DigitalOcean Q4 Earnings Call Highlights

Core Insights - DigitalOcean reported a strong Q4 performance with an 18% year-over-year revenue growth, reaching $242 million, and a full-year revenue of $901 million [4] - The company emphasized the importance of scaling larger customers, which has become a key driver of business growth [1] - DigitalOcean's AI customer ARR reached $120 million, reflecting a 150% year-over-year increase, with 70% of this revenue coming from inference services [10][7] Financial Performance - Adjusted EBITDA for Q4 was $99 million, representing a 41% margin, while the full-year adjusted EBITDA was $375 million with a 42% margin [2] - Gross profit for Q4 was $142 million, up 13% year-over-year, with a gross margin of 59%, and for the full year, gross profit was $540 million, up 16% year-over-year, with a gross margin of 60% [3] - Trailing 12-month adjusted free cash flow was $168 million in Q4, equating to 19% of revenue, with full-year adjusted free cash flow margins also at 19% [2][7] Growth Strategy - The company plans to add 31 MW of data center capacity in 2026, guiding for revenue growth of 19% to 23% for the year, with a path to 30% growth in 2027 [6][18] - DigitalOcean's Digital Native Enterprise (DNE) cohort reached $604 million in ARR, accounting for 62% of total ARR and growing 30% year-over-year [8] - The company introduced a new AI customer revenue metric to better capture revenue from customers leveraging AI products [10] Customer Metrics - Customers generating $100,000 in ARR grew by 58% year-over-year, while those at $1 million in ARR grew by 123%, with a net dollar retention (NDR) of 115% for $1 million customers [8] - The company reported a 102% NDR for $100,000 customers and 106% for $500,000 customers, indicating strong customer retention and growth [8] Future Outlook - Management expects Q1 2026 revenue to be between $249 million and $250 million, reflecting an 18% to 19% year-over-year growth [19] - Full-year 2026 revenue growth is projected at 19% to 23%, with adjusted EBITDA margins expected to be between 36% and 38% [19] - The company is also focusing on optimizing its financing approach, including an $800 million bank facility and $625 million in convertible notes [15][13]