DigitalOcean (NYSE:DOCN) Announces 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 for the quarter, beating analysts’ consensus estimates of $0.32 by $0.13, FiscalAI reports. The firm had revenue of $321.19 million for the quarter, compared to analyst estimates of $306.74 million. DigitalOcean had a net margin of 23.26% and a return on equity of 31.01%. DigitalOcean’s quarterly revenue was up 39.6% on a year-over-year basis. During the same period last year, the firm posted $0.54 EPS.

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 Price Performance

NYSE DOCN traded down $8.10 during trading hours on Wednesday, reaching $82.40. The company’s stock had a trading volume of 2,286,068 shares, compared to its average volume of 3,528,057. DigitalOcean has a fifty-two week low of $41.96 and a fifty-two week high of $187.50. The stock has a market cap of $8.60 billion, a PE ratio of 36.88, a PEG ratio of 78.28 and a beta of 1.69. The company has a debt-to-equity ratio of 1.14, a quick ratio of 1.31 and a current ratio of 1.31. The company’s 50-day moving average is $118.80 and its two-hundred day moving average is $111.32.

Wall Street Analyst Weigh In

Several analysts have recently weighed in on the stock. Citigroup reaffirmed a “buy” rating on shares of DigitalOcean in a report on Tuesday, October 27th. Morgan Stanley cut their price target on shares of DigitalOcean from $175.00 to $150.00 and set an “overweight” rating for the company in a report on Wednesday. Robert W. Baird started coverage on shares of DigitalOcean in a report on Tuesday, July 21st. They set an “outperform” rating and a $165.00 price target for the company. Weiss Ratings downgraded shares of DigitalOcean from a “buy (b-)” rating to a “hold (c+)” rating in a research report on Wednesday, September 9th. Finally, Canaccord Genuity Group reaffirmed a “buy” rating and issued a $200.00 price objective on shares of DigitalOcean in a report on Friday, July 10th. Two research analysts have rated the stock with a Strong Buy rating, fourteen have given a Buy rating and two have assigned a Hold rating to the company’s stock. According to MarketBeat, DigitalOcean currently has a consensus rating of “Buy” and an average target price of $147.25.

Key DigitalOcean News

Here are the key news stories impacting DigitalOcean this week:

• Positive Sentiment: DigitalOcean reported Q3 earnings of $0.45 per share, topping the $0.32 consensus, while revenue of $321.19 million exceeded estimates of $306.74 million and rose 39.6% year over year. The company also raised its 2026 outlook, which reportedly came in above expectations. DigitalOcean Q3 results and outlook
• Positive Sentiment: Management expects revenue growth of at least 60% in 2027. About 90% of AI-related customer revenue comes from customers already using DigitalOcean’s core cloud services, suggesting AI demand is building within its existing customer base. DigitalOcean long-term investor takeaways
• Negative Sentiment: Stifel lowered its price target for DOCN to $130. Separately, non-GAAP earnings declined, and reported EPS of $0.45 was below the $0.54 earned a year earlier, despite beating analyst estimates. Stifel lowers DigitalOcean price target

Insider Transactions at DigitalOcean

In related news, CAO Cherie Barrett sold 4,456 shares of DigitalOcean stock in a transaction that occurred on Thursday, August 13th. The stock was sold at an average price of $132.37, for a total transaction of $589,840.72. Following the completion of the transaction, the chief accounting officer directly owned 65,487 shares in the company, valued at $8,668,514.19. The trade was a 6.37% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available at this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, Director Warren Adelman sold 4,200 shares of the stock in a transaction on Friday, August 7th. The shares were 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. This trade represents a 5.86% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. Insiders sold a total of 22,641 shares of company stock valued at $2,589,317 in the last ninety days. Corporate 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.