0001582961-25-000138
SEC filingRevenue grew 14% YoY driven by ARPU and Higher Spend Customers, with operating margin expanding to 16%.
For the three months ended June 30, 2025, DigitalOcean reported revenue of $218.7 million, a 14% increase year-over-year from $192.5 million. The growth was primarily driven by a 12% increase in average revenue per user (ARPU) to $111.70 and a 16% rise in revenue from Higher Spend Customers, which now constitute 89% of total revenue (up from 87%). Gross profit grew to $130.9 million (60% margin) compared to $114.1 million (59% margin) in the prior year. The margin improvement was attributed to higher revenue partially offset by increased co-location costs from data center expansion.
Operating expenses increased 4% to $95.3 million. Research and development expenses rose 20% due to higher headcount and lower capitalized software costs. Sales and marketing increased 7% with higher personnel costs. General and administrative expenses declined 11% due to lower acquisition-related compensation and restructuring costs, partially offset by higher professional services and digital services tax. Operating income more than doubled to $35.6 million, with operating margin expanding from 12% to 16%. Net income attributable to common stockholders was $37.0 million ($0.39 per diluted share) versus $19.1 million ($0.20 per diluted share) in Q2 2024.
The MD&A does not provide discrete segment-level financials. However, key customer metrics highlight the shift toward higher-value customers. Higher Spend Customers (Builders, Scalers, Scalers+) numbered 174,000, up 9% year-over-year, and generated 89% of revenue. ARPU grew 12% to $111.70, reflecting increased usage and product adoption. Revenue from Scalers+ (spend >$8,333/month) reached 585 customers, up 23%. The net dollar retention rate improved to 99% from 97%, indicating better expansion and retention.
Geographically, North America contributed 37% of revenue, Europe 27%, Asia 23%, and rest of world 13%. The company continues to invest in AI/ML offerings (Gradient platform) and strategic partnerships (e.g., Hugging Face) to drive future growth.
Management emphasized continued investment in platform innovation, particularly for Higher Spend Customers, and migration services to capture larger workloads. The company expects to increase revenue from existing customers through new products and expanded outreach. Macroeconomic uncertainties remain, but the self-service model and low customer concentration (top 25 customers ~9% of revenue) provide resilience. Adjusted EBITDA margin was 41% in Q2 2025, consistent with the prior year, and free cash flow generation remains strong (operating cash flow of $156.5 million for the six months). The company entered into a new credit facility in May 2025 and repurchased $79 million of stock in the first half of 2025. No explicit revenue or EPS guidance was provided.
As of June 30, 2025, DigitalOcean had cash and cash equivalents of $387.7 million, down from $428.4 million at year-end 2024. Total assets were $1.72 billion. The company's long-term debt (0% Convertible Senior Notes due December 2026) had a carrying value of $1.489 billion (net of $10.8M unamortized debt issuance costs) at a fair value of $1.401 billion. Stockholders' deficit improved to -$175.2 million from -$203.0 million, driven by net income. The company also had a new $500M term loan facility and $300M revolving credit facility (2025 Credit Facility) with no outstanding borrowings as of period end.
Purchase commitments (software licenses, bandwidth, network services, third-party vendors) have not materially changed from December 31, 2024. The company disclosed $3.2 million of undiscounted fixed payment obligations for co-location leases not yet commenced (expected to start July-September 2025, weighted-average term 3.6 years). A $1.7 million letter of credit secures an office lease. Deferred revenue stood at $11.3 million (up from $5.4M at year-end), and remaining performance obligations (RPO) were $53.4 million with a weighted-average life of 1.9 years.
During H1 2025, the company repurchased 2,255,544 shares for $79.2 million under the $140 million share buyback program (authorized February 2024). No dividends were paid. Capital expenditures totaled $98.6 million ($95.2M property & equipment + $3.4M internal-use software), representing 23.0% of revenue. Debt activity was limited; the Convertible Notes remained outstanding, but the company entered a new $500M/$300M credit facility (no draws) and terminated the prior $250M credit facility. Debt issuance costs of $4.6M were deferred.
The company has one operating and reporting segment (cloud computing). The CODM (CEO) reviews net income and consolidated expenses. Revenue by customer category for H1 2025: Scalers $155.2M (36%), Builders $124.2M (29%), Scalers+ $101.4M (24%), Learners/Testers/Other $48.6M (11%). Geographically, North America contributed 37%, Europe 28%, Asia 24%, Rest of World 11%. U.S. alone was 31%.