DigitalOcean(DOCN) - 2025 Q3 - Quarterly Results

Financial Performance - Revenue for Q3 2025 was $230 million, representing a 16% year-over-year increase; full year revenue guidance raised to $896 to $897 million[5] - Net income was $158 million, up 381% year-over-year, with a net income margin of 69%; adjusted EBITDA was $100 million, a 15% increase year-over-year, with an adjusted EBITDA margin of 43%[6] - Annual Run-Rate Revenue (ARR) ended the quarter at $919 million, also a 16% year-over-year increase; incremental ARR of $44 million was the highest in company history[5] - Revenue for Q3 2025 was $229,634,000, representing a 15.7% increase from $198,484,000 in Q3 2024[41] - Gross profit for Q3 2025 was $136,933,000, up from $116,564,000 in Q3 2024, indicating a growth of 17.5%[41] - Net income attributable to common stockholders for Q3 2025 was $158,371,000, compared to $32,949,000 in Q3 2024, reflecting a significant increase of 378.5%[41] - Net income attributable to common stockholders for the nine months ended September 30, 2025, was $233,602,000, a significant increase from $66,226,000 in 2024, representing a growth of 253%[43] - Adjusted EBITDA for the nine months ended September 30, 2025, was $275,541,000, compared to $242,629,000 in 2024, reflecting an increase of 13.5%[46] - The net income margin for the nine months ended September 30, 2025, was 35%, up from 12% in 2024, showing a substantial improvement[46] Customer Metrics - Customers with an annual run-rate of more than $1 million contributed $110 million in total ARR, growing at 72% year-over-year[5] - The number of customers with greater than $100,000 in ARR grew 26%, and revenue from these customers increased by 41% year-over-year[12] - Net Dollar Retention Rate (NDR) improved to 99% from 97% in Q3 2024, reflecting strong customer retention[12] - The net dollar retention rate is calculated monthly, reflecting customer revenue retention and expansion over the past 12 months[32] Cash Flow and Financing - Adjusted free cash flow was $85 million at a 37% margin, compared to $26 million at a 13% margin in Q3 2024[6] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $252,324,000, up from $211,386,000 in 2024, indicating a growth of 19.4%[43] - Adjusted free cash flow for the nine months ended September 30, 2025, was $141,081,000, compared to $98,002,000 in 2024, an increase of 43.9%[51] - The company reported a net cash used in financing activities of $307,177,000 for the nine months ended September 30, 2025, compared to $41,020,000 in 2024, indicating a significant increase in cash outflow[43] - The company issued $606,827,000 in 2030 Convertible Notes, net of issuance costs, as part of its financing activities[43] Assets and Liabilities - Total assets as of September 30, 2025, were $1,725,706,000, compared to $1,639,015,000 as of December 31, 2024[39] - Current liabilities increased to $324,998,000 from $220,955,000, indicating a rise of 47.0%[39] Operational Highlights - Direct AI revenue more than doubled year-over-year for the fifth consecutive quarter, indicating strong demand in the AI sector[3] - DigitalOcean announced new product features including Spaces Cold Storage and Managed Databases Storage Autoscaling during the quarter[12] - Operating expenses for Q3 2025 totaled $92,001,000, slightly up from $91,958,000 in Q3 2024[41] - The company has a remaining performance obligation (RPO) that reflects future service commitments not yet recognized in financial statements[34] - Organic ARR excludes revenue impacts from acquisitions and pricing increases, providing a clearer view of underlying revenue growth[35] Capital Expenditures - Capital expenditures for property and equipment were $102,931,000 for the nine months ended September 30, 2025, down from $132,886,000 in 2024, a decrease of 22.5%[43] - The adjusted free cash flow margin for the nine months ended September 30, 2025, was 21%, compared to 17% in 2024, reflecting an improvement in cash flow efficiency[51]