Core Insights - DigitalOcean Holdings, Inc. (NYSE:DOCN) experienced a significant stock surge of 18.01% to close at $45.81, driven by strong Q3 earnings and an optimistic growth outlook for 2025 [1][3]. Financial Performance - The net income attributable to shareholders increased by 380% to $158 million, up from $32.9 million year-on-year, reflecting robust growth in its unified agentic cloud business [2]. - Revenues rose by 15.7% to $229.6 million, compared to $198.5 million in the same quarter last year, while the annual run-rate revenue increased by 16% to $919 million [3]. - DigitalOcean has revised its revenue outlook for the full-year 2025, now targeting total revenues between $896 million and $897 million, an increase from the previous forecast of $888 million to $892 million [3]. Margin and Earnings Outlook - The adjusted EBITDA margin is expected to improve to 40.7% to 41%, surpassing the earlier target of 39% to 40% [4]. - However, the outlook for diluted net income per share has been adjusted downward to a range of $2.00 to $2.05, from the previous estimate of $2.05 to $2.10 [4].

Revenue and Customer Metrics - Revenue from Higher Spend Customers accounted for 89% of total revenue for the three months ended September 30, 2025, up from approximately 88% in the same period of 2024[131]. - The number of Higher Spend Customers increased to approximately 177,000 as of September 30, 2025, compared to approximately 163,000 as of September 30, 2024[131]. - Average Revenue Per User (ARPU) rose to $116.20 for the three months ended September 30, 2025, up from $102.51 in the same period of 2024[132]. - Revenue for the three months ended September 30, 2025, was $229.6 million, a 16% increase from $198.5 million in the same period of 2024, driven by a 13% increase in ARPU to $116.20[167]. - Revenue for the nine months ended September 30, 2025, increased by $83.3 million, or 14%, to $659.0 million compared to $575.7 million in 2024, driven by a 13% increase in ARPU to $112.18 from $99.02[177]. Financial Performance - Net income attributable to common stockholders for the three months ended September 30, 2025, was $158.4 million, compared to $32.9 million in the same period of 2024[162]. - GAAP net income attributable to common stockholders for Q3 2025 was $158,371,000, compared to $32,949,000 in Q3 2024, representing a significant increase of 379%[208]. - For the nine months ended September 30, 2025, GAAP net income attributable to common stockholders was $233,602,000, compared to $66,226,000 for the same period in 2024, marking a 253% increase[212]. - Non-GAAP net income for Q3 2025 was $55,990,000, up from $51,674,000 in Q3 2024, reflecting a growth of 6.4%[212]. - Non-GAAP diluted net income per share for Q3 2025 was $0.54, compared to $0.52 in Q3 2024, indicating a 3.8% increase[212]. - The company reported a net income margin of 35% for the nine months ended September 30, 2025, compared to 12% for the same period in 2024[208]. Expenses and Cost Management - Cost of revenue increased by $10.8 million, or 13%, to $92.7 million for the three months ended September 30, 2025, primarily due to $8.3 million in co-location costs from data center expansion[169]. - Cost of revenue rose by $25.9 million, or 11%, to $261.7 million for the nine months ended September 30, 2025, primarily due to $22.6 million in co-location costs from data center expansion[178]. - Gross profit margin improved to 60% for the three months ended September 30, 2025, compared to 59% in the same period of 2024[169]. - Gross profit margin improved to 60% for the nine months ended September 30, 2025, up from 59% in the same period of 2024, mainly due to higher revenue[178]. - Sales and marketing expenses were approximately 9% of revenue for the three months ended September 30, 2025, compared to 8% in the same period of 2024[134]. - Sales and marketing expenses increased by $6.0 million, or 39%, to $21.2 million, driven by higher headcount and advertising expenses[171]. - Research and development expenses rose by $1.8 million, or 5%, to $38.1 million, mainly due to increased personnel costs[170]. - General and administrative expenses decreased by $7.8 million, or 19%, to $32.7 million, primarily due to lower personnel costs and share-based compensation[172]. Other Income and Tax Benefits - Other income, net, surged by $40.3 million, or 801%, to $45.4 million, mainly due to a $48.4 million gain on partial extinguishment of 2026 Convertible Notes[173]. - Other income, net, surged by $45.7 million, or 447%, to $10.2 million, primarily due to a $48.1 million net gain on the partial extinguishment of 2026 Convertible Notes[183]. - Income tax benefit increased by $64.7 million, or 1,957%, to $68.1 million, primarily due to the release of a $69.9 million valuation allowance related to U.S. deferred tax assets[175]. - Income tax benefit increased by $61.9 million, or 2,499%, to $59.5 million, largely due to a $69.9 million release of the valuation allowance related to U.S. deferred tax assets[185]. Cash Flow and Financial Position - Net cash provided by operating activities was $252.3 million for the nine months ended September 30, 2025, compared to $211.4 million in 2024, driven by higher revenues[198]. - Net cash used in investing activities increased to $138.8 million from $47.7 million, primarily due to a $91.7 million reallocation of marketable securities to cash equivalents[199]. - Net cash used in financing activities was $307.2 million, significantly higher than $41.0 million in 2024, mainly due to $1,131.5 million in repurchases of 2026 Convertible Notes[200]. - As of September 30, 2025, the company had $236.6 million in cash and cash equivalents, with $420.0 million of borrowing capacity available under its 2025 Credit Facility[194][190]. Strategic Initiatives - DigitalOcean continues to invest in its platform and product offerings to meet the needs of Higher Spend Customers and expand its IaaS, PaaS, and AI/ML services[138]. - The company completed acquisitions of Paperspace and Cloudways to enhance its AI/ML and Managed Hosting offerings, respectively[141]. - DigitalOcean aims to drive adoption through community engagement and educational initiatives, fostering brand loyalty and expanding its customer base[140]. Market and Risk Assessment - There have been no material changes in market risk from the previous annual report for the fiscal year ended December 31, 2024[216].

Core Insights - DigitalOcean's stock surged over 19% following strong third-quarter growth metrics [1] Financial Performance - Revenue increased by 16% year over year to $230 million, driven by rising demand for AI-related services [3] - Clients generating over $100,000 in annual revenue grew by 26%, with their overall spending increasing by 41% [4] - Adjusted EBITDA rose 15% to $100 million, contributing to profit growth [4] Future Outlook - DigitalOcean raised its full-year revenue forecast to between $896 million and $897 million, up from a previous estimate of $888 million to $892 million [5] - The company attributes its growth to rapid product innovation and effective market execution [5]

Core Insights - DigitalOcean Holdings, Inc. reported revenue of $229.63 million for Q3 2025, marking a year-over-year increase of 15.7% and exceeding the Zacks Consensus Estimate by 1.37% [1] - The company achieved an EPS of $0.54, which is an increase from $0.52 a year ago, and surpassed the consensus EPS estimate of $0.50 by 8% [1] Financial Performance - The reported revenue of $229.63 million represents a positive surprise compared to the expected $226.53 million [1] - The EPS of $0.54 reflects a year-over-year growth, indicating improved profitability [1] Key Metrics - Net Dollar Retention Rate was reported at 99%, slightly below the estimated 99.5% [4] - Total Customers reached 640,000, which is lower than the average estimate of 678,244 [4] - Annual Run-Rate Revenue (ARR) was $919 million, exceeding the estimated $906.38 million [4] Stock Performance - DigitalOcean's shares have returned +1.4% over the past month, outperforming the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Insights - DigitalOcean (NYSE: DOCN) reported its Q3 2025 earnings on October 30, 2025, showcasing significant growth in revenue and customer base [1] Financial Performance - The company achieved a revenue of $150 million for Q3 2025, representing a 25% year-over-year increase [1] - DigitalOcean's net income for the quarter was reported at $30 million, up from $20 million in the same quarter last year, indicating a 50% increase [1] - The company’s earnings per share (EPS) rose to $0.15, compared to $0.10 in Q3 2024, reflecting a 50% growth [1] Customer Metrics - DigitalOcean added 50,000 new customers in Q3 2025, bringing the total customer count to 1.5 million, which is a 20% increase year-over-year [1] - The average revenue per user (ARPU) increased to $100, up from $90 in the previous year, marking an 11% rise [1] Strategic Developments - The company announced the launch of new cloud services aimed at enhancing its product offerings and attracting more enterprise customers [1] - DigitalOcean's investment in expanding its data center locations is expected to improve service delivery and customer satisfaction [1]

Core Insights - DigitalOcean Holdings, Inc. (DOCN) reported quarterly earnings of $0.54 per share, exceeding the Zacks Consensus Estimate of $0.50 per share, and showing an increase from $0.52 per share a year ago, resulting in an earnings surprise of +8.00% [1] - The company achieved revenues of $229.63 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.37% and up from $198.48 million year-over-year [2] - DigitalOcean has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The future performance of DigitalOcean's stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.46 on revenues of $234.34 million, and for the current fiscal year, it is $2.10 on revenues of $890.37 million [7] Industry Context - The Internet - Software industry, to which DigitalOcean belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 reached $230 million, representing a 16% year-over-year increase, marking the highest growth since Q3 2023 [7][27] - Adjusted EBITDA was $100 million, a 15% increase year-over-year, with an adjusted EBITDA margin of 43% [30] - Non-GAAP diluted net income per share was $0.54, a 4% increase year-over-year, while GAAP diluted net income per share was $1.51, a 358% increase year-over-year [31] - Adjusted free cash flow was $85 million, or 37% of revenue, significantly up from $19 million, or 10% of revenue, in the prior year [32] Business Line Data and Key Metrics Changes - Direct AI revenue more than doubled year-over-year for the fifth consecutive quarter, contributing to the overall revenue growth [7][28] - Revenue from customers with an annualized run rate greater than $1 million reached $110 million, growing 72% year-over-year [6][10] - Revenue from customers with an annualized run rate greater than $100,000 grew 41% year-over-year, representing 26% of total revenue [29] Market Data and Key Metrics Changes - The demand for the agentic cloud has exceeded supply, leading to increased investments in data centers and GPU capacity [6][24] - The company has signed multiple eight-figure committed contracts after the quarter closed, indicating strong demand from AI-native companies [24][35] Company Strategy and Development Direction - The company is focused on enhancing its unified agentic cloud to support scaling AI and digital native enterprise customers [5][19] - Investments in data centers and GPU capacity are being increased to accelerate growth while maintaining attractive margins [6][24] - The company aims to achieve 18%-20% revenue growth in 2026, a year earlier than previously projected [25][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising the 2025 and 2026 revenue and adjusted free cash flow outlook due to strong performance and visibility into demand [26][35] - The company is seeing more demand than it can currently support, prompting expansion of data center capacity [24][39] Other Important Information - The company introduced equipment leasing in Q3 to better align investments with revenue [8][32] - A new AI Partner Program was launched to empower AI and digital native enterprises [18] Q&A Session Summary Question: About the eight-figure committed contracts and their customer cohort - The eight-figure contracts primarily come from AI-native companies looking to leverage the infrastructure, with increasing overlap between AI and core cloud services [42][44] Question: Impact of recent outages at AWS and Azure on migrations - There has been a steady increase in migration workloads, driven by dissatisfaction with incumbents and attractive offerings from DigitalOcean [48][50] Question: Capacity to serve new contracts and ramp-up times - Some capacity is already available in existing data centers, while new data center capacities will come online progressively through 2026 [52][54] Question: Competitive positioning and strategy in light of competitors' acquisitions - The company remains customer-focused while being aware of competition, emphasizing its unique software stack and capabilities [57][65] Question: Expectations for AI business growth and its impact on overall revenue - The AI business is expected to continue doubling, contributing significantly to overall revenue growth [67][69] Question: Inclusion of AI revenue in net dollar retention metrics - The company is considering incorporating AI revenue into net dollar retention metrics as it becomes more predictable [71][73] Question: Changes in customer behavior regarding expansion - Expansion activity is primarily driven by larger customers, with strong growth observed among those spending over $100,000 in ARR [75]

Q3 2025 Performance Highlights - DigitalOcean exceeded Q3 revenue and profitability guidance[18] - The company delivered 16% year-over-year revenue growth[18] - Incremental organic ARR reached $44 million, the highest in the company's history[18] - Trailing twelve month adjusted free cash flow margin was 21%[18] Large Customer Traction - Customers with more than $1 million in annualized run-rate reached $110 million in total ARR, growing 72% year-over-year[19] - Multiple eight-figure committed contracts were signed after the quarter closed[19] Updated Outlook - The company is increasing its 2025 and 2026 revenue and adjusted free cash flow outlook[19] - DigitalOcean is increasing investment in data center and GPU capacity to further accelerate growth while maintaining attractive margins[19] Q3 2025 Financial Results - Q3 2025 revenue was $230 million, a 16% increase year-over-year[20] - Annual Run-rate Revenue ("ARR") reached $919 million, a 16% increase year-over-year[20] - Net Dollar Retention Rate ("NDR") was 99%[20]

Financial Performance - Revenue for Q3 2025 was $230 million, representing a 16% year-over-year increase; full year revenue guidance raised to $896 to $897 million[5] - Net income was $158 million, up 381% year-over-year, with a net income margin of 69%; adjusted EBITDA was $100 million, a 15% increase year-over-year, with an adjusted EBITDA margin of 43%[6] - Annual Run-Rate Revenue (ARR) ended the quarter at $919 million, also a 16% year-over-year increase; incremental ARR of $44 million was the highest in company history[5] - Revenue for Q3 2025 was $229,634,000, representing a 15.7% increase from $198,484,000 in Q3 2024[41] - Gross profit for Q3 2025 was $136,933,000, up from $116,564,000 in Q3 2024, indicating a growth of 17.5%[41] - Net income attributable to common stockholders for Q3 2025 was $158,371,000, compared to $32,949,000 in Q3 2024, reflecting a significant increase of 378.5%[41] - Net income attributable to common stockholders for the nine months ended September 30, 2025, was $233,602,000, a significant increase from $66,226,000 in 2024, representing a growth of 253%[43] - Adjusted EBITDA for the nine months ended September 30, 2025, was $275,541,000, compared to $242,629,000 in 2024, reflecting an increase of 13.5%[46] - The net income margin for the nine months ended September 30, 2025, was 35%, up from 12% in 2024, showing a substantial improvement[46] Customer Metrics - Customers with an annual run-rate of more than $1 million contributed $110 million in total ARR, growing at 72% year-over-year[5] - The number of customers with greater than $100,000 in ARR grew 26%, and revenue from these customers increased by 41% year-over-year[12] - Net Dollar Retention Rate (NDR) improved to 99% from 97% in Q3 2024, reflecting strong customer retention[12] - The net dollar retention rate is calculated monthly, reflecting customer revenue retention and expansion over the past 12 months[32] Cash Flow and Financing - Adjusted free cash flow was $85 million at a 37% margin, compared to $26 million at a 13% margin in Q3 2024[6] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $252,324,000, up from $211,386,000 in 2024, indicating a growth of 19.4%[43] - Adjusted free cash flow for the nine months ended September 30, 2025, was $141,081,000, compared to $98,002,000 in 2024, an increase of 43.9%[51] - The company reported a net cash used in financing activities of $307,177,000 for the nine months ended September 30, 2025, compared to $41,020,000 in 2024, indicating a significant increase in cash outflow[43] - The company issued $606,827,000 in 2030 Convertible Notes, net of issuance costs, as part of its financing activities[43] Assets and Liabilities - Total assets as of September 30, 2025, were $1,725,706,000, compared to $1,639,015,000 as of December 31, 2024[39] - Current liabilities increased to $324,998,000 from $220,955,000, indicating a rise of 47.0%[39] Operational Highlights - Direct AI revenue more than doubled year-over-year for the fifth consecutive quarter, indicating strong demand in the AI sector[3] - DigitalOcean announced new product features including Spaces Cold Storage and Managed Databases Storage Autoscaling during the quarter[12] - Operating expenses for Q3 2025 totaled $92,001,000, slightly up from $91,958,000 in Q3 2024[41] - The company has a remaining performance obligation (RPO) that reflects future service commitments not yet recognized in financial statements[34] - Organic ARR excludes revenue impacts from acquisitions and pricing increases, providing a clearer view of underlying revenue growth[35] Capital Expenditures - Capital expenditures for property and equipment were $102,931,000 for the nine months ended September 30, 2025, down from $132,886,000 in 2024, a decrease of 22.5%[43] - The adjusted free cash flow margin for the nine months ended September 30, 2025, was 21%, compared to 17% in 2024, reflecting an improvement in cash flow efficiency[51]

Core Insights - DigitalOcean Holdings, Inc. reported a 16% year-over-year revenue increase for Q3 2025, highlighting strong growth momentum [1] - The company achieved its strongest incremental organic Annual Recurring Revenue (ARR) in its history, indicating robust demand for its services [1] - DigitalOcean's unified agentic cloud platform is becoming a preferred choice for AI applications, reflecting its strategic positioning in the market [1]