DDOG · 10-Q · 2026Q3 · Full report

Gross Margin Drivers

Datadog, Inc. · 2026-11-04 · Importance 45 · Surprise 38 · No source text

Q3 2026 cost of revenue rose 34% year over year to $237.2 million, including a $52.1 million increase in third-party cloud infrastructure hosting and software costs and a $3.9 million increase in personnel and allocated overhead costs. Gross margin was flat year over year in Q3 because revenue grew in proportion to third-party cloud infrastructure provider costs. For the first nine months of 2026, cost of revenue increased 37% to $686.5 million, with cloud infrastructure costs up $158.1 million and personnel costs up $13.5 million; gross margin declined, primarily due to higher third-party cloud provider spending.

Key facts

• Datadog's cost of revenue increased $186.4 million, or 37%, in the nine months ended September 30, 2026, primarily due to $158.1 million more in third-party cloud infrastructure hosting and software costs and $13.5 million more in personnel and allocated overhead costs. source
• Datadog's cost of revenue increased $60.7 million, or 34%, for the three months ended September 30, 2026, primarily due to $52.1 million more in third-party cloud infrastructure hosting and software costs and $3.9 million more in personnel and allocated overhead costs. source
• Datadog's gross margin remained flat for the three months ended September 30, 2026 compared with the same period in 2025, primarily because revenue grew in proportion to third-party cloud infrastructure provider costs. source
• Datadog's gross margin decreased for the nine months ended September 30, 2026 compared with 2025, primarily due to increased spending with third-party cloud infrastructure providers. source

Impact estimates