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DigitalOcean AI Customer ARR reached $170M, up 221% YoY; AI-Native Cloud debuted at Deploy 2026.
DOCN lifted 2026 revenue outlook to $1.130B-$1.145B as committed data center capacity rose to ~135MW.
DigitalOcean Holdings (DOCN - Free Report) posted a sizable first-quarter 2026 earnings beat, even as profitability moved lower from the year-ago period. Non-GAAP earnings came in at 44 cents, down 21.4% year over year, but the figure beat the Zacks Consensus Estimate by 63%.
Revenue was $258.0 million, up 22.4% year over year and beat the consensus by 3.1%. The quarter’s outperformance was supported by retention and expansion in larger customer cohorts, with Annual Run-Rate Revenues (ARR) ending the period at $1.032 billion, up 22% year over year. AI Customer ARR was $170 million, which jumped 221% year over year.
DOCN shares rose 5.4% to close at $160.99 on May 6, following the results.
DOCN’s Larger Customer Cohorts Drove the Upside
DOCN’s release underscored that growth continues to be led by its biggest customers. Revenue from $1 million-plus customers rose 179% year over year to $183 million in ARR, and that cohort now represents 18% of total revenues.
Momentum was also visible one tier down. Revenues from $500,000-plus customers climbed 132% year over year and represents 21% of total revenues, while revenues from $100,000-plus customers rose 73% and now represent 30% of total revenues. Management tied the quarter’s revenue beat to strong retention in top Digital Native Enterprise cohorts and continued expansion among top cloud and AI-native customers.
DigitalOcean Holdings, Inc. Price, Consensus and EPS Surprise
DOCN’s AI-Native Cloud Push Expanded the Platform Story
DigitalOcean positioned the quarter around product breadth, highlighting the launch of its AI-Native Cloud at Deploy 2026. The company said it delivered more than 15 product launches across five integrated layers: infrastructure, core cloud, inference, data and managed agents.
The company has highlighted recent AI-native wins, including Cursor, Ideogram and Higgsfield AI, as examples of customers building production inference and related workloads on the platform, with AI customer ARR now generated primarily from non-bare metal services.
DOCN’s Margins Mixed as Operating Costs Rose
DOCN’s cost structure showed clear investment alongside solid operating profitability. Gross profit was $144.7 million, translating to a gross margin of 56.1%, down from 61.5% in the year-ago quarter.
Operating expenses increased across the board. Research and development expense climbed to $48.8 million from $39.6 million, while sales and marketing rose to $21.7 million from $19.4 million. General and administrative expense increased to $37.6 million from $32.8 million.
On a non-GAAP basis, adjusted operating income was $64 million with a 25% margin (contracted from 30% reported in the year-ago quarter), while adjusted EBITDA was $104.6 million and the adjusted EBITDA margin held at 41% (unchanged year over year).
DigitalOcean’s Cash Flow Shifted as Investment Accelerated
The balance sheet expanded sharply following the company’s follow-on offering, with cash, cash equivalents and restricted cash ending the quarter at $741.5 million. Net proceeds from the follow-on public offering were $888.8 million, and the company repaid $500.0 million of its term loan facility principal while also drawing $120.0 million during the quarter.
DigitalOcean generated $46.9 million of net cash from operating activities in the first quarter, down from $64.1 million a year earlier, reflecting working capital movement and higher cash interest costs. Capital spending remained meaningful, with $40 million of property and equipment expenditures and $4.7 million of internal-use software development.
Adjusted free cash flow was positive but modest at $2.2 million, compared with negative $0.8 million in the year-ago quarter.
DOCN Raised Its 2026 Outlook as Capacity Plans Expanded
DOCN guided second-quarter revenue to $272 million-$274 million, implying 24%-25% year-over-year growth. The company expects an adjusted EBITDA margin of 37%-38% and non-GAAP earnings between 20 cents per share and 23 cents per share.
For 2026, DigitalOcean raised its revenue outlook to $1.130 billion-$1.145 billion, calling for 25%-27% year-over-year growth, alongside an adjusted EBITDA margin of 37%-39% and an adjusted free cash flow margin of 9%-12%. Non-GAAP earnings are expected to be $1.10-$1.20 per share.
Management also pointed to incremental committed data center capacity of about 60 megawatts, bringing total committed capacity to roughly 135 megawatts, and said it now expects 2027 revenue growth to exceed 50%, with 2027 revenues projected to exceed $1.7 billion.
Zacks Rank & Stocks to Consider
DigitalOcean currently has a Zacks Rank #3 (Hold).
Docebo is set to report its quarterly results on May 8, while both Cisco and Keysight Technologies are set to report their quarterly results on May 13. Year to date, shares of Cisco and Keysight Technologies have returned 18.8% and 80.4%, respectively, while Docebo has dropped 10%.
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DOCN Q1 Earnings Beat Estimates, Revenues Up AI-Native Customer Demand
Key Takeaways
DigitalOcean Holdings (DOCN - Free Report) posted a sizable first-quarter 2026 earnings beat, even as profitability moved lower from the year-ago period. Non-GAAP earnings came in at 44 cents, down 21.4% year over year, but the figure beat the Zacks Consensus Estimate by 63%.
Revenue was $258.0 million, up 22.4% year over year and beat the consensus by 3.1%. The quarter’s outperformance was supported by retention and expansion in larger customer cohorts, with Annual Run-Rate Revenues (ARR) ending the period at $1.032 billion, up 22% year over year. AI Customer ARR was $170 million, which jumped 221% year over year.
DOCN shares rose 5.4% to close at $160.99 on May 6, following the results.
DOCN’s Larger Customer Cohorts Drove the Upside
DOCN’s release underscored that growth continues to be led by its biggest customers. Revenue from $1 million-plus customers rose 179% year over year to $183 million in ARR, and that cohort now represents 18% of total revenues.
Momentum was also visible one tier down. Revenues from $500,000-plus customers climbed 132% year over year and represents 21% of total revenues, while revenues from $100,000-plus customers rose 73% and now represent 30% of total revenues. Management tied the quarter’s revenue beat to strong retention in top Digital Native Enterprise cohorts and continued expansion among top cloud and AI-native customers.
DigitalOcean Holdings, Inc. Price, Consensus and EPS Surprise
DigitalOcean Holdings, Inc. price-consensus-eps-surprise-chart | DigitalOcean Holdings, Inc. Quote
DOCN’s AI-Native Cloud Push Expanded the Platform Story
DigitalOcean positioned the quarter around product breadth, highlighting the launch of its AI-Native Cloud at Deploy 2026. The company said it delivered more than 15 product launches across five integrated layers: infrastructure, core cloud, inference, data and managed agents.
The company has highlighted recent AI-native wins, including Cursor, Ideogram and Higgsfield AI, as examples of customers building production inference and related workloads on the platform, with AI customer ARR now generated primarily from non-bare metal services.
DOCN’s Margins Mixed as Operating Costs Rose
DOCN’s cost structure showed clear investment alongside solid operating profitability. Gross profit was $144.7 million, translating to a gross margin of 56.1%, down from 61.5% in the year-ago quarter.
Operating expenses increased across the board. Research and development expense climbed to $48.8 million from $39.6 million, while sales and marketing rose to $21.7 million from $19.4 million. General and administrative expense increased to $37.6 million from $32.8 million.
On a non-GAAP basis, adjusted operating income was $64 million with a 25% margin (contracted from 30% reported in the year-ago quarter), while adjusted EBITDA was $104.6 million and the adjusted EBITDA margin held at 41% (unchanged year over year).
DigitalOcean’s Cash Flow Shifted as Investment Accelerated
The balance sheet expanded sharply following the company’s follow-on offering, with cash, cash equivalents and restricted cash ending the quarter at $741.5 million. Net proceeds from the follow-on public offering were $888.8 million, and the company repaid $500.0 million of its term loan facility principal while also drawing $120.0 million during the quarter.
DigitalOcean generated $46.9 million of net cash from operating activities in the first quarter, down from $64.1 million a year earlier, reflecting working capital movement and higher cash interest costs. Capital spending remained meaningful, with $40 million of property and equipment expenditures and $4.7 million of internal-use software development.
Adjusted free cash flow was positive but modest at $2.2 million, compared with negative $0.8 million in the year-ago quarter.
DOCN Raised Its 2026 Outlook as Capacity Plans Expanded
DOCN guided second-quarter revenue to $272 million-$274 million, implying 24%-25% year-over-year growth. The company expects an adjusted EBITDA margin of 37%-38% and non-GAAP earnings between 20 cents per share and 23 cents per share.
For 2026, DigitalOcean raised its revenue outlook to $1.130 billion-$1.145 billion, calling for 25%-27% year-over-year growth, alongside an adjusted EBITDA margin of 37%-39% and an adjusted free cash flow margin of 9%-12%. Non-GAAP earnings are expected to be $1.10-$1.20 per share.
Management also pointed to incremental committed data center capacity of about 60 megawatts, bringing total committed capacity to roughly 135 megawatts, and said it now expects 2027 revenue growth to exceed 50%, with 2027 revenues projected to exceed $1.7 billion.
Zacks Rank & Stocks to Consider
DigitalOcean currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector that are set to report their quarterly results are Docebo (DCBO - Free Report) , Cisco Systems (CSCO - Free Report) and Keysight Technologies (KEYS - Free Report) . Docebo and Keysight Technologies sport a Zacks Rank #1 (Strong Buy) each at present, while Cisco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Docebo is set to report its quarterly results on May 8, while both Cisco and Keysight Technologies are set to report their quarterly results on May 13. Year to date, shares of Cisco and Keysight Technologies have returned 18.8% and 80.4%, respectively, while Docebo has dropped 10%.