10-Q · August 4, 2026
DigitalOcean delivered Q2 revenue of $281.184 million, up 29% year over year and 9% sequentially, supported by a 45% rise in DNE-customer revenue and AI Customer ARR of $234 million. However, the growth came with…
Earnings analysis · 10-Q
DOCN earnings analysis
Filed November 3, 2026 · Our reading of the company's report
The latest report
DigitalOcean delivered a strong Q3, with revenue of $321.2 million beating consensus by 4.7%, non-GAAP diluted EPS of $0.45, and adjusted free cash flow of $130.2 million. AI Customer ARR reached $376 million, up 288%…
Read full summary
DigitalOcean delivered a strong Q3, with revenue of $321.2 million beating consensus by 4.7%, non-GAAP diluted EPS of $0.45, and adjusted free cash flow of $130.2 million. AI Customer ARR reached $376 million, up 288% year over year, and management raised the Q4 exit growth outlook to 44%-45% while expecting 60% or greater growth in 2027. The principal offset is a $57.1 million conversion expense that contributed to a $42.6 million GAAP net loss, alongside capacity-expansion and financing execution risks. The filing states that there were no material changes to the risk factors in the 2025 Form 10-K.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.45
- Segment
- No operating-segment revenue breakdown was disclosed in the provided filing text; AI Customer ARR was $376 million, up 288% year over year.
What stood out
-
Revenue beat and accelerated sequential growth
Q3 revenue was $321.2 million, exceeding the $306.8 million consensus estimate by approximately 4.7% and rising from $281 million in Q2 2026 and $230 million in Q3 2025.
-
Adjusted EPS exceeded consensus
Non-GAAP diluted EPS was $0.45, $0.17 above the $0.28 consensus estimate, despite a $57.1 million conversion expense.
-
AI-related ARR surged
AI Customer ARR increased 288% year over year to $376 million, indicating strong demand contribution from AI-related workloads.
-
Cash generation strengthened materially
Adjusted free cash flow was $130.2 million, above the $68 million generated in Q2 2026 and the $88 million generated in Q3 2025.
-
Management raised growth outlook
Management raised the Q4 exit growth outlook to 44%-45% and expects revenue growth of 60% or more in 2027.
-
Repurchase capacity remains available
As of September 30, 2026, the company had $100 million remaining under its share repurchase authorization, supporting continued capital-return flexibility.
What to watch
-
Conversion costs drove GAAP loss
The $57.1 million conversion expense contributed to a $42.6 million GAAP net loss, highlighting the risk that transaction-related costs will continue to depress GAAP earnings.
-
Capacity expansion and financing exposure
GAAP operating profitability compressed, while the company is expanding infrastructure capacity to support AI growth; the filing also added transaction and master lease agreements dated September 10, 2026, increasing execution and financing exposure.
-
Capital allocation may pressure liquidity
Although $100 million remained available under the buyback program at September 30, 2026, deploying that capital could reduce liquidity available for infrastructure investment and other obligations.
Management's outlook
Q4 2026 guidance is revenue of $348 million-$351 million, adjusted EBITDA margin of 42%-43%, and non-GAAP diluted EPS of $0.30-$0.32. Full-year 2026 revenue guidance is $1.208 billion-$1.211 billion and non-GAAP diluted EPS is $1.60-$1.62. Management also raised the Q4 exit growth outlook to 44%-45% and expects revenue growth of 60% or more in 2027.
Earlier filings 4
10-Q · May 5, 2026
DigitalOcean reported strong Q1 2026 results, with revenue of $257.9 million and an EPS of $0.44, both exceeding expectations. The company experienced a robust 22% revenue growth year-over-year driven by increases in…
10-K · February 24, 2026
DigitalOcean describes a focused strategy to serve AI-native and digital-native enterprises with a unified cloud + AI platform, driving product investment (Gradient AI GPUs, platform enhancements) and higher-value…
10-Q · August 5, 2025
DigitalOcean reported a beat quarter with revenue of $218,700,000 (up $26,224,000 or ~13.6% YoY) and income from operations of $35,619,000 (operating margin 16.3%). Diluted EPS was $0.39 versus $0.20 a year ago and net…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.