DigitalOcean — Third Quarter 2026 Earnings Summary

Financial Performance:

• Q3 2026 revenue was $321 million, a 40% year-over-year increase.
• Annual Run-Rate Revenue (ARR) ended the quarter at $1,285 million, up 40% year-over-year.
• AI Customer ARR grew 288% year-over-year to $376 million.
• Million+ Dollar Customer ARR grew 273% year-over-year to $386 million.
• The company added a record $160 million in incremental ARR, a 266% increase year-over-year.
• Net loss attributable to common stockholders was $43 million, a 127% decrease year-over-year; net loss margin was 13%.
• Net loss included a $57 million induced conversion expense related to the partial repurchase of 2030 Convertible Notes.
• Operating income was $33 million, a 27% decrease year-over-year, with an operating income margin of 10%.
• Adjusted operating income was $74 million, a 6% increase year-over-year, with an adjusted operating income margin of 23%.
• Adjusted EBITDA was $144 million, a 45% increase year-over-year, with an adjusted EBITDA margin of 45%.
• Diluted net loss per share was $0.37; non-GAAP diluted net income per share was $0.45.
• Net cash from operating activities increased to $161 million (50% margin) from $96 million (42% margin) in Q3 2025.
• Adjusted free cash flow increased to $130 million (41% margin) from $85 million (37% margin) in Q3 2025.
• Cash and cash equivalents were $666 million as of September 30, 2026.
• Remaining Performance Obligation (RPO) was $800 million, with $345 million expected to be recognized over the next 12 months, compared to $61 million in RPO in Q3 2025.
• Deferred revenue was $52.7 million as of September 30, 2026, compared to $5.9 million as of December 31, 2025.

Guidance and Future Outlook:

• Q4 2026 revenue growth outlook raised to 44-45% year-over-year.
• Full-year 2027 revenue growth expected to be 60%+.
• Q4 2026 total revenue guidance is $348 to $351 million.
• Q4 2026 adjusted EBITDA margin guidance is 42% to 43%.
• Q4 2026 non-GAAP diluted net income per share guidance is $0.30 to $0.32.
• Full-year 2026 total revenue guidance is $1.208 to $1.211 billion, up approximately 34% year-over-year.
• Full-year 2026 adjusted EBITDA margin guidance is 41% to 42%.
• Full-year 2026 adjusted free cash flow margin guidance is 20% to 22% of revenue.
• Full-year 2026 non-GAAP diluted net income per share guidance is $1.60 to $1.62.

Business Segments and Product Lines:

• Inference Engine token volume grew roughly 10x quarter-over-quarter.
• Launched Managed Agents, Agent Droplets, Agent Learning Services, and Agent Data Services.
• Shipped over 70 releases in 65 business days in Q3, including 21 new models added to the catalog, a new data center, and 49 product and platform releases.
• Customers spending over $100,000 a year now represent 41% of revenue.
• The number of $100K+ Customers grew 11%, with revenue from these customers growing 133%.
• The number of $500K+ Customers grew 47%, with revenue from these customers growing 214%.
• The number of $1M+ Customers grew 96%, with revenue from these customers growing 273%.

Market and Competitive Landscape:

• The company describes the AI center of gravity as shifting from people chatting with models to agents doing work.
• DigitalOcean positions itself as an AI-Native Cloud purpose-built for inference and agentic workloads.
• The company has 680,000 customers and millions of developers globally.
• The platform is described as open with no vendor lock-in.

Risks and Challenges:

• Forward-looking statements are subject to risks including fluctuations in financial results, ability to sustain profitability, and ability to expand usage or attract/retain customers.
• Risks include the speed of market development, success of AI/ML product offerings, ability to release updates, and ability to control costs.
• Specific risks include security breaches, competitive markets, integration of new leadership, acquisitions, macroeconomic conditions, and availability of data center capacity, power, and GPUs.
• The company noted a $57 million induced conversion expense related to debt repurchase.

Management Commentary and Tone:

• CEO Paddy Srinivasan stated revenue growth accelerated year-over-year to 40%, marking the fifth consecutive quarter of acceleration.
• Management emphasized that sophisticated AI natives are adopting the platform rather than just renting capacity.
• The company highlighted a unique platform, durable and profitable growth, a diverse customer base, and a flexible balance sheet.
• Management noted that 2026 capacity was delivered on or ahead of schedule.
• CEO stated the company is "different by design" and continues to accelerate.

Other Key Points:

• Repurchased approximately $472 million of 2030 Convertible Notes, funded by a concurrent registered direct offering, reducing leverage with minimal cash usage and minimal dilution.
• Secured an incremental 20 megawatts (MW) of committed data center capacity expected to come online in 2028, bringing total committed capacity to approximately 180 MW.
• Secured a $785 million equipment lease facility to fund capacity expansion.
• Launched the Memphis data center ahead of schedule, delivering all three 2026 data centers on time or early.
• Conference call scheduled for November 3, 2026, at 8:00 a.m. ET.