As cloud computing enters its next growth phase driven by artificial intelligence (AI) workloads, investors are becoming more selective about where value truly lies. While most attention gravitates toward hyperscalers like Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL), some mid-sized cloud platforms are quietly strengthening their competitive position. One such $50 cloud stock is DigitalOcean (DOCN) which is delivering faster growth, rising profit and surging AI-driven demand. Here's what investor ...

Financial Data and Key Metrics Changes - Revenue for Q3 2025 reached $230 million, representing a 16% year-over-year increase, marking the highest growth since Q3 2023 [7][27] - Adjusted EBITDA was $100 million, a 15% increase year-over-year, with an adjusted EBITDA margin of 43% [30] - Non-GAAP diluted net income per share was $0.54, a 4% increase year-over-year, while GAAP diluted net income per share was $1.51, a 358% increase year-over-year [31] - Adjusted free cash flow was $85 million, or 37% of revenue, significantly up from $19 million, or 10% of revenue, in the prior year [32] Business Line Data and Key Metrics Changes - Direct AI revenue more than doubled year-over-year for the fifth consecutive quarter, contributing to the overall revenue growth [7][28] - Revenue from customers with an annualized run rate greater than $1 million reached $110 million, growing 72% year-over-year [6][10] - Revenue from customers with an annualized run rate greater than $100,000 grew 41% year-over-year, representing 26% of total revenue [29] Market Data and Key Metrics Changes - The demand for the agentic cloud has exceeded supply, leading to increased investments in data centers and GPU capacity [6][24] - The company has signed multiple eight-figure committed contracts after the quarter closed, indicating strong demand from AI-native companies [24][35] Company Strategy and Development Direction - The company is focused on enhancing its unified agentic cloud to support scaling AI and digital native enterprise customers [5][19] - Investments in data centers and GPU capacity are being increased to accelerate growth while maintaining attractive margins [6][24] - The company aims to achieve 18%-20% revenue growth in 2026, a year earlier than previously projected [25][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising the 2025 and 2026 revenue and adjusted free cash flow outlook due to strong performance and visibility into demand [26][35] - The company is seeing more demand than it can currently support, prompting expansion of data center capacity [24][39] Other Important Information - The company introduced equipment leasing in Q3 to better align investments with revenue [8][32] - A new AI Partner Program was launched to empower AI and digital native enterprises [18] Q&A Session Summary Question: About the eight-figure committed contracts and their customer cohort - The eight-figure contracts primarily come from AI-native companies looking to leverage the infrastructure, with increasing overlap between AI and core cloud services [42][44] Question: Impact of recent outages at AWS and Azure on migrations - There has been a steady increase in migration workloads, driven by dissatisfaction with incumbents and attractive offerings from DigitalOcean [48][50] Question: Capacity to serve new contracts and ramp-up times - Some capacity is already available in existing data centers, while new data center capacities will come online progressively through 2026 [52][54] Question: Competitive positioning and strategy in light of competitors' acquisitions - The company remains customer-focused while being aware of competition, emphasizing its unique software stack and capabilities [57][65] Question: Expectations for AI business growth and its impact on overall revenue - The AI business is expected to continue doubling, contributing significantly to overall revenue growth [67][69] Question: Inclusion of AI revenue in net dollar retention metrics - The company is considering incorporating AI revenue into net dollar retention metrics as it becomes more predictable [71][73] Question: Changes in customer behavior regarding expansion - Expansion activity is primarily driven by larger customers, with strong growth observed among those spending over $100,000 in ARR [75]