Core Viewpoint - DigitalOcean Holdings, Inc. has announced the pricing of an upsized public offering of common stock, raising approximately $800 million, which is an increase from the previously announced $700 million [1][2]. Group 1: Offering Details - The offering consists of 10,389,611 shares of common stock, with an additional 1,558,441 shares available for underwriters to purchase within 30 days at the public offering price [1]. - The offering is expected to close on March 26, 2026, pending customary closing conditions [1]. Group 2: Use of Proceeds - The net proceeds from the offering will be used for investments in additional infrastructure capacity to support customer demand for DigitalOcean's cloud and AI platform [2]. - Funds will also be allocated to strengthen the balance sheet by paying down existing Term Loan A and for general corporate purposes [2]. Group 3: Underwriters - J.P. Morgan, Morgan Stanley, and BofA Securities are acting as joint book-running managers for the offering, with Goldman Sachs & Co. LLC, Citizens Capital Markets, and MUFG serving as bookrunners [3]. - KeyBanc Capital Markets is acting as a co-manager for the offering [3]. Group 4: Company Overview - DigitalOcean is positioned as the Agentic Inference Cloud designed for AI-native and Digital-native enterprises, providing production-ready GPU infrastructure combined with a full-stack cloud [6]. - The platform aims to deliver operational simplicity and predictable economics at scale, with over 640,000 customers relying on DigitalOcean for their cloud and AI infrastructure [6].

Core Viewpoint - DigitalOcean Holdings, Inc. has announced a proposed public offering of $700 million in common stock to support its growth and infrastructure needs [1][2]. Group 1: Offering Details - The public offering consists of $700 million in common stock, with an additional 30-day option for underwriters to purchase up to $105 million more [1]. - The offering is subject to market conditions, and there is no assurance regarding its completion or terms [1]. - J.P. Morgan, Morgan Stanley, and BofA Securities are acting as joint book-running managers for the offering [3]. Group 2: Use of Proceeds - The net proceeds from the offering will be used for investments in additional infrastructure capacity to meet customer demand for DigitalOcean's cloud and AI platform [2]. - Funds will also be allocated to strengthen the balance sheet by paying down existing Term Loan A [2]. - General corporate purposes will also be a focus for the use of proceeds [2]. Group 3: Company Overview - DigitalOcean is positioned as the Agentic Inference Cloud designed for AI-native and digital-native enterprises, providing production-ready GPU infrastructure [6]. - The platform aims to deliver operational simplicity and predictable economics at scale, enabling customers to expand as they grow [6]. - Over 640,000 customers rely on DigitalOcean for their cloud and AI infrastructure needs [6].

Company Overview - DigitalOcean Holdings, Inc. (DOCN) shares increased by 10.8% to close at $68.69, driven by notable trading volume compared to typical sessions, despite a 3.2% loss over the past four weeks [1] - The company is experiencing strong demand for its Agentic Inference Cloud, particularly from AI-native and cloud-native companies scaling production workloads [1] Earnings Expectations - DigitalOcean is projected to report quarterly earnings of $0.27 per share, reflecting a year-over-year decline of 51.8%, with revenues expected to reach $249.68 million, an increase of 18.5% from the previous year [2] - The consensus EPS estimate for DigitalOcean has been revised down by 58.3% over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not correlate with price appreciation [3] Industry Context - DigitalOcean is part of the Zacks Internet - Software industry, where another company, Palantir Technologies Inc. (PLTR), reported a 0.3% increase in its stock price, closing at $151.6, with an 8.3% return over the past month [3] - Palantir's consensus EPS estimate for its upcoming report is $0.29, representing a year-over-year increase of 123.1%, with a Zacks Rank of 3 (Hold) [4]

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]

Core Insights - The company achieved an 18% revenue growth in Q4, attributed to a strategic shift towards Digital-Native Enterprises (DNEs), which now account for 62% of total Annual Recurring Revenue (ARR) and are growing at 30% year-over-year [1] Group 1: Customer Growth and Retention - The company has transformed its largest customers into a significant growth driver, with million-dollar customers increasing by 123% year-over-year and maintaining a 0% churn rate over the past twelve months [1] Group 2: Strategic Positioning - The strategic focus is on the 'Agentic Inference Cloud,' aimed at AI-native companies that require comprehensive full-stack services, including compute, storage, and databases, rather than just GPU rentals [1] Group 3: Revenue Composition - 70% of AI customer ARR is generated from inference services and general-purpose cloud products, indicating a shift away from the low-margin 'GPU training arms race' [1] Group 4: Operational Performance - The operational performance was enhanced by a record $51 million in incremental organic ARR in Q4, exceeding peak performance levels seen during the COVID era [1] Group 5: Cost Efficiency - The company is capitalizing on open-source model adoption to improve unit economics, claiming that open-source inference can be 90% more cost-effective than closed-source alternatives for production workloads [1]

Financial Data and Key Metrics Changes - The company achieved 18% revenue growth in Q4, reaching $901 million for the full year [5][36] - Adjusted EBITDA margins were 42% for the year, with adjusted free cash flow margins at 19% [5][38] - Q4 gross profit was $142 million, up 13% year-over-year, with a gross margin of 59% [36][37] - Non-GAAP diluted net income per share for the full year was $2.12, a 10% year-over-year increase [40] Business Line Data and Key Metrics Changes - The company delivered $51 million in incremental organic ARR in Q4, the highest in its history [5][11] - ARR from Digital Native Enterprises (DNEs) reached $604 million in Q4, accounting for 62% of total ARR, growing 30% year-over-year [12] - The million-dollar customers segment reached $133 million in ARR, growing at 123% year-over-year [12][52] Market Data and Key Metrics Changes - AI customer ARR reached $120 million in Q4, growing 150% year-over-year, making up 12% of total ARR [31] - The company expects to deliver 21% revenue growth in 2026, with an exit growth rate of 25%+ in Q4 2026 [10][32] Company Strategy and Development Direction - The company is focusing on serving top DNEs and eliminating reasons for them to leave, which has turned into a growth engine [8][11] - The strategy includes building a vertically integrated Agentic Inference Cloud to support AI-native companies [18][22] - The company aims to achieve 30% revenue growth in 2027 while maintaining 20%+ unlevered adjusted free cash flow margins [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory, citing strong demand for the Agentic Inference Cloud [43][49] - The company anticipates near-term pressure on gross margin and adjusted EBITDA due to new capacity investments but remains disciplined [33][48] - Management highlighted the importance of balancing growth with financial discipline, emphasizing that growth and discipline are not trade-offs [33][50] Other Important Information - The company has strengthened its executive team by adding Vinay Kumar as Chief Product and Technology Officer [27] - The company is sunsetting a legacy dedicated bare metal CPU offering, expecting approximately $13 million of ARR to roll off by the end of Q1 2026 [42] Q&A Session Summary Question: Insights on the inference market evolution - Management noted that while major players like OpenAI and Anthropic dominate headlines, there is significant growth in open-source models, which are becoming increasingly important for managing unit economics [56][57] Question: Clarification on the weighted Rule of 50 numbers - Management explained that the weighted Rule of 50 is calculated by multiplying revenue growth by 1.5 and adding 0.5 times the free cash flow margin, indicating a strong growth opportunity while maintaining financial discipline [61][62] Question: Dynamics of the inference cloud with open-source models - Management confirmed that they are extending day zero support for open-source models and are working on intelligent routing algorithms to optimize model usage [65][68] Question: Revenue efficiency for AI per megawatt - Management indicated that they expect to deliver materially higher ARR per megawatt than competitors, with projections of around $20 million per megawatt as AI investments grow [70][72] Question: Confirmation on incremental capacity and revenue growth - Management confirmed that the incremental 31 MW capacity will come online by the end of 2026, supporting a revenue growth rate of 25%+ in Q4 2026 and 30% growth in 2027 [75]

Financial Data and Key Metrics Changes - The company achieved 18% revenue growth in Q4, reaching $901 million for the full year [5][36] - Adjusted EBITDA margins were 42% for the year, with adjusted free cash flow margins at 19% [5][38] - Q4 gross profit was $142 million, up 13% year-over-year, with a gross margin of 59% [36][37] - Non-GAAP diluted net income per share for the full year was $2.12, a 10% year-over-year increase [40] Business Line Data and Key Metrics Changes - The company delivered $51 million in incremental organic ARR in Q4, the highest in its history [5][11] - ARR from Digital Native Enterprises (DNEs) reached $604 million in Q4, accounting for 62% of total ARR, growing 30% year-over-year [12] - The million-dollar customers reached $133 million in ARR, growing at 123% year-over-year [12][52] Market Data and Key Metrics Changes - AI customer ARR reached $120 million in Q4, growing 150% year-over-year, now making up 12% of total ARR [30][31] - The company expects to deliver 21% revenue growth in 2026, with an exit growth rate of 25%+ in Q4 2026 [10][32] Company Strategy and Development Direction - The company is focusing on serving high-growth cloud and AI-native companies, positioning itself as a preferred platform for these disruptors [8][14] - The strategy includes building a vertically integrated inferencing cloud designed for AI-native workloads, emphasizing simplicity and performance [18][22] - The company plans to ramp up its data center capacity, with 31 megawatts of new capacity expected to come online in 2026 [46][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on the growing demand for AI and cloud-native solutions, projecting strong growth through 2027 [10][32] - The company highlighted the importance of balancing growth with financial discipline, maintaining profitability while investing in growth opportunities [33][49] - Management noted that the shift from model training to inference at scale is reshaping the software landscape, and the company is well-positioned to benefit from this trend [52][54] Other Important Information - The company introduced a new metric, AI customer revenue, to provide clearer visibility into its growth from AI products [30] - The company has strengthened its executive team by adding a Chief Product and Technology Officer to enhance its capabilities [27] Q&A Session Summary Question: Can you discuss the evolution of the inference market and the role of open-source models? - Management noted that while major players like OpenAI and Anthropic dominate headlines, there is significant growth in the open-source model space, which is becoming increasingly important for managing unit economics [56][57] Question: Can you elaborate on the weighted rule of fifty and free cash flow margins? - Management explained that the weighted rule of fifty values revenue growth more than free cash flow margins, and they are confident in achieving attractive margins while accelerating revenue growth [61][62] Question: How does the company plan to support the rapid evolution of open-source models? - Management indicated that they are extending day zero support for new open-source models and are working on automating the process to reduce operational overhead [66][67]

Financial Data and Key Metrics Changes - The company achieved 18% revenue growth in Q4 2025, reaching $901 million for the full year [4] - Incremental organic ARR was $51 million, the highest in the company's history [4] - Adjusted EBITDA margins were 42% and adjusted free cash flow margins were 19% for the year [4][34] - Q4 revenue was $242 million, up 18% year-over-year, with a gross profit of $142 million and a gross margin of 59% [34] Business Line Data and Key Metrics Changes - ARR from Digital Native Enterprises (DNEs) reached $604 million in Q4, growing 30% year-over-year [10] - The million-dollar customers cohort reached $133 million in ARR, growing at 123% year-over-year [10] - The company delivered a record organic incremental ARR of $51 million in Q4, surpassing previous peak quarters [9] Market Data and Key Metrics Changes - AI customer ARR reached $120 million in Q4 2025, growing 150% year-over-year, now making up 12% of total ARR [28] - The company is positioned to capture a significant share of the AI and cloud-native market, with a focus on serving these disruptors [5][12] Company Strategy and Development Direction - The company is focusing on scaling its top customers and expanding its base of AI-native customers [45] - It aims to deliver 21% revenue growth in 2026, with an exit growth rate of 25%+ in Q4 2026, and 30% growth in 2027 [7][30] - The strategy includes building a vertically integrated inference cloud to support AI-native companies [16][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on the AI-driven disruption in the software industry [5][48] - The company anticipates near-term pressure on gross margin and adjusted EBITDA due to new capacity investments but remains committed to maintaining financial discipline [31][41] - Management highlighted the importance of balancing growth with disciplined capital allocation [31][45] Other Important Information - The company introduced a new metric, AI customer revenue, to provide clearer visibility into its momentum [27] - The company has strengthened its executive team by adding a Chief Product and Technology Officer to enhance its capabilities [25] Q&A Session Summary Question: Insights on the inference market and customer evolution - Management noted that while major players like OpenAI and Anthropic dominate headlines, there is a growing importance of open-source models for managing unit economics [52][53] - The company is seeing a healthy adoption of open-source models among its AI-native customers, which is expected to grow [55][56] Question: Clarification on the weighted rule of fifty and free cash flow margins - Management explained that the weighted rule of fifty considers revenue growth as three times more valuable than free cash flow margin, indicating strong growth potential alongside disciplined financial management [57][58] Question: Operational support for open-source models - Management confirmed that they are extending day zero support for open-source models, with automation expected to increase in the future [63] - The company is working on intelligent routing algorithms to optimize the use of both open-source and closed-source models [65][66] Question: Revenue efficiency for fully utilized megawatts - Management indicated that they expect to deliver materially higher ARR per megawatt compared to competitors, with a focus on integrating AI and core cloud capabilities [68][70] Question: Incremental capacity and revenue growth projections - Management confirmed that the incremental 31 megawatts of capacity will come online by the end of 2026, supporting a projected exit growth rate of 25%+ in Q4 2026 and 30% growth in 2027 [73]

Q4 2025 Earnings and Investor Update Presentation February 24, 2026 2026 DigitalOcean. All rights reserved 1 Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our financial outlook. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results or ou ...