DigitalOcean reported fourth‑quarter 2025 revenue of $242 million, up 18% year‑over‑year from $205 million in Q4 2024 and 5% from the $230 million reported in Q3 2025. Non‑GAAP diluted earnings per share were $0.44, beating the consensus estimate of $0.38 by $0.06, or 15.8%. The company’s gross profit margin stood at 59% and its adjusted EBITDA margin at 41%, reflecting a modest compression driven by planned capacity expansion but still well above the 60% and 42% margins recorded for the full year 2025.
The growth was largely fueled by a surge in AI‑centric demand. DigitalOcean’s million‑plus‑dollar customer ARR rose to $133 million, an increase of 123% year‑over‑year, while AI customer ARR grew 150% year‑over‑year. Core cloud services also contributed to the top‑line lift, with the company reporting a record $51 million in organic incremental ARR and reaching a $1 billion annualized monthly run‑rate revenue in December.
Gross profit and adjusted EBITDA margins, while slightly compressed, remain healthy. Management attributed the margin pressure to the company’s commitment to adding 31 megawatts of incremental data‑center capacity in 2026, a move expected to create near‑term pressure on margins but positioned to support long‑term growth in high‑margin AI services.
DigitalOcean raised its full‑year 2026 revenue guidance to a growth range of 19%–23% (21% midpoint) and non‑GAAP EPS guidance to $0.75–$1.00. The upward revision signals management confidence in sustained demand, particularly from AI and enterprise customers, while acknowledging the short‑term margin impact of the capacity expansion.
CEO Paddy Srinivasan said, "AI is reshaping entire industries, and we are built for this shift. DigitalOcean's Agentic Inference Cloud is gaining further traction with large Cloud and AI Native customers that are driving the shift, which is evident in our strong Q4 performance and our increased outlook for 2026 and 2027." He added, "We delivered 18% top‑line growth in Q4 and reached $1 billion in annualized monthly run‑rate revenue in December. We added a record $51 million in organic incremental ARR. Our million+ dollar customer ARR was $133 million, growing 123% year‑over‑year."
Investors reacted cautiously, weighing the company’s strong earnings beat and raised outlook against near‑term margin pressure from the planned capacity expansion. The market’s mixed sentiment reflects confidence in DigitalOcean’s AI‑driven growth trajectory while remaining mindful of short‑term operational costs.
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.