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

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

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 1.9%

Shares of DOCN traded down $1.67 during midday trading on Tuesday, hitting $88.12. The stock had a trading volume of 3,565,230 shares, compared to its average volume of 3,507,405. DigitalOcean has a 1 year low of $38.45 and a 1 year high of $187.50. The firm has a market cap of $9.20 billion, a PE ratio of 40.13, a price-to-earnings-growth ratio of 91.60 and a beta of 1.70. The company has a debt-to-equity ratio of 1.14, a current ratio of 1.31 and a quick ratio of 1.31. The stock’s 50 day moving average is $119.22 and its 200 day moving average is $111.13.

Wall Street Analyst Weigh In

Several analysts have recently issued reports on DOCN shares. Truist Financial started coverage on DigitalOcean in a report on Thursday, August 27th. They set a “buy” rating and a $175.00 price objective on the stock. Canaccord Genuity Group reissued a “buy” rating and issued a $200.00 target price on shares of DigitalOcean in a report on Friday, July 10th. Zacks Research raised shares of DigitalOcean from a “hold” rating to a “strong-buy” rating in a report on Monday, October 19th. Oppenheimer boosted their price target on shares of DigitalOcean from $190.00 to $220.00 and gave the stock an “outperform” rating in a research report on Wednesday, October 14th. Finally, UBS Group decreased their price target on shares of DigitalOcean from $125.00 to $105.00 and set a “neutral” rating on the stock in a research note on Monday, October 26th. Two research analysts have rated the stock with a Strong Buy rating, fourteen have given a Buy rating and two have issued a Hold rating to the company. Based on data from MarketBeat.com, the company currently has an average rating of “Buy” and an average price target of $150.69.

Insider Buying and Selling

In related news, CAO Cherie Barrett sold 4,456 shares of the stock in a transaction dated Thursday, August 13th. The shares were sold at an average price of $132.37, for a total value of $589,840.72. Following the sale, the chief accounting officer directly owned 65,487 shares of the company’s stock, valued at $8,668,514.19. This represents a 6.37% decrease in their position. The transaction was disclosed in a document filed with the SEC, which is available through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CFO Matt Steinfort sold 10,000 shares of the firm’s 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 completion of the sale, the chief financial officer directly owned 503,692 shares of the company’s stock, valued at approximately $53,255,355.16. The trade was a 1.95% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. 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. In the last ninety days, insiders sold 22,641 shares of company stock valued at $2,589,317. Company insiders own 0.96% of the company’s stock.

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.