DigitalOcean Announces Third Quarter 2026 Financial Results
DigitalOcean Holdings, Inc. (DOCN) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 DigitalOcean Announces Third Quarter 2026 Financial Results Raising Q4 2026 exit revenue growth outlook to 44-45% and increasing expected 2027 revenue growth to 60%+ Q3 2026 Revenue of $321 million grew 40% year-over-year Million+ Dollar Customer ARR grew 273% year-o
How this was made
The 30-second read
Why it matters
The raised guidance reflects accelerating demand for AI workloads, which may boost the company's valuation and attract growth‑focused investors.
Market read
The earnings beat and raised outlook provide a fresh catalyst for DOCN, likely influencing both the stock and the broader AI‑cloud sector.
What to watch
Potential margin pressure from the $472 million convertible note repurchase and upcoming capacity expansion costs.
DigitalOcean Announces Third Quarter 2026 Financial Results Raising Q4 2026 exit revenue growth outlook to 44-45% and increasing expected 2027 revenue growth to 60%+
Revenue grew 40% year-over-year, ARR reached $1,285 million, AI Customer ARR grew 288%, adjusted EBITDA increased 45%, and fourth-quarter revenue guidance calls for 44% to 45% year-over-year growth. GAAP net loss reflected a $57 million induced conversion expense related to the partial repurchase of 2030 Convertible Notes.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, Q3 2026GAAP | $321.2M | – | 40% |
| Revenue, nine months ended September 30, 2026GAAP | $860.3M | – | – |
| Cost of revenue, Q3 2026GAAP | $160.1M | – | – |
| Cost of revenue, nine months ended September 30, 2026GAAP | $399.8M | – | – |
| Gross profit, Q3 2026GAAP | $161.1M | – | – |
| Gross profit, nine months ended September 30, 2026GAAP | $460.4M | – | – |
| Research and development expense, Q3 2026GAAP | $58.79M | – | – |
| Sales and marketing expense, Q3 2026GAAP | $24.21M | – | – |
| General and administrative expense, Q3 2026GAAP | $45.05M | – | – |
| Total operating expenses, Q3 2026GAAP | $128.0M | – | – |
| Operating income, Q3 2026GAAP | $33.02M | – | decrease of 27% |
| Operating income margin, Q3 2026GAAP | 10% | – | – |
| Operating income, nine months ended September 30, 2026GAAP | $98.97M | – | – |
| Adjusted operating income, Q3 2026non-GAAP | $74.14M | – | 6% |
| Adjusted operating income margin, Q3 2026non-GAAP | 23% | – | – |
| Adjusted operating income, nine months ended September 30, 2026non-GAAP | $205.6M | – | – |
| Net income (loss) attributable to common stockholders, Q3 2026GAAP | −$42.61M | – | decrease of 127% |
| Net income (loss) margin, Q3 2026GAAP | (13)% | – | – |
| Net income attributable to common stockholders, nine months ended September 30, 2026GAAP | $8.60M | – | – |
| Diluted net income (loss) per share attributable to common stockholders, Q3 2026GAAP | $(0.37) | – | – |
| Basic net income (loss) per share attributable to common stockholders, Q3 2026GAAP | $(0.37) | – | – |
| Diluted net income per share attributable to common stockholders, nine months ended September 30, 2026GAAP | $0.08 | – | – |
| Non-GAAP net income, Q3 2026non-GAAP | $54.76M | – | – |
| Non-GAAP diluted net income per share, Q3 2026non-GAAP | $0.45 | – | – |
| Non-GAAP net income, nine months ended September 30, 2026non-GAAP | $155.5M | – | – |
| Non-GAAP diluted net income per share, nine months ended September 30, 2026non-GAAP | $1.33 | – | – |
| Adjusted EBITDA, Q3 2026non-GAAP | $144.2M | – | 45% |
| Adjusted EBITDA margin, Q3 2026non-GAAP | 45% | – | – |
| Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $362.3M | – | – |
| Net cash provided by operating activities, Q3 2026GAAP | $161.2M | – | – |
| Net cash provided by operating activities margin, Q3 2026GAAP | 50% | – | – |
| Net cash provided by operating activities, nine months ended September 30, 2026GAAP | $318.1M | – | – |
| Adjusted free cash flow, Q3 2026non-GAAP | $130.2M | – | – |
| Adjusted free cash flow margin, Q3 2026non-GAAP | 41% | – | – |
| Adjusted free cash flow, nine months ended September 30, 2026non-GAAP | $193.0M | – | – |
| Unlevered adjusted free cash flow, Q3 2026non-GAAP | $136.0M | – | – |
| Annual Run-Rate Revenue, Q3 2026other | $1.28B | – | 40% |
| AI Customer ARR, Q3 2026other | $376M | – | 288% |
| Incremental ARR added, Q3 2026other | $160M | – | 266% |
| Remaining Performance Obligation, Q3 2026other | $800M | – | – |
| Remaining Performance Obligation expected to be recognized over the next 12 months, Q3 2026other | $345M | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
fourth quarter ending December 31, 2026 and full year 2026 outlook
- RevenueFourth quarter: $348 to $351 million, up 44% to 45% year-over-year. Full year 2026: $1.208 to $1.211 billion, up approximately 34% year-over-year.
- NoteFourth quarter adjusted EBITDA margin of 42% to 43%.
- NoteFourth quarter non-GAAP diluted net income per share of $0.30 to $0.32.
- NoteFourth quarter fully diluted weighted average shares outstanding of approximately 128 to 129 million shares.
- NoteFull year 2026 adjusted EBITDA margin of 41% to 42%.
- NoteFull year 2026 adjusted free cash flow margin in the range of 20% to 22% of revenue.
- NoteFull year 2026 non-GAAP diluted net income per share of $1.60 to $1.62.
- NoteFull year 2026 fully diluted weighted average shares outstanding of approximately 122 to 123 million shares.
- NoteExpected 2027 revenue growth of 60%+.
Capital returns
- Repurchased approximately $472 million of our 2030 Convertible Notes, funded by a concurrent registered direct offering, reducing leverage with minimal cash usage and minimal dilution, with issued shares mostly offset by the retired notes.
What drove it
- AI Customer ARR was $376 million, an increase of 288%.
- Revenue from $100K+ Customers, representing 41% of total revenue, grew 133%; the number of $100K+ Customers grew 11%.
- Revenue from $500K+ Customers, representing 33% of total revenue, grew 214%; the number of $500K+ Customers grew 47%.
- Revenue from $1M+ Customers, representing 30% of total revenue, grew 273%; the number of $1M+ Customers grew 96%.
- Inference Engine token volume grew roughly 10x quarter-over-quarter.
- The company launched Managed Agents, Agent Droplets, Agent Learning Services and Agent Data Services.
- The Memphis data center launched ahead of schedule, with all three 2026 data centers delivered on time or early.
- DigitalOcean secured an incremental 20 MW of committed data center capacity expected to come online in 2028, bringing total committed capacity to approximately 180 MW.
Concerns
- GAAP net loss attributable to common stockholders was $(42,609) (in thousands), including an induced conversion expense of $57,110 (in thousands) related to the partial repurchase of 2030 Convertible Notes.
- GAAP operating income was $33,025 (in thousands), compared with $44,932 (in thousands), while operating income margin was 10%, compared with 20%.
- Adjusted operating income margin was 23%, compared with 30%.
- The company identifies the timing and availability of data center capacity, power, GPUs and other equipment as a risk, alongside plans to accelerate investments in data centers and GPU capacity.
- RPO is not necessarily indicative of future revenue growth because it does not account for the timing of customers' consumption or their usage beyond contracted capacity.
What to watch
- Fourth-quarter total revenue guidance of $348 to $351 million and 44% to 45% year-over-year growth.
- Fourth-quarter adjusted EBITDA margin guidance of 42% to 43%, compared with 45% in Q3 2026.
- Full-year 2026 adjusted free cash flow margin guidance of 20% to 22% of revenue, compared with 22% for the nine months ended September 30, 2026.
- Execution against expected 2027 revenue growth of 60%+.
- Delivery of the incremental 20 MW of committed data center capacity expected to come online in 2028.
- Growth in AI Customer ARR, which was $376 million and increased 288% year-over-year in Q3 2026.
Balance sheet and cash flow
- Cash and cash equivalents: $666,096 (in thousands) as of September 30, 2026, compared with $254,475 (in thousands) as of December 31, 2025.
- Marketable securities: $178,645 (in thousands) as of September 30, 2026.
- Debt, current: $312,052 (in thousands) as of September 30, 2026, compared with $325,109 (in thousands) as of December 31, 2025.
- Debt, long-term: $149,578 (in thousands) as of September 30, 2026, compared with $970,653 (in thousands) as of December 31, 2025.
- Finance lease liabilities and equipment financing obligations, current: $204,778 (in thousands) as of September 30, 2026.
- Finance lease liabilities and equipment financing obligations, long-term: $718,821 (in thousands) as of September 30, 2026.
- Property and equipment, net: $1,407,705 (in thousands) as of September 30, 2026, compared with $589,094 (in thousands) as of December 31, 2025.
- Capital expenditures - property and equipment, nine months ended September 30, 2026: $(105,124) (in thousands), compared with $(102,931) (in thousands).
- Capital expenditures - internal-use software, nine months ended September 30, 2026: $(19,279) (in thousands), compared with $(6,541) (in thousands).
- Net cash used in investing activities, nine months ended September 30, 2026: $(381,974) (in thousands), compared with $(138,772) (in thousands).
- Net cash provided by financing activities, nine months ended September 30, 2026: $475,796 (in thousands), compared with net cash used in financing activities of $(307,177) (in thousands).
- Secured a $785 million equipment lease facility to fund the expansion of capacity to meet growing customer demand.
Analysis
DigitalOcean reported Q3 2026 revenue of $321,192 (in thousands), up 40%, with Annual Run-Rate Revenue ending at $1,285 million, also up 40%. The company reported a record $160 million of ARR added during the quarter, up 266%. AI Customer ARR reached $376 million and grew 288%, while management said Inference Engine token volume grew roughly 10x quarter-over-quarter. These figures point to AI-related workloads and larger customers as the principal sources of growth.
Customer mix moved toward larger accounts. Revenue from $100K+ Customers represented 41% of total revenue and grew 133%, while revenue from $500K+ and $1M+ Customers represented 33% and 30% of total revenue and grew 214% and 273%, respectively. The company also expanded its platform with Managed Agents, Agent Droplets, Agent Learning Services and Agent Data Services, and shipped over 70 releases in 65 business days in Q3.
Profitability and cash generation remained strong on adjusted measures, although GAAP profitability was affected by debt-conversion activity. Adjusted EBITDA was $144,212 (in thousands), up 45%, and adjusted EBITDA margin was 45%, compared with 43%. Net cash provided by operating activities was $161,227 (in thousands), compared with $95,787 (in thousands), and adjusted free cash flow was $130,185 (in thousands), compared with $84,888 (in thousands). GAAP net loss attributable to common stockholders was $(42,609) (in thousands), including a $57,110 (in thousands) induced conversion expense. GAAP operating income declined to $33,025 (in thousands) from $44,932 (in thousands), and adjusted operating income margin was 23%, compared with 30%.
Capital allocation focused on capacity expansion and balance-sheet financing. DigitalOcean repurchased approximately $472 million of 2030 Convertible Notes through a concurrent registered direct offering and secured a $785 million equipment lease facility. Cash and cash equivalents were $666,096 (in thousands), marketable securities were $178,645 (in thousands), and property and equipment, net was $1,407,705 (in thousands) at September 30, 2026. The company launched its Memphis data center ahead of schedule, delivered all three 2026 data centers on time or early, and secured 20 MW of incremental committed capacity expected to come online in 2028.
The outlook calls for further acceleration. Fourth-quarter revenue is guided to $348 to $351 million, up 44% to 45% year-over-year, with adjusted EBITDA margin of 42% to 43%. Full-year 2026 revenue is guided to $1.208 to $1.211 billion, up approximately 34% year-over-year, and adjusted free cash flow margin is guided to 20% to 22% of revenue. Management also stated that it now expects 60%+ revenue growth for full year 2027. The key reported tradeoff is that the company is scaling infrastructure and financing capacity while maintaining high adjusted cash flow, even as GAAP results and operating margins reflect conversion-related costs and increased investment.
Management, verbatim
Revenue growth accelerated year-over-year to 40%, our fifth consecutive quarter of acceleration, and we added a record $160 million of ARR.
Paddy Srinivasan, CEO of DigitalOcean
Not in the filing
stated, not guessed- Prior-quarter financial results and sequential comparisons for revenue, profitability, EPS, cash flow and ARR were not provided.
- GAAP gross margin and non-GAAP gross margin were not reported.
- Segment revenue, segment profitability and segment-level guidance were not reported.
- Dividend information was not provided.
- Prior-quarter cash, debt and capital expenditure balances were not provided.
- Previous-release outlook was not provided, so comparison of reported results with prior guidance is unavailable.
- Forward guidance for gross margin, operating expenses and tax rate was not provided.
Written by an AI language model 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 checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. 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
The filing is a standard SEC 8‑K earnings release for DigitalOcean, a U.S. listed AI‑native cloud provider.
Ticker impact
DigitalOcean reported Q3 2026 revenue of $321 million, up 40% YoY, and raised its Q4 2026 revenue growth outlook to 44‑45% and full‑year 2027 growth to 60%+.
upward pressure as the market prices in the higher revenue growth outlook
The company delivered record ARR growth and lifted guidance, which historically triggers buying in growth‑oriented tech stocks.
Market effects
Positive for AI‑cloud and SaaS providers as the guidance lift underscores sector tailwinds.
U.S. equity markets may see modest upside in cloud‑tech indices.
Global investors tracking AI infrastructure may adjust exposure upward.
Counterpoint
If the raised outlook is already priced in, the stock could face short‑term profit‑taking.
Key entities
- companyDigitalOcean Holdings, Inc.
U.S. listed provider of AI‑native cloud services (ticker DOCN).
- executivePaddy Srinivasan
CEO of DigitalOcean who delivered the earnings commentary.
