DigitalOcean (NYSE:DOCN) Releases Quarterly Earnings Results

DigitalOcean (NYSE:DOCN) posted its quarterly earnings results on Tuesday. The company reported $0.45 EPS for the quarter, topping the consensus estimate of $0.32 by $0.13, FiscalAI reports. DigitalOcean had a net margin of 3.11% and a return on equity of 15.01%. The business had revenue of $321.19 million during the quarter, compared to the consensus estimate of $306.74 million. During the same quarter in the previous year, the firm posted $0.54 earnings per share. The company’s quarterly 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 Stock Down 13.6%

DigitalOcean stock traded down $11.43 during mid-day trading on Thursday, hitting $72.59. The company had a trading volume of 4,574,448 shares, compared to its average volume of 3,550,610. The company has a quick ratio of 1.31, a current ratio of 1.15 and a debt-to-equity ratio of 0.61. DigitalOcean has a 1 year low of $41.96 and a 1 year high of $187.50. The business has a fifty day moving average of $118.24 and a 200 day moving average of $111.48. The stock has a market cap of $7.58 billion, a price-to-earnings ratio of 233.40, a PEG ratio of 78.90 and a beta of 1.69.

Insider Buying and Selling

In other DigitalOcean news, CFO Matt Steinfort sold 10,000 shares of the company’s stock in a transaction on 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 represents a 1.95% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the SEC, which is available at this hyperlink. 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. Also, Director Warren J. Adelman sold 4,200 shares of the firm’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 directly 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 SEC filing for this sale provides additional information. Insiders have sold 22,641 shares of company stock worth $2,589,317 in the last ninety days. 0.96% of the stock is owned by corporate insiders.

DigitalOcean News Roundup

Here are the key news stories impacting DigitalOcean this week:

• Positive Sentiment: DigitalOcean reported strong third-quarter results and raised its outlook. Recent coverage highlights higher guidance and AI-related revenue growth; the company has also indicated it expects revenue growth of at least 60% in 2027. DigitalOcean Stock Jumps On Higher Guidance And AI Revenue Growth
• Neutral Sentiment: Several firms lowered their price targets but maintained positive ratings: Goldman Sachs cut its target to $156 and kept Buy, while Canaccord, Citi, and Barclays also reduced targets while retaining Buy or Overweight ratings. UBS lowered its target to $100 and maintained Neutral. The revisions temper the bullish signal, though the ratings suggest analysts still see potential upside.
• Negative Sentiment: A valuation-focused article argues DOCN could be 62% below fair value following the results and a $1 billion offering. The offering and valuation concerns may be contributing to investor caution despite the improved outlook. DigitalOcean Holdings Could Be 62% Below Fair Value Following Results And $1b Offering

Wall Street Analyst Weigh In

A number of brokerages recently issued reports on DOCN. Robert W. Baird began coverage on shares of DigitalOcean in a research note on Tuesday, July 21st. They issued an “outperform” rating and a $165.00 price target for the company. Oppenheimer raised their price objective on shares of DigitalOcean from $190.00 to $220.00 and gave the company an “outperform” rating in a report on Wednesday, October 14th. The Goldman Sachs Group decreased their price objective on shares of DigitalOcean from $178.00 to $156.00 and set a “buy” rating for the company in a research report on Thursday. Weiss Ratings downgraded shares of DigitalOcean from a “buy (b-)” rating to a “hold (c+)” rating in a research note on Wednesday, September 9th. Finally, Canaccord Genuity Group dropped their target price on DigitalOcean from $200.00 to $180.00 and set a “buy” rating on the stock in a report on Wednesday. Two equities research analysts have rated the stock with a Strong Buy rating, fourteen have issued a Buy rating and two have given a Hold rating to the stock. Based on data from MarketBeat.com, DigitalOcean currently has an average rating of “Buy” and an average price target of $141.06.

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.