Key Highlights
- DOCN shares climbed approximately 16% in pre-market sessions following stronger-than-expected Q1 performance
- Quarterly revenue reached $257.9M, representing 22.4% year-over-year expansion and surpassing the $249.7M forecast
- Adjusted earnings per share of $0.44 exceeded the Street’s $0.26 estimate by 67.7%
- Management increased full-year 2026 revenue outlook to $1.14B at the midpoint; targeting growth above 50% in 2027
- AI-focused customer ARR expanded 221% YoY to $170M; customers generating $1M+ in ARR jumped 179% to $183M
Shares of DigitalOcean (DOCN) climbed approximately 16% during pre-market hours on May 5 following the cloud infrastructure provider’s first quarter 2026 report that significantly exceeded analyst projections.
DigitalOcean Holdings, Inc., DOCN
The company posted quarterly revenue of $257.9 million, marking a 22.4% increase from the year-ago period and topping Wall Street’s $249.7 million projection. Adjusted earnings per share of $0.44 substantially outperformed the consensus forecast of $0.26, representing a 67.7% beat.
Shares were changing hands near $127.51 in the aftermath of the earnings release.
Adjusted operating income totaled $59.08 million, exceeding the anticipated $48 million by 23.1%. Adjusted EBITDA expanded 21% to reach $105 million.
The company’s operating margin registered at 14.2%, compared to 17.9% in the corresponding quarter of the previous year. Free cash flow margin experienced a decline, dropping to 0.8% from the prior quarter’s 11.1%.
Annual Recurring Revenue climbed to $1.03 billion, advancing 22.4% year over year and exceeding projections. Billings totaled $258.3 million, also up 22.4% from the year-earlier period.
Artificial Intelligence Metrics Drive Momentum
AI Customer ARR experienced explosive growth of 221% year over year, reaching $170 million. Meanwhile, Million+ Dollar Customer ARR soared 179% to $183 million — metrics that clearly resonated with investors.
CEO Paddy Srinivasan highlighted the platform’s strategic advantage in the evolving AI landscape. “The Inference and agentic era needs its own cloud. DigitalOcean built it,” he stated.
Management Elevates Outlook
For the second quarter of 2026, DigitalOcean projected revenue between $272 million and $274 million, with a midpoint of $273 million that exceeds analyst expectations of $260.9 million by 4.8%.
Second quarter adjusted EPS guidance was set at $0.20 to $0.23, with the $0.215 midpoint coming in marginally below the $0.23 Street consensus.
Management raised its full-year 2026 revenue guidance to a range of $1.13 billion to $1.145 billion, up from the previous $1.09 billion forecast. The $1.1375 billion midpoint remains below the analyst consensus of $1.43 billion.
Full-year adjusted EPS projections were increased to a midpoint of $1.15, reflecting a 31.4% boost from prior guidance and surpassing the $0.99 consensus estimate.
The company also established a 2027 revenue growth objective exceeding 50%.
Throughout the quarter, DigitalOcean executed a follow-on equity offering of 11.9 million shares, generating net proceeds of $888 million. The company allocated $500 million of those funds toward retiring its Term Loan Facility.
Customer acquisition efficiency demonstrated continued strength, with the CAC payback period clocking in at 9.3 months. The platform’s self-serve business model continues to minimize customer onboarding expenses.
Wall Street analysts are forecasting revenue expansion of 23% over the coming 12 months, representing an acceleration from the two-year trajectory.
The company’s five-year compounded annual revenue growth rate stands at 22.8%, while the annualized growth rate over the past two years measures 15.4%.
