DigitalOcean (NYSE:DOCN) Posts Quarterly Earnings Results, Beats Estimates By $0.13 EPS

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

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 Trading Down 1.7%

NYSE DOCN traded down $1.51 on Tuesday, reaching $88.28. The stock had a trading volume of 3,206,642 shares, compared to its average volume of 3,505,282. The company has a quick ratio of 1.31, a current ratio of 1.31 and a debt-to-equity ratio of 1.14. The stock has a fifty day moving average price of $119.22 and a two-hundred day moving average price of $111.13. DigitalOcean has a 12-month low of $38.45 and a 12-month high of $187.50. The firm has a market capitalization 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.

Analysts Set New Price Targets

A number of brokerages have recently issued reports on DOCN. Zacks Research raised DigitalOcean from a “hold” rating to a “strong-buy” rating in a research note on Monday, October 19th. Canaccord Genuity Group reiterated a “buy” rating and issued a $200.00 price objective on shares of DigitalOcean in a report on Friday, July 10th. Truist Financial started coverage on DigitalOcean in a research note on Thursday, August 27th. They issued a “buy” rating and a $175.00 price target on the stock. Weiss Ratings cut DigitalOcean from a “buy (b-)” rating to a “hold (c+)” rating in a report on Wednesday, September 9th. Finally, Robert W. Baird assumed coverage on DigitalOcean in a report on Tuesday, July 21st. They set an “outperform” rating and a $165.00 price target for the company. Two analysts have rated the stock with a Strong Buy rating, fourteen have issued a Buy rating and two have issued a Hold rating to the stock. According to MarketBeat.com, the company has a consensus rating of “Buy” and a consensus target price 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 on Friday, August 7th. The stock was sold at an average price of $124.01, for a total value of $520,842.00. Following the sale, the director owned 67,433 shares in the company, valued at approximately $8,362,366.33. The trade was a 5.86% decrease in their position. The transaction was disclosed in a filing with the Securities & Exchange Commission, which can be accessed through this hyperlink. Also, CFO Matt Steinfort sold 10,000 shares of the stock in a transaction dated Thursday, September 3rd. The stock was sold at an average price of $105.73, for a total transaction of $1,057,300.00. Following the sale, the chief financial officer directly owned 503,692 shares in the company, valued at $53,255,355.16. This represents a 1.95% decrease in their position. The SEC filing for this sale provides additional information. 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. Insiders sold a total of 22,641 shares of company stock worth $2,589,317 over the last ninety days. Company insiders own 0.96% of the company’s stock.

DigitalOcean Company Profile

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.