DigitalOcean shares fall 3.2% premarket despite Q3 beat and raised outlook
Adjusted EPS of 45 cents topped the 32-cent consensus estimate compiled by Finnhub, and revenue of $321.19 million topped the $312.79 million estimate. The company raised its fourth-quarter growth outlook.
Key takeaways
- DigitalOcean (DOCN) reported third-quarter 2026 revenue of $321.19 million, up 40% from a year earlier, and adjusted earnings of 45 cents per share on Nov. 3. The company raised its fourth-quarter revenue growth forecast to 44% to 45%, and expects full-year 2027 revenue growth of 60% or more.
DigitalOcean (DOCN) topped third-quarter estimates on Nov. 3 and raised its outlook for revenue growth.
Shares fell 3.2% in premarket trading as of 9:22 a.m. ET, from a regular-session close of $89.79.
Revenue rose 40% to $321.19 million in the quarter ended Sept. 30, the company said in a results release.
Here's how the company did:
- Adjusted EPS: 45 cents vs. 32 cents consensus estimate
- Revenue: $321.19 million vs. $312.79 million consensus estimate, up from $229.63 million a year earlier
- GAAP result: a loss of 37 cents per share vs. $1.51 per share diluted profit a year earlier
CEO Paddy Srinivasan said, “Revenue growth accelerated year-over-year to 40%, our fifth consecutive quarter of acceleration, and we added a record $160 million of ARR.”
Customer growth
Annual run-rate revenue ended the quarter at $1.29 billion, up 40% from a year earlier.
AI Customer ARR was $376 million, up 288%.
Million-plus dollar customer ARR grew 273% year-over-year to $386 million.
Customers spending over $100,000 a year now account for 41% of total revenue, and revenue from that group grew 133%.
Guidance
For the fourth quarter, the company expects total revenue of $348 million to $351 million, up 44% to 45% year-over-year.
It expects non-GAAP diluted net income of 30 cents to 32 cents per share in the fourth quarter, and an adjusted EBITDA margin of 42% to 43%.
For full-year 2026, the company now expects total revenue of $1.208 billion to $1.211 billion, up about 34% year-over-year.
The company guided third-quarter revenue to $304 million to $307 million in August, so the reported figure came in above that range.
The company said it expects to deliver 60% or more revenue growth for full-year 2027.
Costs, charges and cash
The GAAP net loss attributable to common stockholders was $43 million, including a $57 million induced conversion expense tied to a partial repurchase of 2030 convertible notes.
The company repurchased about $472 million of its 2030 convertible notes, funded by a concurrent registered direct offering.
Operating income was $33 million, down 27% from a year earlier.
Cash and cash equivalents stood at $666 million as of Sept. 30.
Adjusted free cash flow was $130 million, a 41% margin, up from $85 million in the third quarter of 2025.