DigitalOcean Holdings, Inc. (DOCN): Results of Operations and Financial Condition
DigitalOcean Holdings, Inc. (DOCN) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 DigitalOcean Announces Second Quarter 2026 Financial Results Raising 2026 revenue outlook RPO increased to $894 million , up 12x from a year ago Q2 2026 Revenue of $281 million grew 29% year-over-year Million+ Dollar Customer ARR grew 214% year-over-year to $259 mill
How this was made
The 30-second read
Why it matters
The key tradable elements are the raised 2026 revenue outlook, Q3 initiation guidance, and evidence of accelerating AI inference-driven demand alongside positive free cash flow.
Market read
Guidance and quarterly metrics provide a fresh decision point for positioning in AI-inference cloud exposure, with explicit revenue and margin targets for Q3 and full-year 2026.
What to watch
RPO definition changes and the mix shift toward inference/core cloud may complicate comparisons versus prior periods, so traders should watch for margin sustainability and conversion of commitments into recognized revenue.
DigitalOcean Announces Second Quarter 2026 Financial Results Raising 2026 revenue outlook
Revenue grew 29%, ARR grew 29%, AI Customer ARR grew 212%, and the company raised its full-year 2026 revenue outlook to $1.170 to $1.180 billion.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | $281 million | – | 29% |
| Annual Run-Rate Revenue (ARR)other | $1,125 million | – | 29% |
| AI Customer ARRother | $234 million | – | 212% |
| Million+ Dollar Customer ARRother | $259 million | – | 214% |
| Incremental ARR added during the quarterother | $93 million | – | 191% |
| Net income attributable to common stockholdersGAAP | $35 million | – | (4%) |
| Net income marginGAAP | 13% | – | – |
| Operating incomeGAAP | $29 million | – | (18%) |
| Operating income marginGAAP | 10% | – | – |
| Adjusted operating incomenon-GAAP | $67 million | – | 9% |
| Adjusted operating income marginnon-GAAP | 24% | – | – |
| Adjusted EBITDAnon-GAAP | $114 million | – | 27% |
| Adjusted EBITDA marginnon-GAAP | 40% | – | – |
| Diluted net income per shareGAAP | $0.29 | – | – |
| Non-GAAP diluted net income per sharenon-GAAP | $0.45 | – | – |
| Net cash from operating activitiesGAAP | $110 million | – | – |
| Net cash from operating activities marginGAAP | 39% | – | – |
| Adjusted free cash flownon-GAAP | $61 million | – | – |
| Adjusted free cash flow marginnon-GAAP | 22% | – | – |
| Cash and cash equivalentsGAAP | $767 million | – | – |
| Remaining Performance Obligation (RPO)other | $894 million | – | up 12x from a year ago |
| RPO expected to be recognized over the next 12 monthsother | $366 million | – | – |
| Number of $100K+ Customersother | 9% | – | 9% |
| Revenue from $100K+ Customersother | 35% of total revenue | – | 98% |
| Number of $500K+ Customersother | 35% | – | 35% |
| Revenue from $500K+ Customersother | 26% of total revenue | – | 160% |
| Number of $1M+ Customersother | 73% | – | 73% |
| Revenue from $1M+ Customersother | 23% of total revenue | – | 214% |
| Product releases since Aprilother | more than 80 | – | – |
| Additional committed data center capacityother | 20 MW | – | – |
| Total committed capacityother | approximately 155 MW | – | – |
| Weighted average contract lifeother | over 3 years | – | – |
third quarter ending September 30, 2026 and full year 2026 outlook
- RevenueQ3: Total revenue of $304 to $307 million, up 32% to 34% year-over-year. Full year 2026: Total revenue of $1.170 to $1.180 billion, up 30% to 31% year-over-year.
- NoteQ3: Adjusted EBITDA margin of 38% to 39%.
- NoteQ3: Non-GAAP diluted net income per share of $0.28 to $0.30.
- NoteQ3: Fully diluted weighted average shares outstanding of approximately 126 to 127 million shares.
- NoteFull year 2026: Adjusted EBITDA margin of 38.5% to 39.5%.
- NoteFull year 2026: Adjusted free cash flow margin in the range of 11% to 13% of revenue.
- NoteFull year 2026: Non-GAAP diluted net income per share of $1.35 to $1.40.
- NoteFull year 2026: Fully diluted weighted average shares outstanding of approximately 122 to 123 million shares.
Capital returns
- Repurchased approximately $472 million of our 0.00% Convertible Senior Notes due 2030, funded by a concurrent registered direct offering.
- Issued shares offset by the retired notes and an intended repurchase of approximately 500,000 shares.
What drove it
- Revenue was $281 million, an increase of 29%.
- AI Customer ARR was $234 million, an increase of 212%.
- Record $93 million of incremental ARR added during the quarter, an increase of 191%.
- Launched Inference Engine as part of AI-Native Cloud.
- Signed first nine-figure annual customer commitments with leading AI-Natives.
- 85% of AI customer ARR now comes from inference and core cloud rather than bare metal.
- Revenue from $100K+ Customers, which represents 35% of total revenue, grew 98%.
- Revenue from $500K+ and $1M+ Customers, which represents 26% and 23% of total revenue, grew 160% and 214%, respectively.
Concerns
- Net income attributable to common stockholders was $35 million, a decrease of 4%.
- Operating income was $29 million, a decrease of 18%.
- Net cash from operating activities margin was 39%, from 42% in the second quarter of 2025.
- Adjusted free cash flow margin was 22%, from 26% in the second quarter of 2025.
- Full-year 2026 adjusted free cash flow margin is expected to be in the range of 11% to 13% of revenue.
- Additional capacity is actively being pursued.
What to watch
- Execution against third-quarter total revenue guidance of $304 to $307 million, up 32% to 34% year-over-year.
- Progress toward full-year 2026 total revenue guidance of $1.170 to $1.180 billion, up 30% to 31% year-over-year.
- Adjusted EBITDA margin relative to Q3 guidance of 38% to 39% and full-year guidance of 38.5% to 39.5%.
- Conversion of $894 million of RPO, including $366 million expected to be recognized over the next 12 months.
- The ramp of Inference Engine, for which early customers drove total token consumption up approximately 30x in the last 60-days.
- Delivery of committed data center capacity expected to come online in 2027 and 2028.
Balance sheet and cash flow
- Cash and cash equivalents was $767 million as of June 30, 2026.
- Net cash from operating activities increased to $110 million at a 39% margin, from $92 million at a 42% margin in the second quarter of 2025.
- Adjusted free cash flow increased to $61 million at a 22% margin, from $57 million at a 26% margin in the second quarter of 2025.
- Remaining Performance Obligation (RPO) was $894 million, of which, $366 million is expected to be recognized over the next 12 months.
- Secured an incremental 20 MW of committed data center capacity expected to come online in 2027 and 2028, bringing total committed capacity to approximately 155 MW.
Analysis
DigitalOcean reported a strong second quarter, with revenue of $281 million growing 29% year-over-year and ARR ending at $1,125 million, also up 29%. The company added a record $93 million of incremental ARR, up 191%, while AI Customer ARR reached $234 million, up 212%. RPO was $894 million versus $71 million in the second quarter of 2025, with $366 million expected to be recognized over the next 12 months. These metrics point to sharply accelerating commercial activity and a larger contracted revenue base.
Growth was concentrated in larger customers and AI-oriented workloads. Million+ Dollar Customer ARR was $259 million, up 214%. Revenue from $100K+ Customers represented 35% of total revenue and grew 98%, while revenue from $500K+ and $1M+ Customers represented 26% and 23% of total revenue and grew 160% and 214%, respectively. The company launched Inference Engine, signed first nine-figure annual customer commitments, and stated that 85% of AI customer ARR comes from inference and core cloud rather than bare metal.
Profitability remained positive but the GAAP earnings measures trailed top-line growth. Net income attributable to common stockholders was $35 million, down 4%, and operating income was $29 million, down 18%. In contrast, adjusted operating income increased 9% to $67 million and adjusted EBITDA increased 27% to $114 million, with a 40% adjusted EBITDA margin. Operating cash flow rose to $110 million and adjusted free cash flow rose to $61 million, although their reported margins declined to 39% and 22%, respectively, from 42% and 26% in the second quarter of 2025.
The company ended the period with $767 million of cash and cash equivalents and repurchased approximately $472 million of its 0.00% Convertible Senior Notes due 2030 through a concurrent registered direct offering. It also secured an incremental 20 MW of committed data center capacity, bringing total committed capacity to approximately 155 MW. The capacity expansion and longer customer commitments support the higher level of RPO, but they also make delivery timing and infrastructure execution important.
Management initiated third-quarter revenue guidance of $304 to $307 million, up 32% to 34% year-over-year, and raised full-year 2026 revenue guidance to $1.170 to $1.180 billion, up 30% to 31% year-over-year. Q3 adjusted EBITDA margin is guided to 38% to 39%, below the reported 40% in the second quarter, while full-year adjusted EBITDA margin is expected at 38.5% to 39.5%. Full-year adjusted free cash flow margin guidance of 11% to 13% of revenue is a key figure to monitor as the company accelerates investments in data centers and GPU capacity.
Management, verbatim
Our growth rate is accelerating, as revenue grew 29% year-over-year, more than double our growth rate a year ago.
Paddy Srinivasan, CEO of DigitalOcean
The acceleration is coming from our highest spending customers and sophisticated AI Natives, and we are now beginning to land nine-figure annual commitments.
Paddy Srinivasan, CEO of DigitalOcean
Our customer momentum and early product traction give us confidence to raise our 2026 revenue outlook to approximately 30%, reaching 35% or more by Q4 2026, and strengthen our conviction in our ability to exceed 50% growth in 2027.
Paddy Srinivasan, CEO of DigitalOcean
Not in the filing
stated, not guessed- Revenue by reportable segment was not provided.
- GAAP gross profit and gross margin were not provided.
- Non-GAAP gross margin was not provided.
- Operating expenses were not provided.
- Income tax expense and tax rate were not provided.
- Debt balance, excluding the disclosed repurchase of approximately $472 million of 0.00% Convertible Senior Notes due 2030, was not provided.
- GAAP diluted EPS prior-year and prior-quarter comparisons were not provided.
- Non-GAAP diluted EPS prior-year and prior-quarter comparisons were not provided.
- Prior-quarter comparisons for reported revenue, ARR, profitability, cash flow, RPO, and customer metrics were not provided.
- Prior-period outlook was not provided, so comparison of actual results with prior guidance was not available.
- GAAP forward guidance reconciliation was not available on a forward-looking basis without unreasonable effort.
- Dividend information was not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
This is an SEC Form 8-K (Item 2.02) with DigitalOcean’s Q2 2026 results and updated financial outlook, including ARR, RPO, and cash flow metrics.
Ticker impact
DigitalOcean reported Q2 2026 revenue of $281M (+29% YoY) and raised 2026 revenue outlook to about 30% growth.
Bullish bias for DOCN as traders price in higher 2026 growth and stronger free cash flow margins.
The filing includes both realized quarterly results and explicit updated guidance for Q3 and full-year 2026, plus RPO and ARR metrics that support demand visibility.
Market effects
Supports the AI-inference cloud spend narrative and may lift sentiment toward AI-native infrastructure providers with similar inference workloads.
Limited direct regional read-through beyond US-listed cloud infrastructure sentiment.
Moderate, as AI inference workload demand is global but the disclosure is company-specific.
Counterpoint
Raised guidance could still be conservative if customer commitments slip or if capacity additions do not translate into sustained inference ARR growth.
Key entities
- issuerDigitalOcean Holdings, Inc.
AI-native cloud provider reporting Q2 2026 results and raising 2026 revenue outlook.
- executivePaddy Srinivasan
CEO quoted on accelerating growth and confidence in exceeding 50% growth in 2027.
