It has been about a month since the last earnings report for DigitalOcean Holdings, Inc. (DOCN Quick QuoteDOCN - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is DigitalOcean due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for DigitalOcean Holdings, Inc. before we dive into how investors and analysts have reacted as of late.

DOCN Q1 Earnings Beat Estimates, Revenues Up AI-Native Customer Demand

DigitalOcean 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’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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in fresh estimates.

The consensus estimate has shifted -5.88% due to these changes.

VGM Scores

Currently, DigitalOcean has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

DigitalOcean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

DigitalOcean belongs to the Zacks Internet - Software industry. Another stock from the same industry, Spotify (SPOT Quick QuoteSPOT - Free Report) , has gained 14.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.

Spotify reported revenues of $5.3 billion in the last reported quarter, representing a year-over-year change of +20.3%. EPS of $4.04 for the same period compares with $1.13 a year ago.

Spotify is expected to post earnings of $3.31 per share for the current quarter, representing a year-over-year change of +789.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Spotify. Also, the stock has a VGM Score of B.