Class A common stock, as reported on the Nasdaq Global Select Market. The Company estimates the fair value of the rights to acquire stock under the ESPP using the Black-Scholes option-pricing model. Stock-based compensation for stock options and RSUs is recognized on a straight-line basis over the requisite service period and account for forfeitures as they occur. Stock-based compensation for PSUs is amortized under the accelerated attribution method and may be adjusted over the vesting period based on interim estimates of performance against pre-set objectives. PSUs will vest upon achievement of specified performance targets and subject to continuous service through the applicable vesting dates. The compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied and the Company accounts for forfeitures as they occur.
The Company also has certain options that have performance-based vesting conditions; stock-based compensation expense for such awards is recognized on a straight-line basis from the time the vesting condition is likely to be met through the time the vesting condition has been achieved.
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Stock-based compensation expense was included in the condensed consolidated statement of operations as follows (in thousands):
Three Months Ended
March 31,
2026 2025
Cost of revenue $ 8,558 $ 6,651
Research and development 123,671 105,735
Sales and marketing 42,298 34,125
General and administrative 22,314 17,754
Stock-based compensation, net of amounts capitalized 196,841 164,265
Capitalized stock-based compensation expense 9,189 5,662
Total stock-based compensation expense $ 206,030 $ 169,927
13. Interest Income and Other Income, Net
Interest income and other income, net consist of the following (in thousands):
Three Months Ended
March 31,
2026 2025
Interest income $ 49,229 $ 50,727
Other income (loss), net 5,493 ( 3,548 )
Interest income and other income, net $ 54,722 $ 47,179
14. Income Ta xes
The Compa ny recorded a provision for income taxes of $ 6.4 million and $ 7.2 million for the three months ended March 31, 2026 and 2025, respectively . The Company has generated U.S. operating income and has minimal profits in its foreign jurisdictions during the quarter.
The Company’s effective tax rate was 10.79 % and 22.50 % for the three months ended March 31, 2026 and March 31, 2025, respectively. The effective tax rate differs from the U.S. federal statutory rate primarily due to the impact of a full valuation allowance on U.S. deferred tax assets, the favorable effects of the One Big Beautiful Bill Act (“OBBBA”), and withholding taxes in certain foreign jurisdictions.
The Company has applied ASC 740, Income Taxes , and has determined that it has uncertain positions that would result in a tax reserve for each of the three months ended March 31, 2026 and 2025. There were no material changes to the Company's unrecognized tax benefits during the three months ended March 31, 2026. The Company’s policy is to recognize interest and penalties related to uncertain income tax positions in income tax expense. The Company is subject to U.S. federal tax authority, U.S. state tax authority and foreign tax authority examinations.
The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company recorded a full valuation allowance against substantially all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.
The Company is subject to tax laws in the United States and numerous foreign jurisdictions. The United States and many international legislative and regulatory bodies continually propose and enact legislation that could significantly impact how U.S. multinational corporations are taxed. The Company is closely monitoring proposed legislation and its potential impact.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA permanently extends certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation for certain qualified property, and reverses the requirement to capitalize and amortize domestic research and experimentation (“R&E”) expenses. As a result, for tax years beginning after December 31, 2024, taxpayers may deduct such expenses in the year incurred. The legislation also
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introduced an election to accelerate any unamortized domestic R&E expenditures over a one- or two-year period beginning with the 2025 tax year and includes modifications to the international tax framework. The OBBBA also includes modifications to the international tax framework. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects thereof could be repealed or modified in future legislation. In accordance with ASC 740, Accounting for Income Taxes , the Company has reflected the effects of the OBBBA in its financial statements for the quarter ended March 31, 2026. The enactment of the OBBBA reduced the Company’s forecasted U.S. income tax expense for 2026. The legislation did not impact the Company’s U.S. net deferred tax assets or liabilities, as a full valuation allowance continues to be maintained against those balances.
15. Net Income Per Share
Basic and diluted net income per common share is presented in conformity with the two-class method required for participating securities. Basic and diluted net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as the conversion of Class B common stock is assumed in the computation of the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation.
The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):
Three Months Ended
March 31,
2026 2025
Basic net income per share: Class A Class B Class A Class B
Numerator:
Net income $ 48,893 $ 3,681 $ 22,808 $ 1,834
Denominator:
Weighted-average shares used in calculating net income per share, basic $ 328,539 $ 24,733 $ 317,561 $ 25,536
Basic net income per share $ 0.15 $ 0.15 $ 0.07 $ 0.07
Diluted net income per share:
Numerator:
Allocation of distributed income, net of interest expense and related tax
$ 49,625 $ 3,736 $ 24,101 $ 1,938
Reallocation of undistributed net income as a result of conversion of Class B to Class A shares
3,736 — 1,938 —
Allocation of undistributed income
$ 53,361 $ 3,736 $ 26,039 $ 1,938
Denominator:
Number of shares used in basic calculation 328,539 24,733 317,561 25,536
Weighted-average effect of diluted securities:
Conversion of Class B to Class A common shares outstanding 24,733 — 25,536 —
Employee stock options 2,771 — 5,961 —
Employee stock purchase plan
21 — 86 —
Restricted stock units and performance stock units
3,627 — 3,404 —
Unvested restricted stock in connection with acquisition 444 — 194 —
Shares issuable upon conversion of the 2025 Notes
— — 5,740 —
Shares issuable upon conversion of the 2029 Notes
4,596 — 4,596 —
Number of shares used in diluted calculation 364,731 24,733 363,078 25,536
Diluted net income per share $ 0.15 $ 0.15 $ 0.07 $ 0.08
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Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):
As of March 31,
2026 2025
Shares subject to outstanding stock options, RSUs and PSUs 4,359 2,868
Total 4,359 2,868
The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the Notes on diluted net income per share.
The Company entered into Capped Calls in connection with the issuance of the Notes. The effect of the Capped Calls was excluded from the calculation of diluted net income per share as the effect of the Capped Calls would have been anti-dilutive. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the Notes.
16. Derivative Financial Instruments
The Company’s derivative financial instruments consist of foreign currency forward contracts used to manage exposure to fluctuations in foreign currency exchange rates, which all have maturities of 12 months or less.
As of March 31, 2026, the Company had foreign currency forward contracts designated as cash flow hedges with total notional amounts of approximately $ 194.0 million. The notional amounts of derivative instruments represent the amount of foreign currency to be exchanged under the contracts and do not represent the Company’s exposure to credit or market risk.
As of March 31, 2026, an estimated ($ 3.0 ) million of net gains (losses) included in accumulated other comprehensive income (loss) is expected to be reclassified into earnings within the next 12 months. Cash flows from the settlement of these contracts are classified in the same category as the underlying hedged transactions. Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies and Note 4, Fair Value Measurements for additional information.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, or the Annual Report. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
Datadog is the AI-powered observability and security platform for cloud applications.
Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security, service management, and many other capabilities to provide unified, real-time observability and security for our customers’ entire technology stack. Datadog is used by organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations, security and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user behavior and track key business metrics.
We generate revenue from the sale of subscriptions to customers using our cloud-based platform. The terms of our subscription agreements are primarily monthly or annual. Customers also have the option to purchase additional products, such as additional containers to monitor, custom metrics packages, anomaly detection and app analytics. Professional services are generally not required for the implementation of our products and revenue from such services has been immaterial to date.
We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our customers can expand their footprint with us on a self-service basis. Our customers often significantly increase their usage of the products they initially buy from us and expand their usage to other products we offer on our platform. We grow with our customers as they expand their workloads in the public and private cloud.
As of March 31, 2026, we had $426.4 million in cash and cash equivalents and $4.3 billion in marketable securities. We generated revenue of $1,006.4 million and $761.6 million in the three months ended March 31, 2026 and 2025, respectively, representing year-over-year growth of 32%. Substantially all of our revenue is from subscription software sales. While we have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, we generated net income of $52.6 million and $24.6 million for the three months ended March 31, 2026 and 2025, respectively. Our operating cash flow was $334.6 million and $271.5 million for the three months ended March 31, 2026 and 2025, respectively. Our free cash flow was $289.1 million and $244.4 million for the three months ended March 31, 2026 and 2025, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” below.
Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including changes in trade policies, such as trade wars, tariffs or other trade restrictions or the threat of such actions, fluctuating inflation and interest rates, and the conflicts in Ukraine and the Middle East have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses.
Due to our subscription model, the effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. However, if economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.
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Factors Affecting Our Performance
Acquiring New Customers
We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisition by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our platform and products. We also plan to continue to invest in building brand awareness within the development and operations communities. As of March 31, 2026, we had approximately 33,200 customers spanning organizations of a broad range of sizes and industries, compared to approximately 30,500 as of March 31, 2025. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.
We define the number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated. Users of our free trials or tier are not included in our customer count. A single organization with multiple divisions, segments or subsidiaries is generally counted as a single customer. However, in some cases where they have separate billing terms, we may count separate divisions, segments or subsidiaries as multiple customers.
Expanding Within Our Existing Customer Base
Our base of customers represents a significant opportunity for further sales expansion. As of March 31, 2026, we had approximately 4,550 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 90% of our ARR, up from 3,770 customers as of March 31, 2025, representing 88% of our ARR. We monitor our number of customers with ARR of $100,000 or more, and believe it is useful to investors, as an indicator of our ability to grow the number of customers that are exceeding this ARR threshold. We define ARR as the annual run-rate revenue of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly run-rate revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used and monthly subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent our revenue under GAAP on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue.
A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate, which compares our ARR from the same set of customers in one period, relative to the year-ago period. As of March 31, 2026, our trailing 12-month dollar-based net retention rate was low-120%'s. As of March 31, 2025, our trailing 12-month dollar-based net retention rate was high-110%'s. The increase in our trailing 12-month dollar-based net retention rate was attributable to increased usage growth from existing customers. We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net retention rates, to arrive at the trailing 12-month dollar-based net retention rate.
We believe that our land-and-expand business model allows us to efficiently increase revenue from our existing customer base. Our customers often expand the deployment of our platform across large teams and more broadly within the enterprise as they migrate more workloads to the cloud, find new use cases for our platform, and generally realize the benefits of our platform. We intend to continue to invest in enhancing awareness of our brand and developing more products, features and functionality, which we believe are important factors to achieve widespread adoption of our platform. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solution, competition, pricing and overall changes in our customers’ spending levels.
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Sustaining Innovation and Technology Leadership
Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform that will position us to further extend the adoption of our platform and products. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Datadog is a daily part of the lives of developers, operations engineers and business leaders. We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our efficient go-to-market model enables us to prioritize significant investment in innovation. We have demonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring solution to include over 20 products. Approximately 85% of our customers were using two or more products as of March 31, 2026, up from approximately 83% a year earlier. Additionally, as of March 31, 2026, approximately 56% of our customers were using four or more products, up from approximately 51% a year earlier, approximately 35% of our customers were using six or more products, up from 28% a year earlier, approximately 20% of our customers were using eight or more products, up from 13% a year earlier; and approximately 11% of our customers were using ten or more products, up from 6% a year earlier. We believe these metrics indicate strong expansion of product adoption across our platform.
We intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent on our ability to successfully develop, market and sell existing and new products to both new and existing customers.
Expanding Internationally
We believe there is a significant opportunity to expand usage of our platform outside of North America. Revenue, as determined based on the billing address of our customers, from regions outside of North America was approximately 28% and 30% of our total revenue for the three months ended March 31, 2026 and 2025, respectively. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in EMEA and APAC. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have sales presence internationally, primarily in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.
Components of Results of Operations
Revenue
We generate revenue from the sale of subscriptions to customers using our cloud-based platform. The terms of our subscription agreements are primarily monthly, annual or multi-year, with the majority of our revenue coming from annual subscriptions. Our customers can enter into a subscription for a committed contractual amount of usage that is apportioned ratably on a monthly basis over the term of the subscription period, a subscription for a committed contractual amount of usage that is delivered as used, or a monthly subscription based on usage. To the extent that our customers’ usage exceeds the committed contracted amounts under their subscriptions, either on a monthly basis in the case of a ratable subscription or once the entire commitment is used in the case of a delivered-as-used subscription, they are charged for their incremental usage. Usage is measured on a per-unit basis, with the unit of measure differing for each product, based on the unit that, in working with customers and design partners, best indicates the value we deliver.
In the case of subscriptions for committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement, generally beginning on the date that our platform is made available to a customer. As a result, much of our revenue is generated from subscriptions entered into during previous periods. Consequently, any decreases in new subscriptions or renewals in any one period may not be immediately reflected as a decrease in revenue for that period, but could negatively affect our revenue in future quarters. This also makes it difficult for us to rapidly increase our revenue through the sale of additional subscriptions in any period, as revenue is recognized over the term of the subscription agreement. In the case of a subscription for a committed contractual amount of usage that is delivered as used, a monthly subscription based on usage, or usage in excess of a ratable subscription, we recognize revenue as the product is used, which may lead to fluctuations in our revenue and results of operations. In addition, historically, we have experienced seasonality in new customer bookings, as we typically enter into a higher percentage of subscription agreements with new customers in the fourth quarter of the year.
Due to ease of implementation of our products, professional services generally are not required and revenue from such services has been immaterial to date.
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Cost of Revenue
Cost of revenue primarily consists of expenses related to providing our products to customers, including payments to our third-party cloud infrastructure providers for hosting our software, personnel-related expenses for operations and global support, including salaries, benefits, bonuses and stock-based compensation, payment processing fees, information technology, depreciation and amortization related to the amortization of acquired intangibles and internal-use software and other overhead costs such as allocated facilities.
We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capability of our platform and ensure that our customers are realizing the full benefit of our platform and products. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future.
Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand our products and geographical coverage.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and sales commissions. Operating expenses also include overhead costs for facilities and shared IT-related expenses, including depreciation expense.
Research and Development
Research and development expense consists primarily of personnel costs for our engineering, service and design teams. Additionally, research and development expense includes contractor fees, depreciation and amortization and allocated overhead costs. Research and development costs are expensed as incurred, with the exception of certain software development costs which are eligible for capitalization. We expect that our research and development expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform.
Sales and Marketing
Sales and marketing expense consists primarily of personnel costs for our sales and marketing organization, costs of general marketing and promotional activities, including the free tier and free introductory trials of our products, travel-related expenses, amortization of acquired customer relationships, and allocated overhead costs. Sales commissions earned by our sales force are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be four years. We expect that our sales and marketing expense will increase in absolute dollars as we expand our sales and marketing efforts.
General and Administrative
General and administrative expense consists primarily of personnel costs for finance, legal, human resources, and other administrative functions. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs. We expect that our general and administrative expense will increase in absolute dollars as our business grows.
Other Income, (Loss), Net
Other income, (loss), net consists of interest income, primarily due to income earned on money market funds included in cash and cash equivalents and on marketable securities, partially offset by interest expense on the Notes and amortization of premiums on our marketable securities.
Provision for Income Taxes
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Provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We recorded a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
Three Months Ended
March 31,
2026 2025
(in thousands)
Revenue $ 1,006,426 $ 761,553
Cost of revenue (1)(2)(3)
209,228 157,628
Gross profit 797,198 603,925
Operating expenses
Research and development (1)(3)
435,298 341,061
Sales and marketing (1)(2)(3)
279,823 214,291
General and administrative (1)(3)(4)
74,750 60,993
Total operating expenses 789,871 616,345
Operating income (loss) 7,327 (12,420)
Other income:
Interest expense (5)
(3,119) (2,963)
Interest income and other income, net 54,722 47,179
Other income, net 51,603 44,216
Income before provision for income taxes 58,930 31,796
Provision for income taxes 6,356 7,154
Net income $ 52,574 $ 24,642
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(1) Includes stock-based compensation expense as follows:
Three Months Ended
March 31,
2026 2025
(in thousands)
Cost of revenue $ 8,558 $ 6,651
Research and development 123,671 105,735
Sales and marketing 42,298 34,125
General and administrative 22,314 17,754
Total $ 196,841 $ 164,265
_________________
(2) Includes amortization of acquired intangibles expense as follows:
Three Months Ended
March 31,
2026 2025
(in thousands)
Cost of revenue $ 1,282 $ 894
Sales and marketing 358 203
Total $ 1,640 $ 1,097
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(3) Includes employer payroll taxes on employee stock transactions as follows:
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Three Months Ended
March 31,
2026 2025
(in thousands)
Cost of revenue $ 188 $ 186
Research and development 11,276 9,582
Sales and marketing 1,895 1,570
General and administrative 3,635 2,225
Total $ 16,994 $ 13,563
_________________
(4) Includes M&A transaction costs as follows:
Three Months Ended
March 31,
2026 2025
(in thousands)
General and administrative
$ 695 $ —
_________________
(5) Includes amortization of issuance costs as follows:
Three Months Ended
March 31,
2026 2025
(in thousands)
Interest expense $ 1,047 $ 1,819
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:
Three Months Ended
March 31,
2026 2025
(as a percentage of total revenue (1) )
Revenue 100 % 100 %
Cost of revenue 21 21
Gross profit 79 79
Operating expenses
Research and development 43 45
Sales and marketing 28 28
General and administrative 7 8
Total operating expenses 78 81
Operating income (loss) 1 (2)
Other income:
Interest expense 0 0
Interest income and other income, net 5 6
Other income, net 5 6
Income before provision for income taxes 6 4
Provision for income taxes 1 1
Net income 5 % 3 %
(1) Certain items may not total due to rounding.
Comparison of the Three Months Ended March 31, 2026 and 2025
Revenue
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Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
Revenue $ 1,006,426 $ 761,553 $ 244,873 32 %
Revenue increased by $244.9 million, or 32%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 . Approximately 75% of the increase in revenue was attributable to growth from existing customers, and the remaining 25% was attributable to growth from new customers.
Cost of Revenue and Gross Margin
Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
Cost of revenue $ 209,228 $ 157,628 $ 51,600 33 %
Gross margin 79 % 79 %
Cost of revenue increased by $51.6 million, or 33%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $41.8 million in third-party cloud infrastructure hosting and software costs and an increase of $4.3 million in personnel costs including allocated overhead costs as a result of increased headcount.
Our gross margin remained flat for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily as a result of revenue growing in proportion to the growth of our third-party cloud infrastructure provider costs.
Research and Development
Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
Research and development $ 435,298 $ 341,061 $ 94,237 28 %
Percentage of revenue 43 % 45 %
Research and development expense increased by $94.2 million, or 28%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $70.3 million in personnel costs including allocated overhead costs for our engineering, product and design teams as a result of increased headcount and an increase of $13.4 million in cloud infrastructure-related investments.
Sales and Marketing
Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
Sales and marketing $ 279,823 $ 214,291 $ 65,532 31 %
Percentage of revenue 28 % 28 %
Sales and marketing expense increased by $65.5 million, or 31%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $53.7 million in personnel costs including allocated overhead costs for our sales and marketing organization as a result of increased headcount and increased variable compensation for our sales personnel and an increase of $8.4 million in advertising, sales, marketing and promotional activities.
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General and Administrative
Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
General and administrative $ 74,750 $ 60,993 $ 13,757 23 %
Percentage of revenue 7 % 8 %
General and administrative expense increased by $13.8 million, or 23%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $11.5 million in personnel costs including allocated overhead costs as a result of increased headcount.
Other Income, Net
Three Months Ended
March 31,
2026 2025 Change % Change
(dollars in thousands)
Other income, net $ 51,603 $ 44,216 $ 7,387 17 %
Percentage of revenue 5 % 6 %
Other income, net increased by $7.4 million, or 17%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 . This increase was primarily driven by an increase of $9.0 million due to fluctuations related to foreign currency exchange rates, partially offset by a $1.5 million decrease in interest income, mainly due to income earned from investments in marketable securities.
Liquidity and Capital Resources
Our largest source of operating cash is cash collection from sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, hosting expenses, facility expenses, and marketing expenses. We generated positive cash flows from operations during the three months ended March 31, 2026 and 2025. When assessing sources of liquidity, we also include cash and cash equivalents of $426.4 million and marketable securities of $4.3 billion as of March 31, 2026. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support our cash requirements for the next 12 months and beyond.
Our working capital requirements principally consist of workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancelable licenses and services arrangements that are integral to our business operations, and operating lease obligations. Our principal commitments consist of purchase commitments for business operations, operating lease obligations , and obligations to pay the Notes’ coupons and principal . Purchase commitments for business operations are primarily related to cloud hosting and other software-based services.
We have also issued long-term debt to finance our business. In December 2024, we issued $1.0 billion aggregate principal amount of the 2029 Notes in a private placement to qual ified institutional buyers pursuant to Rule 144A under the Securities Act. The total net proceeds from the sale of the 2029 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $979.1 million. The principal and future interest payments related to our 2029 Notes are $1.0 billion. We may from time to time seek to retire or purchase the 2029 Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise.
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Cash Flows
The following table shows a summary of our cash flows for the periods presented:
Three Months Ended
March 31,
2026 2025
(in thousands)
Cash provided by operating activities $ 334,622 $ 271,541
Cash used in investing activities (314,798) (443,408)
Cash provided by financing activities 9,711 1,653
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2026 increased by $63.1 million compared to the three months ended March 31, 2025, primarily driven by an increase in non-cash charges of $44.8 million, an increase in deferred revenue of $33.5 million, and an increase in accounts payable of $32.2 million. The increase in non-cash charges related primarily to an increase of $32.6 million in stock-based compensation as we continued to increase headcount to support the growth of the business. The increase in cash provided by operating activities was partially offset by a decrease in accounts receivable of $48.4 million and an increase in deferred contract costs of $14.0 million.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 decreased by $128.6 million compared to the three months ended March 31, 2025, primarily driven by an increase in proceeds from maturities of marketable securities of $490.5 million. This decrease in cash used in investing activities was partially offset by an increase in purchases of marketable securities of $334.7 million and an increase in capitalized software development costs of $15.8 million.
Financing Activities
Net cash (used in) provided by financing activities for the three months ended March 31, 2026 increased $8.1 million compared to the three months ended March 31, 2025, primarily due to proceeds from the exercise of stock options of $8.0 million.
Non-GAAP Free Cash Flow
We report our financial results in accordance with U.S. GAAP. To supplement our condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and excludes items that we do not consider to be indicative of our liquidity. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results.
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The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, for each of the periods indicated:
Three Months Ended
March 31,
2026 2025
(in thousands)
Net cash provided by operating activities $ 334,622 $ 271,541
Less: Purchases of property and equipment (11,358) (8,748)
Less: Capitalized software development costs (34,173) (18,402)
Free cash flow $ 289,091 $ 244,391
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
There have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.
Recently Adopted Accounting Pronouncements
See Note 2, Basis of Presentation and Summary of Significant Accounting Policies , in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of March 31, 2026, we had $389.3 million in cash equivalents and $4.3 billion in marketable securities, which consisted of corporate debt securities, commercial paper, certificates of deposit, U.S. government treasury securities, and U.S. government agency securities . Our cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. As of March 31, 2026, a hypothetical 10% relative change in interest rates would not have a material impact on our condensed consolidated financial statements.
Foreign Currency Exchange Risk
Our reporting currency and the functional currency of our wholly-owned foreign subsidiaries is the U.S. dollar. All of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, France, and Ireland. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.
To mitigate a portion of our exposure to foreign currency exchange rate fluctuations, we enter into foreign currency forward contracts to hedge certain forecasted cash flows denominated in foreign currencies. These contracts are designated as cash flow hedges and are intended to reduce the variability in operating expenses associated with changes in foreign exchange rates. We do not enter into foreign currency forward contracts for trading or speculative purposes.
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A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have a material effect on our operating results.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026. Based on the evaluation of our disclosure controls and procedures as of March 31, 2026, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties including those described below. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our Class A common stock could decline.
Risk Factors Summary
The following is a summary of the principal risks associated with an investment in our Class A common stock:
• Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.
• Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
• We have a history of operating losses and may not achieve or sustain profitability in the future.
• We have a limited operating history, which makes it difficult to forecast our future results of operations.
• We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
• Our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions. If our customers do not renew or expand their subscriptions with us, or decrease their spend on our products, our future operating results would be harmed.
• If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.
• Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.
• If we or our third-party service providers experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security breaches, or if unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform and information technology systems, then our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced, and we may incur significant liabilities or additional expenses.
• Interruptions or performance problems associated with our products and platform capabilities may adversely affect our business, financial condition and results of operations.
• We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed.
• If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or to changing customer needs, requirements or preferences, our platform and products may become less competitive.
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• The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition and results of operations could be harmed.
• We and our third-party service providers are subject to stringent and changing laws, regulations standards, and contractual obligations related to data privacy and security. Actual or perceived failure by us or our third-party service providers to comply with such laws, regulations, standards, or contractual obligations could harm our business.
• The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, including our executive officers, directors and their affiliates, which will limit the ability of holders of our Class A common stock to influence the outcome of important transactions.
Risks Associated with our Growth
Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.
Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential customers. Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth in the United States or abroad, changes in trade policies, such as trade wars, tariffs or other trade restrictions or the threat of such actions, financial and credit market fluctuations, fluctuating inflation and interest rates, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, such as the conflicts in Ukraine and the Middle East, could cause a decrease in business investments, including spending on information technology, disrupt the timing and cadence of key industry events, and negatively affect the growth of our business and our results of operations. Such catastrophic and disruptive events have and may adversely affect workforces, economies and financial markets globally, leading to a reduction in the ability of, or the inability of, customers, partners, suppliers, vendors or other parties to meet their contractual obligations, and for a period of time, a reduction in customer spending on technology, and such conditions have and may reoccur in the future. For instance, there is currently significant uncertainty about trade policies, treaties, tariffs and taxes. Even in the absence of tariffs or other trade restrictions, the related uncertainty with respect to international trade may lead to continuing volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced usage and demand for our products. The war in Ukraine, conflicts in the Middle East and related political and economic responses such as sanctions imposed on Russia and Iran, may also exacerbate these issues and trends especially in these regions. In addition interest rates remain elevated, which may dampen economic growth and cause companies to moderate spending on information technology. These types of unfavorable conditions could disrupt the timing of and attendance at key industry events, which we rely upon in part to generate sales of our products. If those events are disrupted, our marketing investments, sales pipeline and ability to generate new customers and sales of our products could be negatively and adversely affected. Our competitors, many of which are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers and may be less dependent on key industry events to generate sales for their products. The increased pace of consolidation in certain industries may result in reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or how any such event may impact our business.
Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
Our revenue was $1,006.4 million and $761.6 million for the three months ended March 31, 2026 and 2025, respectively. You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, we expect that our revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on a number of factors, including our ability to:
• price our products effectively so that we are able to attract new customers and expand sales to our existing customers;
• expand the functionality and use cases for the products we offer on our platform;
• maintain and expand the rates at which customers purchase and renew subscriptions to our platform;
• provide our customers with support that meets their needs;
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• continue to introduce our products to new markets outside of the United States;
• successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our platform; and
• increase awareness of our brand on a global basis and successfully compete with other companies.
We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.
In addition, we expect to continue to expend substantial financial and other resources on:
• our technology infrastructure, including systems architecture, scalability, availability, performance and security;
• our sales and marketing organization to engage our existing and prospective customers, increase brand awareness and drive adoption of our products;
• product development, including investments in our product development team and the development of new products and new functionality for our platform as well as investments in further optimizing our existing products and infrastructure;
• acquisitions or strategic investments;
• international expansion; and
• general administration.
These investments may not result in increased revenue growth in our business. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. In future periods if our revenue growth does not meet our expectations or increase at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations may be harmed, and we may not maintain profitability in the future.
We have a history of operating losses and may not sustain profitability in the future.
Prior to the year ended December 31, 2023, we incurred net losses in each fiscal year since our inception, including a net loss of $(50.2) million in the year ended December 31, 2022. While we have experienced significant revenue growth in recent periods and periods of profitability, we are not certain whether or when we will obtain a high enough volume of sales to sustain or increase our growth or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we intend to continue to expend significant funds to further develop our platform, including by introducing new products and functionality, and to expand our inside and field sales teams and customer success team to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face increased compliance costs associated with growth and the expansion of our customer base. Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unable to sustain profitability, the value of our business and Class A common stock may significantly decrease.
We have a limited operating history at our current scale, which makes it difficult to forecast our future results of operations.
As a result of our limited operating history at our current scale and the introduction of several new products in recent years, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including slowing demand for our products, increasing competition, changes to technology, a decrease in the growth of our overall market, or our failure, for any reason, to continue to take advantage of growth opportunities. We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and
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uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
We have funded our operations since inception primarily through equity and debt financings and sales of our products. We cannot be certain if our operations will continue to generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests. See also "Risks Related to Our Outstanding Notes."
Strategic and Operational Risks
Our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions. If our customers do not renew or expand their subscriptions with us, or decrease their spend on our products, our future operating results would be harmed.
Our future success depends in part on our ability to sell additional subscriptions and products to our existing customers, and our customers renewing their subscriptions when the contract term expires. The terms of our subscription agreements are primarily monthly or annual, with some quarterly, semiannual and multi-year. Our customers have no obligation to renew their subscriptions for our products after the expiration of their subscription period. In order for us to maintain or improve our results of operations, it is important that our customers renew or expand their subscriptions with us. Whether our customers renew or expand their subscriptions with us may be impacted by a number of factors, including business strength or weakness of our customers, customer usage, customer satisfaction with our products and platform capabilities and customer support, our prices, the capabilities and prices of competing products, mergers and acquisitions affecting our customer base, consolidation of affiliates’ multiple paid business accounts into a single paid business account, or reductions in our customers’ spending on IT solutions or their spending levels generally. These factors may be exacerbated by unfavorable conditions in the economy, see “Risks Associated with our Growth—Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations” above. These factors may also be exacerbated if, consistent with our growth strategy, our customer base continues to grow to encompass larger enterprises, which may also require more sophisticated and costly sales efforts. Certain customers and cohorts of customers in specific industries have or in the future may increase usage of our product and then seek to optimize their usage, renew their subscriptions on terms less favorable to us, or not renew their subscriptions, which may result in revenue volatility. For example, in prior periods customers in our cloud-native cohort, and more recently larger customers in our AI-native cohort, which cohort includes our largest customer and represented year-over-year revenue growth of high single digits for the quarter ended March 31, 2026, have rapidly increased their usage of our product and then optimized or may in the future optimize their usage or fail to renew their subscriptions. If our customers do not purchase additional subscriptions and products from us, reduce their usage, fail to renew their subscriptions or renew on different terms, our revenue and dollar-based net retention may decline and our business, financial condition and results of operations may be harmed.
If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.
To increase our revenue, we must continue to attract new customers. Our success will depend to a substantial extent on the widespread adoption of our platform and products as an alternative to existing solutions. Many enterprises have invested substantial personnel and financial resources to integrate traditional on-premise architectures into their businesses and, therefore, may be reluctant or unwilling to migrate to cloud computing. Further, the adoption of SaaS business software may be slower in industries with heightened data security interests or business practices requiring highly-customizable application software. In addition, as our market matures, our products evolve, and competitors introduce lower cost or differentiated products that are perceived to compete with our platform and products, our ability to sell subscriptions for our products could be impaired. Similarly, our subscription sales could be adversely affected if customers or users within these organizations
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perceive that features incorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled with solutions offered by other companies that operate in adjacent markets and compete with our products. As a result of these and other factors, we may be unable to attract new customers, which may have an adverse effect on our business, financial condition and results of operations.
Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.
Our ability to increase our customer base and achieve broader market acceptance of our products and platform capabilities will depend to a significant extent on our ability to expand our sales and marketing organization. We plan to continue expanding our direct sales force, both domestically and internationally. We also plan to dedicate significant resources to sales and marketing programs. All of these efforts will require us to invest significant financial and other resources, including in channels in which we have limited or no experience to date. Our business and results of operations will be harmed if our sales and marketing efforts do not generate significant increases in revenue or increases in revenue that are smaller than anticipated. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop, integrate and retain talented and effective sales personnel, if our new and existing sales personnel, on the whole, are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.
If we or the third-parties with whom we work experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security breaches, or if unauthorized parties otherwise obtain access to or otherwise compromise our customers’ data, our data, or our platform and information technology systems, then our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced, and we may incur significant liabilities or additional expenses.
We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share personal, confidential and proprietary information and other information (collectively, sensitive information) necessary to provide our services, to operate our business, for legal and marketing purposes, and for other business-related purposes.
Our platform and products involve the storage and transmission of data, including personal information, and security breaches or unauthorized access to our platform and products, or those of the third-parties with whom we work, could result in the unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to sensitive information including our customers’ data. Consequently, we may be subject to significant litigation, indemnity obligations, fines, penalties, disputes, investigations and other liabilities. We have previously and may in the future become the target of cyber-attacks by third parties, including without limitation nation-state actors, seeking to gain unauthorized access to and exfiltrate our or our customers’ data, including confidential and personal information, or to disrupt our ability to provide our services. Cyber-attacks, computer malware, viruses, employee mistakes or malfeasance, social engineering (including through deep fakes and spear phishing), malicious code, denial-of-service attacks, credential harvesting and general hacking have become more prevalent in our industry, particularly against cloud services, and have become enhanced or facilitated by artificial intelligence. Ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are prevalent and can lead to significant interruptions, delays, or outages in our operations, loss of data (including customer data), loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments). In addition, many of our employees work remotely and utilize network connections, computers and devices outside our premises or network, which may pose additional data security risks (including, for example, the increasing number of phishing and malicious emails we continue to receive). The reliability and continuous availability of our platform is critical to our success.
We use third-parties, including sub-processors, to help us deliver services to our customers. These vendors, such as cloud infrastructure providers, store or process personal and confidential information for us or our customers. We use third-party technology, systems and services in a variety of contexts, including, without limitation, cloud infrastructure, encryption and authentication technology, employee email, content delivery to customers, back-office support, credit card processing and other functions. While we have taken steps designed to protect the confidential and personal information that we have access to, our security measures or those of the third-parties with whom we work that store or otherwise process certain of our and our customers’ data on our behalf could be breached or we could suffer a loss of our or our customers’ data. Our ability to monitor these third-parties’ data security is limited, and they may not have adequate information security measures in place. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach
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of or disruption to our platform, systems and networks or the systems and networks of third parties that support us and our services. Despite the security controls we have in place, such attacks are very difficult to avoid.
There can be no assurance that any security measures that we or the third-parties with whom we work have implemented will be effective against current or future security threats. While we have developed systems and processes designed to protect the integrity, confidentiality, and security of our and our customers’ data, our security measures or those of the third-parties with whom we work could fail and result in unauthorized access to or disclosure, modification, misuse, loss or destruction of such data.
Third parties may also conduct attacks designed to temporarily deny customers access to our cloud services. Any security breach or other security incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our products, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, and adversely affect our business, financial condition and results of operations. These risks are likely to increase as we continue to grow and process, store, and transmit increasingly large amounts of data.
In addition, we do not directly control content that our customers store in our products. If our customers use our products for the collection, transmission or storage of personal information and our security measures are or are believed to have been breached as a result of third-party action, employee error, malfeasance or otherwise, our reputation could be damaged, our business may suffer, and we could incur significant liability. Our remediation efforts may not be successful. We employ a shared responsibility model where our customers are responsible for using, configuring, and otherwise implementing security measures related to our platform, services, and products. As part of this shared responsibility security model, we make certain security features available to our customers that can be implemented at our customers’ discretion, or identify security areas or measures for which our customers are responsible. In certain cases our customers may choose not to implement, or may incorrectly implement, those features or measures, misuse our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure, or security incidents. Even if we are not the cause of a resulting customer security issue or incident, our customer relationships, reputation, and business may be adversely impacted. Some of our customers may be subject to the EU’s Digital Operational Resilience Act (DORA) and similar regulatory requirements in the United Kingdom related to operational resilience, which has led and will lead certain of our customers to negotiate additional specific provisions with us, including certain mandatory risk management, transparency and continuity provisions. If we fail to materially comply with these contractual requirements, we may be subject to investigations, audits or other adverse consequences.
We also process, store and transmit our own data as part of our business and operations. This data includes personal, confidential or proprietary information. We may expend significant resources, fundamentally change our business activities and practices, or modify our operations or information technology in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities on a timely basis. Among other things, our applications, systems, networks, software, other computer assets and physical facilities have been and in the future could be breached or could otherwise malfunction or fail, or the sensitive information that we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties fraudulently induce our employees or our members to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. For example, in April 2025, we notified customers of access by an unauthorized third party to a number of Datadog source code repositories arising from compromised employee account credentials. After discovering the access, we revoked the credentials and terminated the unauthorized access. However, such unauthorized access may increase our vulnerability to certain attacks at a later date through exploitation of our source code, including the exploitation of potential vulnerabilities in the Datadog platform or products, or information stored within the source code. Additionally, from time to time employees or service providers may inadvertently misconfigure resources or misdirect certain communications, leading to security vulnerabilities or incidents that we must then expend effort and incur expenses to correct.
We may have contractual and other legal obligations, or we may voluntarily choose, to notify relevant stakeholders of security incidents. For instance, most jurisdictions have enacted laws, such as the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. Such mandatory contractual and legal disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach,
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and any failure to provide appropriate notice may violate the terms of our customer contracts. Applicable laws, our contracts and our representations require us to implement and maintain industry-standard or reasonable measures to safeguard personal information or confidential information. A security breach could lead to claims by our customers, or other relevant stakeholders, that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. Further, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that any limitations of liability would be enforceable or adequate or would otherwise protect us from liabilities or damages.
The costs to respond to a security breach and/or mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business.
Additionally, we cannot be certain that our insurance coverage will be adequate or sufficient for fines, judgments, settlements, penalties, costs, attorney fees and other impacts that arise out of privacy or security incidents or breaches. If the impacts of a privacy or security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage, cyber coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations. Our risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of sensitive information.
Real or perceived errors, failures or bugs in our software could adversely affect our business, results of operations, financial condition and growth prospects.
Our software is complex and therefore, undetected errors, failures or bugs have occurred in the past and may occur in the future. Our software is used in IT environments with different operating systems, system management software, applications, devices, databases, servers, storage, middleware, custom and third-party applications and equipment and networking configurations, which may cause errors or failures in the IT environment into which our software is deployed. This diversity increases the likelihood of errors or failures in those IT environments. Despite testing by us, real or perceived errors, failures or bugs may not be found until our customers use our software. Our systems could also be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies, and such vulnerabilities may not be discovered during our due diligence. Real or perceived errors, failures or bugs in our products could result in negative publicity, security breaches or other security incidents, loss of or delay in market acceptance of our software, regulatory investigations and enforcement actions, harm to our brand, weakening of our competitive position, or claims by customers for losses sustained by them or failure to meet the stated service level commitments in our customer agreements. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend significant additional resources in order to help correct the problem. Any real or perceived errors, failures or bugs in our software could also impair our ability to attract new customers, retain existing customers or expand their use of our software, which would adversely affect our business, results of operations and financial condition.
Interruptions or performance problems associated with our products and platform capabilities may adversely affect our business, financial condition and results of operations.
Our continued growth depends in part on the ability of our existing and potential customers to access our products and platform capabilities at any time and within an acceptable amount of time. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our products and platform capabilities simultaneously, denial of service attacks, or other security-related incidents. For example, in March 2023, our platform experienced widespread outages across multiple products and regions, which was substantially resolved in approximately a day.
It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our products and platform capabilities become more complex and our user traffic increases. If our products and platform capabilities are unavailable or if our users are unable to access our products and platform capabilities within a reasonable
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amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platform and products, delays in payment to us by customers, injury to our reputation and brand, legal claims against us, and the diversion of our resources. In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition and results of operations may be adversely affected.
We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed.
As usage of our platform capabilities grow, we will need to devote additional resources to improving and maintaining our infrastructure and integrating with third-party applications. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and professional services, to serve our growing customer base. Any failure of or delay in these efforts could result in impaired system performance and reduced customer satisfaction, resulting in decreased sales to new customers, lower dollar-based net retention rates or, the issuance of service credits or requested refunds, which would hurt our revenue growth and our reputation. Further, any failure in optimizing our spend on third-party cloud services as we scale could negatively impact our gross margins. Even if we are successful in our expansion efforts, they will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and results of operations.
We rely upon third-party providers of cloud-based infrastructure to host our products. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition and results of operations.
We outsource substantially all of the infrastructure relating to our cloud solution to third-party hosting services. Customers of our cloud-based products need to be able to access our platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime. Our cloud-based products depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers. Any limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could adversely affect our business, financial condition and results of operations. In addition, any incident affecting our third-party hosting services’ infrastructure that may be caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss, telecommunications failures, outbreaks of contagious diseases, terrorist or other attacks, and other similar events beyond our control could negatively affect our cloud-based products. A prolonged service disruption affecting our cloud-based solution for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.
In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud solution for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition and results of operations.
We offer free trials and a free tier of our platform to drive developer awareness of our products, and encourage usage and adoption. If these marketing strategies fail to lead to customers purchasing paid subscriptions, our ability to grow our revenue will be adversely affected.
To encourage awareness, usage, familiarity and adoption of our platform and products, we offer free trials and a free tier of our platform. These strategies may not be successful in leading customers to purchase our products, as users of our free tier may not lead to them or others within their organization purchasing and deploying our platform. To the extent that users do not become, or we are unable to successfully attract paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.
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We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price could decline.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:
• fluctuations in demand for or pricing of our platform and products;
• fluctuations in usage of our platform and products;
• our ability to attract new customers;
• our ability to retain our existing customers;
• customer expansion rates and the pricing and quantity of subscriptions renewed;
• the pricing of subscriptions from customers in our cloud-provider marketplaces;
• timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers;
• seasonality driven by industry conferences;
• the investment in new products and features relative to investments in our existing infrastructure and products;
• the timing of our customer purchases;
• fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors;
• changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
• our ability to control costs, including our operating expenses;
• the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;
• the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;
• the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;
• the effects of acquisitions and their integration;
• general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting regions and industries in which our customers participate, including those impacted by the war in Ukraine and conflicts in the Middle East;
• the effects of trade policies, such as trade wars, tariffs or other trade restrictions or the threat of such actions;
• the effect of other economic factors, including inflation, pricing and currency fluctuations;
• the impact of new accounting pronouncements;
• changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance;
• changes in the competitive dynamics of our market, including consolidation among competitors or customers; and
• significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products and platform capabilities.
The global economy, including credit and financial markets, has experienced periods of volatility and disruptions, including periods of diminished liquidity and credit availability, changes in consumer confidence, fluctuations in economic growth, volatility in unemployment rates, fluctuating inflation and interest rates, and uncertainty about economic stability. For a discussion of certain of these economic, political, regulatory, and market risks, see “Risks Associated with our Growth—Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations”. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, or do not improve, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to
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