0001582961-26-000019
SEC filingDigitalOcean's 2025 revenue grew 15% YoY to $901M, driven by 24% DNE customer growth and improved net dollar retention.
DigitalOcean Holdings, Inc. describes itself as 'an agentic inference cloud platform that helps AI and Digital Native Enterprises build, run, and scale intelligent applications with speed, simplicity, and predictable economics.' The platform integrates production-ready GPU infrastructure, a full-stack cloud, model-first inference workflows, and an agentic experience layer. The company targets growing technology companies across verticals such as online gaming, fintech, and cybersecurity, offering a comprehensive range of integrated cloud and AI products that are simple, scalable, and approachable.
The Business section does not disclose formal reporting segments. The company discusses its product portfolio in three broad categories: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS)/Software-as-a-Service (SaaS), and artificial intelligence/machine learning (AI/ML) offerings. However, no segment-level revenue breakdown is provided.
DigitalOcean's product portfolio includes IaaS offerings such as Droplet virtual machines, Spaces Object Storage, Volumes Block Storage, and networking products like Cloud Firewalls, Managed Load Balancers, and Virtual Private Cloud. PaaS/SaaS offerings include Managed Hosting, Managed Databases (PostgreSQL, MySQL, MongoDB, Valkey, Kafka, OpenSearch), Managed Kubernetes, App Platform, Functions, and the DigitalOcean Marketplace with over 350 preconfigured one-click applications. The AI/ML platform, DigitalOcean Gradient AI Agentic Cloud, includes GPU Droplets, the Gradient AI Platform (with access to third-party foundational models, Knowledge-bases, Guardrails, Evaluations, and Observability), Bare Metal GPUs, and Jupyter Notebooks.
The company employs a highly efficient self-service customer acquisition model, complemented by inside sales, targeted outside sales, and partnerships. Marketing relies on high-quality developer content, community engagement (including Hacktoberfest and Deploy conferences), and paid demand generation. Customer support is offered 24/7 free of charge, with paid support plans for faster response times. As of December 31, 2025, DigitalOcean had approximately 21,000 DNE Customers (those spending >$500/month), which comprised 60% of total revenue. The top 25 customers accounted for 10% of revenue in 2025, indicating no material concentration. Annual run-rate revenue (ARR) grew from $723 million in 2023 to $820 million in 2024 to $970 million in 2025.
The company faces competition from large diversified technology companies like Amazon (AWS), Microsoft (Azure), Google (GCP), IBM (IBM Cloud), Alibaba (Alibaba Cloud), and Oracle (Oracle Cloud). Smaller/niche competitors include OVHcloud, Akamai (Linode), Hetzner, Vultr, and Contabo. In AI/ML, competitors include Coreweave and Lambda Labs. Managed Hosting competes with Kinsta and WP Engine. DigitalOcean differentiates by focusing on growing technology companies with simple, scalable, and approachable solutions that are not fully met by larger cloud providers.
DigitalOcean's growth strategies include: (1) increasing usage by existing customers through deeper relationships and product adoption, with net dollar retention improving from 98% in 2024 to 100% in 2025; (2) growing the base of AI Native and Cloud Native DNE Customers via a dedicated AI sales team and marketing; (3) investing in platform and product offerings, including new AI products (Gradient AI GPUs from AMD and NVIDIA, VPC support, image/video models, Agent Development Kit) and core infrastructure enhancements; (4) driving adoption through the community ecosystem; and (5) augmenting the platform through strategic partnerships (e.g., Laravel, fal, AMD, Persistent Systems) and acquisitions (Paperspace, Cloudways).
As of December 31, 2025, DigitalOcean employed 1,462 people, with 848 based outside the United States. None of the employees are represented by a labor union or covered by a collective bargaining agreement. The company provides competitive compensation including base salary, cash bonuses, commissions, long-term equity awards, an employee stock purchase plan, and various benefits. Talent development is supported through regular review cycles, training courses, and anonymous engagement surveys.
DigitalOcean's revenue for the year ended December 31, 2025, was $901.4 million, a 15% increase from $780.6 million in 2024. The growth was primarily driven by a 24% increase in revenue from Digital Native Enterprise (DNE) Customers, reflecting higher average usage and continued adoption of the platform. Gross profit rose 16% to $539.6 million, with gross margin remaining stable at 60% in both periods, as higher revenue was offset by increased co-location costs and depreciation from data center expansions.
Operating income more than doubled to $157.0 million (17% margin) from $91.0 million (12% margin) in 2024. The improvement was driven by revenue growth and a $22.3 million decrease in general and administrative expenses, primarily due to lower personnel costs and the reversal of stock-based compensation from forfeited RSUs. Net income attributable to common stockholders surged to $259.3 million ($2.52 diluted EPS) from $84.5 million ($0.89 diluted EPS) in 2024, benefiting from a $69.9 million valuation allowance release on U.S. deferred tax assets and a $48.1 million net gain on the partial extinguishment of the 2026 Convertible Notes.
DigitalOcean reports revenue as a single segment but provides granular customer metrics. DNE Customers (spending >$500/month) grew to approximately 21,000 as of December 31, 2025, up from 18,000 a year earlier. Revenue from these customers represented 60% of total revenue in 2025, compared to 55% in 2024, underscoring the company's successful focus on higher-spending enterprise clients. The number of $100K+ Customers increased to 628 from 499, $500K+ Customers rose to 95 from 63, and $1M+ Customers grew to 41 from 24. Net dollar retention rate improved to 100% from 98%, indicating better expansion and retention among existing customers.
Management's forward-looking commentary emphasizes continued investment in the platform, particularly in AI/ML offerings (Gradient AI Agentic Cloud), and a focus on growing the DNE customer base through targeted sales and marketing. The company expects research and development expenses to increase in absolute dollars as it invests in product innovation. Sales and marketing expenses are also expected to rise as the company enhances its go-to-market strategies. Macroeconomic uncertainties, including trade tensions and inflation, are noted as potential headwinds. The company believes its existing cash, cash flow from operations, and available credit facility capacity ($420 million as of December 31, 2025) are sufficient to support working capital, capital expenditures, and debt obligations for at least the next 12 months.
As of December 31, 2025, DigitalOcean held $254.5M in cash and cash equivalents, down from $428.4M at end of 2024 due to debt repayments and buybacks. Total debt (carrying value) was $1,295.8M, comprising $625M 0% 2030 Convertible Notes, $312.3M 2026 Convertible Notes (classified as current), and $380M Term Loan A. The company reported negative stockholders' deficit of $28.7M, driven by accumulated deficit of $43.7M and share repurchases.
Purchase commitments totaled $41.0M, primarily for software licenses, bandwidth, and network services. Operating lease obligations (not included in purchase commitments) were $302.4M on an undiscounted basis, with $119.2M due within one year. Additionally, $599.4M of estimated fixed payments for data center leases not yet commenced, with a weighted-average lease term of 9.6 years.
DigitalOcean operates as a single segment. Revenue disaggregation by customer ARR shows Digital Native Enterprise (DNE) customers contributed 60% of total revenue in 2025, up from 55% in 2024. Top DNE subcategories: $321.2M (Above $6K-$100K), $92.0M ($100K-$500K), $30.4M ($500K-$1M), and $96.3M (Above $1M). Developers and other accounted for $361.6M (40%). Geographically, North America represented 38% of revenue, Europe 28%, Asia 23%, and Rest of the world 11%. No single country outside the U.S. exceeded 10%.
DigitalOcean's risk factors prominently feature the elevated debt profile following the issuance of $625 million 0% convertible notes due 2030 and the entry into a $420 million credit facility. The covenants restrict incurring additional debt, paying dividends, and making investments, which could limit strategic flexibility. The capped call transactions introduce counterparty risk and potential dilution if the stock price exceeds the cap. The company also has equipment financing and historical net operating loss carryforwards subject to Section 382 limitations, adding tax uncertainty.
Competition remains intense from hyperscalers (AWS, Azure, GCP) who have superior resources and bundling capabilities. Niche competitors like OVHcloud, Akamai, and Coreweave in AI/ML further pressure DigitalOcean. The company's self-service model and reliance on DNE Customers (larger accounts) expose it to longer sales cycles and higher churn. Customer retention is difficult due to the absence of long-term contracts.
A new emphasis on AI/ML presents both opportunities and risks. The company is investing heavily in AI/ML products, but the market is unpredictable. Failure to deliver competitive offerings or keep pace with rapid technological change could lead to obsolescence. Internal use of AI/ML tools carries risks of data leakage, regulatory noncompliance (e.g., EU AI Act), and intellectual property challenges. The reliance on third-party suppliers for GPUs and other components introduces supply chain vulnerabilities.
DigitalOcean faces a complex regulatory landscape. Data privacy laws (GDPR, CCPA, LGPD, India DPDP) impose stringent requirements and significant penalties for noncompliance. The upcoming ePrivacy Regulation and evolving AI regulations could increase costs. Export controls on semiconductor and AI technologies, particularly related to China, may restrict operations. The company also faces potential changes to Section 230 and DMCA safe harbors, increasing liability for user content.
Data center capacity management is critical: underestimation leads to service disruptions, overestimation increases costs. Reliance on third-party data center providers and limited suppliers for equipment (especially GPUs) heightens operational risk. Energy price increases and geopolitical disruptions (e.g., China-Taiwan tensions) could further strain supply chains.
International operations span ~190 countries, exposing DigitalOcean to currency fluctuations, inflation, and political instability. Trade tariffs and sanctions (e.g., Russia-Ukraine) may impact revenue and supply chains. The company must navigate varying regulatory regimes, which could lead to increased costs or inability to operate in certain markets.