DigitalOcean(US:DOCN)2025-11-05 21:12Revenue and Customer Metrics - Revenue from Higher Spend Customers accounted for 89% of total revenue for the three months ended September 30, 2025, up from approximately 88% in the same period of 2024[131]. - The number of Higher Spend Customers increased to approximately 177,000 as of September 30, 2025, compared to approximately 163,000 as of September 30, 2024[131]. - Average Revenue Per User (ARPU) rose to $116.20 for the three months ended September 30, 2025, up from $102.51 in the same period of 2024[132]. - Revenue for the three months ended September 30, 2025, was $229.6 million, a 16% increase from $198.5 million in the same period of 2024, driven by a 13% increase in ARPU to $116.20[167]. - Revenue for the nine months ended September 30, 2025, increased by $83.3 million, or 14%, to $659.0 million compared to $575.7 million in 2024, driven by a 13% increase in ARPU to $112.18 from $99.02[177]. Financial Performance - Net income attributable to common stockholders for the three months ended September 30, 2025, was $158.4 million, compared to $32.9 million in the same period of 2024[162]. - GAAP net income attributable to common stockholders for Q3 2025 was $158,371,000, compared to $32,949,000 in Q3 2024, representing a significant increase of 379%[208]. - For the nine months ended September 30, 2025, GAAP net income attributable to common stockholders was $233,602,000, compared to $66,226,000 for the same period in 2024, marking a 253% increase[212]. - Non-GAAP net income for Q3 2025 was $55,990,000, up from $51,674,000 in Q3 2024, reflecting a growth of 6.4%[212]. - Non-GAAP diluted net income per share for Q3 2025 was $0.54, compared to $0.52 in Q3 2024, indicating a 3.8% increase[212]. - The company reported a net income margin of 35% for the nine months ended September 30, 2025, compared to 12% for the same period in 2024[208]. Expenses and Cost Management - Cost of revenue increased by $10.8 million, or 13%, to $92.7 million for the three months ended September 30, 2025, primarily due to $8.3 million in co-location costs from data center expansion[169]. - Cost of revenue rose by $25.9 million, or 11%, to $261.7 million for the nine months ended September 30, 2025, primarily due to $22.6 million in co-location costs from data center expansion[178]. - Gross profit margin improved to 60% for the three months ended September 30, 2025, compared to 59% in the same period of 2024[169]. - Gross profit margin improved to 60% for the nine months ended September 30, 2025, up from 59% in the same period of 2024, mainly due to higher revenue[178]. - Sales and marketing expenses were approximately 9% of revenue for the three months ended September 30, 2025, compared to 8% in the same period of 2024[134]. - Sales and marketing expenses increased by $6.0 million, or 39%, to $21.2 million, driven by higher headcount and advertising expenses[171]. - Research and development expenses rose by $1.8 million, or 5%, to $38.1 million, mainly due to increased personnel costs[170]. - General and administrative expenses decreased by $7.8 million, or 19%, to $32.7 million, primarily due to lower personnel costs and share-based compensation[172]. Other Income and Tax Benefits - Other income, net, surged by $40.3 million, or 801%, to $45.4 million, mainly due to a $48.4 million gain on partial extinguishment of 2026 Convertible Notes[173]. - Other income, net, surged by $45.7 million, or 447%, to $10.2 million, primarily due to a $48.1 million net gain on the partial extinguishment of 2026 Convertible Notes[183]. - Income tax benefit increased by $64.7 million, or 1,957%, to $68.1 million, primarily due to the release of a $69.9 million valuation allowance related to U.S. deferred tax assets[175]. - Income tax benefit increased by $61.9 million, or 2,499%, to $59.5 million, largely due to a $69.9 million release of the valuation allowance related to U.S. deferred tax assets[185]. Cash Flow and Financial Position - Net cash provided by operating activities was $252.3 million for the nine months ended September 30, 2025, compared to $211.4 million in 2024, driven by higher revenues[198]. - Net cash used in investing activities increased to $138.8 million from $47.7 million, primarily due to a $91.7 million reallocation of marketable securities to cash equivalents[199]. - Net cash used in financing activities was $307.2 million, significantly higher than $41.0 million in 2024, mainly due to $1,131.5 million in repurchases of 2026 Convertible Notes[200]. - As of September 30, 2025, the company had $236.6 million in cash and cash equivalents, with $420.0 million of borrowing capacity available under its 2025 Credit Facility[194][190]. Strategic Initiatives - DigitalOcean continues to invest in its platform and product offerings to meet the needs of Higher Spend Customers and expand its IaaS, PaaS, and AI/ML services[138]. - The company completed acquisitions of Paperspace and Cloudways to enhance its AI/ML and Managed Hosting offerings, respectively[141]. - DigitalOcean aims to drive adoption through community engagement and educational initiatives, fostering brand loyalty and expanding its customer base[140]. Market and Risk Assessment - There have been no material changes in market risk from the previous annual report for the fiscal year ended December 31, 2024[216].