DigitalOcean (NYSE:DOCN) Issues Quarterly Earnings Results, Beats Expectations By $0.13 EPS

DigitalOcean (NYSE:DOCN) announced its quarterly earnings results on Tuesday. The company reported $0.45 earnings per share (EPS) for the quarter, beating analysts’ consensus estimates of $0.32 by $0.13, FiscalAI reports. The firm had revenue of $321.19 million during the quarter, compared to the consensus estimate of $306.74 million. DigitalOcean had a return on equity of 31.01% and a net margin of 23.26%. The firm’s quarterly revenue was up 39.6% compared to the same quarter last year. During the same period in the prior year, the company posted $0.54 earnings per share.

Here are the key takeaways from DigitalOcean’s conference call:

• Growth accelerated significantly, with Q3 revenue up 40% year over year to $321 million and record incremental ARR of $160 million. Management raised its outlook to approximately 34% revenue growth for 2026 and at least 60% growth for 2027.
• Customers are increasingly adopting DigitalOcean’s full AI-Native Cloud rather than standalone GPU capacity. AI customer ARR rose 288%, inference services grew nearly 600%, token volume increased roughly 10x sequentially, and 90% of AI customer revenue came from customers also using Core Cloud products.
• Profitability and liquidity remained strong, with a 45% adjusted EBITDA margin, $220 million in trailing-12-month adjusted free cash flow, approximately $1.2 billion of liquidity, and net leverage of only 1.2x. The company also secured a $785 million equipment lease facility to support expansion.
• Gross margin was approximately 50% and is expected to remain pressured as new data centers and GPU capacity come online before reaching full utilization. DigitalOcean also established a $1 billion at-the-market equity program, which creates potential future shareholder dilution, although management said it may not use it.
• The company has committed capacity of roughly 180 megawatts, including about 75 megawatts expected to come online in 2027, and expects demand to continue exceeding supply. Management remains confident in execution but noted that future growth depends on data-center partners, equipment availability, and successfully increasing yield per megawatt.

DigitalOcean Stock Performance

NYSE DOCN traded down $1.51 during trading on Tuesday, reaching $88.28. The company’s stock had a trading volume of 3,206,642 shares, compared to its average volume of 3,505,282. The company has a debt-to-equity ratio of 1.14, a quick ratio of 1.31 and a current ratio of 1.31. The firm has a market cap of $9.21 billion, a price-to-earnings ratio of 40.31, a P/E/G ratio of 91.60 and a beta of 1.70. DigitalOcean has a twelve month low of $38.45 and a twelve month high of $187.50. The business’s fifty day moving average price is $119.22 and its 200-day moving average price is $111.13.

Analyst Ratings Changes

A number of analysts have weighed in on the stock. William Blair reissued an “outperform” rating on shares of DigitalOcean in a report on Wednesday, July 15th. Weiss Ratings downgraded shares of DigitalOcean from a “buy (b-)” rating to a “hold (c+)” rating in a research report on Wednesday, September 9th. UBS Group dropped their target price on shares of DigitalOcean from $125.00 to $105.00 and set a “neutral” rating on the stock in a research report on Monday, October 26th. Robert W. Baird initiated coverage on shares of DigitalOcean in a research note on Tuesday, July 21st. They set an “outperform” rating and a $165.00 price target on the stock. Finally, Zacks Research upgraded shares of DigitalOcean from a “hold” rating to a “strong-buy” rating in a research note on Monday, October 19th. Two equities research analysts have rated the stock with a Strong Buy rating, fourteen have given a Buy rating and two have assigned a Hold rating to the company’s stock. Based on data from MarketBeat, the company has a consensus rating of “Buy” and an average price target of $150.69.

Insider Transactions at DigitalOcean

In related news, Director Warren J. Adelman sold 4,200 shares of the business’s stock in a transaction dated Friday, August 7th. The stock was sold at an average price of $124.01, for a total value of $520,842.00. Following the transaction, the director owned 67,433 shares in the company, valued at $8,362,366.33. The trade was a 5.86% decrease in their position. The sale was disclosed in a legal filing with the SEC, which is available at the SEC website. Also, CFO Matt Steinfort sold 10,000 shares of the business’s stock in a transaction dated Thursday, September 3rd. The shares were sold at an average price of $105.73, for a total value of $1,057,300.00. Following the completion of the transaction, the chief financial officer owned 503,692 shares in the company, valued at $53,255,355.16. This trade represents a 1.95% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Over the last quarter, insiders sold 22,641 shares of company stock worth $2,589,317. Company insiders own 0.96% of the company’s stock.

About DigitalOcean

DigitalOcean Holdings, Inc is a cloud computing company that provides infrastructure and developer-focused services for startups, small and medium-sized businesses, and individual developers. Its platform is designed to simplify the deployment, management, and scaling of applications without requiring customers to build and operate extensive in-house infrastructure.

The company’s offerings include Droplets, its virtual machine service; managed Kubernetes; managed databases; object and block storage; networking tools; and application deployment services through App Platform.