DigitalOcean Announces Second Quarter 2026 Financial Results

(Moderate)

(Positive)

Key Terms

remaining performance obligation financial

Remaining performance obligation is the amount of work or services a company still needs to deliver to a customer under a contract. It matters because it shows how much revenue the company can expect to earn in the future from that contract, helping investors understand the company's ongoing business and growth potential.

annual run-rate revenue financial

Annual run-rate revenue is an estimate of a company’s yearly sales obtained by taking recent revenue (for a month or quarter) and projecting it over a full year, like multiplying one month’s receipts by twelve. Investors use it as a quick snapshot of current business size and momentum — similar to measuring a car’s speed over a short stretch to guess its travel over an hour — but it can be misleading if recent results include one-time gains or seasonal swings.

adjusted ebitda financial

Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.

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08/04/2026 - 07:00 AM

Raising 2026 revenue outlook

RPO increased to $894 million, up 12x from a year ago

Q2 2026 Revenue of $281 million grew 29% year-over-year

Million+ Dollar Customer ARR grew 214% year-over-year to $259 million

AI Customer ARR grew 212% year-over-year to $234 million

Record $93 million in incremental ARR

BROOMFIELD, Colo.--(BUSINESS WIRE)-- DigitalOcean Holdings, Inc. (NYSE: DOCN), the AI-Native Cloud purpose-built for inference and agentic workloads, today announced results for its second quarter ended June 30, 2026.

"Our growth rate is accelerating, as revenue grew 29% year-over-year, more than double our growth rate a year ago," said Paddy Srinivasan, CEO of DigitalOcean. "The acceleration is coming from our highest spending customers and sophisticated AI Natives, and we are now beginning to land nine-figure annual commitments. Early Inference Engine customers drove their total token consumption up approximately 30x in the last 60-days, and 85% of our AI customer ARR now comes from inference and core cloud rather than bare metal. Just as important is how we are growing: attractive margins, positive free cash flow, capacity delivered on or ahead of schedule, and a stronger balance sheet. Our customer momentum and early product traction give us confidence to raise our 2026 revenue outlook to approximately 30%, reaching 35% or more by Q4 2026, and strengthen our conviction in our ability to exceed 50% growth in 2027."

Second Quarter 2026 Financial Highlights⁽¹⁾:

Revenue was $281 million, an increase of 29%.
Annual Run-Rate Revenue (“ARR”) ended the quarter at $1,125 million, an increase of 29%. AI Customer ARR was $234 million, an increase of 212%.
Record $93 million of incremental ARR added during the quarter, an increase of 191%.
Net income attributable to common stockholders was $35 million, a decrease of 4%, and net income margin was 13%.
Operating income was $29 million, a decrease of 18%, and operating income margin was 10%.
Adjusted operating income was $67 million, an increase of 9%, and adjusted operating income margin was 24%.
Adjusted EBITDA was $114 million, an increase of 27%, and adjusted EBITDA margin was 40%.
Diluted net income per share was $0.29 and non-GAAP diluted net income per share was $0.45.
Net cash from operating activities increased to $110 million at a 39% margin, from $92 million at a 42% margin in the second quarter of 2025.
Adjusted free cash flow increased to $61 million at a 22% margin, from $57 million at a 26% margin in the second quarter of 2025.
Cash and cash equivalents was $767 million as of June 30, 2026.
Remaining Performance Obligation (“RPO”)⁽²⁾ was $894 million, of which, $366 million is expected to be recognized over the next 12 months. RPO was $71 million in the second quarter of 2025.

Second Quarter 2026 Operational Highlights⁽¹⁾:

Launched Inference Engine as part of AI-Native Cloud.
Shipped more than 80 product releases since April.
Signed first nine-figure annual customer commitments with leading AI-Natives, extending weighted average contract life from 1.6 years to over 3 years.
Secured an incremental 20 MW of committed data center capacity expected to come online in 2027 and 2028, bringing total committed capacity to approximately 155 MW, with additional capacity actively being pursued.
Added to the Russell 1000 Index, recognition of a business that has scaled with discipline, pairing durable growth with consistent execution.
The number of $100K+ Customers⁽³⁾ grew 9%, while the revenue from these customers, which now represents 35% of total revenue, grew 98%.
The number of $500K+ and $1M+ Customers grew 35% and 73%, respectively. Revenue from these customers, which now represents 26% and 23% of total revenue, grew 160% and 214%, respectively.

Recent Developments:

Repurchased approximately $472 million of our 0.00% Convertible Senior Notes due 2030, funded by a concurrent registered direct offering, reducing leverage with minimal cash usage and minimal dilution, with issued shares offset by the retired notes and an intended repurchase of approximately 500,000 shares.

___________________
(1)	All growth rates are year-over-year unless otherwise specified.
(2)	Beginning in the fourth quarter of 2025, the RPO amount represents all contracts regardless of the duration of their original expected term. Prior periods have been recast to conform to the current period presentation. Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 for further details.
(3)	Beginning in the fourth quarter of 2025, we redefined our total customer count and our customer category naming and disaggregation. Prior periods have been recast to conform to the current period presentation. Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 for further details.

Financial Outlook:

DigitalOcean is initiating guidance for the third quarter ending September 30, 2026 as follows:

Total revenue of $304 to $307 million, up 32% to 34% year-over-year.
Adjusted EBITDA margin of 38% to 39%.
Non-GAAP diluted net income per share of $0.28 to $0.30.
Fully diluted weighted average shares outstanding of approximately 126 to 127 million shares.

For the full year 2026, we now expect:

Total revenue of $1.170 to $1.180 billion, up 30% to 31% year-over-year.
Adjusted EBITDA margin of 38.5% to 39.5%.
Adjusted free cash flow margin in the range of 11% to 13% of revenue.
Non-GAAP diluted net income per share of $1.35 to $1.40.
Fully diluted weighted average shares outstanding of approximately 122 to 123 million shares.

A reconciliation of non-GAAP outlook measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation expense-related charges are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. Accordingly, a reconciliation is not available without unreasonable effort and we are unable to assess the probable significance of the unavailable information, although it is important to note that these factors could be material to our results computed in accordance with GAAP.

The financial guidance presented in this release are estimates based on information available to management as of the date of this release. There can be no assurance that our actual results will not differ from the financial guidance presented in this release.

Conference Call Information:

DigitalOcean will host a conference call today, August 4, 2026, at 8:00 a.m. ET to review its results. The conference call and presentation can be accessed by registering for the webcast at https://events.q4inc.com/attendee/684389800 . A live webcast and replay of the conference call in addition to the presentation can be accessed from the DigitalOcean investor relations website at investors.digitalocean.com.

About DigitalOcean

DigitalOcean (NYSE: DOCN) is the AI-Native Cloud, purpose-built for inference and agentic workloads. Its five-layer integrated platform, spanning GPU and CPU infrastructure, core cloud, inference, data, and managed agent orchestration, is open throughout with no vendor lock-in, giving builders everything they need to start fast, scale production AI workloads, and improve unit economics. More than 680,000 customers and millions of developers globally trust DigitalOcean to build, ship, and scale their applications. Learn more at digitalocean.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding our expected future performance, including but not limited to statements in the section titled “Financial Outlook” and the quotations of our CEO. The forward-looking statements contained in this release and the accompanying earnings call referenced in this release are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. These risks, uncertainties, assumptions, and other factors include, but are not limited to: (1) fluctuations in our financial results make it difficult to project future results; (2) our ability to sustain profitability in the future; (3) our ability to expand usage of our platform by existing customers and/or attract new customers and/or retain existing customers; (4) the speed at which the market for our platform and solutions develops; (5) the success of the development and use of our artificial intelligence and machine learning (“AI/ML”) product offerings or use of third-party AI/ML-based tools; (6) our ability to release updates and new features to our platform and adapt and respond effectively to rapidly changing technology or customer needs; (7) our ability to control costs, including our operating expenses, and the timing of payment for expenses; (8) the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges; (9) breaches in our security measures allowing unauthorized access to our platform, our data, or our customers’ data; (10) the competitive markets in which we participate; (11) our ability to effectively integrate and retain new members of our executive leadership team and senior management; (12) the effects of acquisitions and their integration; (13) general market, political, economic, and business conditions, including changes in trade policies, such as trade wars, tariffs and other restrictions or the threat of such actions; (14) the impact of new accounting pronouncements; (15) our ability to control fraudulent registrations and usage of our platform, reduce bad debt and lessen capacity constraints on our data centers, servers and equipment; (16) our customers’ ability to have continued and unimpeded access to our platform, including as a result of evolving laws and industry standards; and (17) our plans with respect to accelerating investments in data centers and GPU capacity.

Further information on these and additional risks, uncertainties, assumptions and other factors that could cause actual results or outcomes to differ materially from those included in or contemplated by the forward-looking statements contained in this release are included under the caption “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent filings and reports we make with the SEC.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this release. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur. The forward-looking statements made in this release relate only to events as of the date on which the statements are made. We assume no obligation to, and do not currently intend to, update any such forward-looking statements after the date of this release, except as required by law.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including: (i) adjusted operating income and adjusted operating income margin, (ii) adjusted EBITDA and adjusted EBITDA margin and (iii) non-GAAP net income and non-GAAP diluted net income per share. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

We believe that adjusted operating income margin and adjusted EBITDA, when taken together with our GAAP financial results, provide meaningful supplemental information regarding our operating performance (including our long-term performance in the case of adjusted operating income) and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted operating income and adjusted EBITDA is helpful to our investors as they are measures used by management in assessing the health of our business, evaluating our operating performance, and for internal planning and forecasting purposes.

We believe non-GAAP net income and non-GAAP diluted net income per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of unusual or non-recurring items from period to period for reasons unrelated to overall operating performance.

Our calculations of each of these measures may differ from the calculations of measures with the same or similar titles by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth in the tables in the section “Reconciliation of GAAP to Non-GAAP Data.”

Adjusted Operating Income and Adjusted Operating Income Margin

We define adjusted operating income as operating income, adjusted to exclude stock-based compensation, amortization of acquired intangible assets, acquisition related compensation, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets and other charges. We define adjusted operating income margin as adjusted operating income as a percentage of revenue.

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net income attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, acquisition related compensation, acquisition and integration related costs, income tax expense (benefit), restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, interest income and other income, net, (gain) loss on extinguishment of debt, net, and other charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue.

Non-GAAP Net Income and Non-GAAP Diluted Net Income Per Share

We define non-GAAP net income as net income attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, (gain) loss on extinguishment of debt, net, and other charges. In addition to these exclusions, we subtract an assumed non-GAAP provision for income taxes to calculate non-GAAP net income that excludes the current period income tax benefit (expense). We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision in order to provide better consistency across reporting periods. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of our stock options, RSUs, PRSUs, and Convertible Notes and, beginning in the first quarter of 2026, excludes the in-the-money portion of our 2030 Convertible Notes as they are covered by our capped call transactions, which are expected to mitigate the dilutive effect of our 2030 Convertible Notes.

Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin

Adjusted free cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, purchase of intangible assets, and excluding cash paid for restructuring and other charges, acquisition related compensation, restructuring related charges, and acquisition and integration related costs. Adjusted free cash flow margin is calculated as adjusted free cash flow divided by total revenue.

We believe that adjusted free cash flow and adjusted free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our core operations that can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments. We further believe that historical and future trends in adjusted free cash flow and adjusted free cash flow margin, even if negative, provide useful information about the amount of net cash provided by operating activities that is available (or not available) to be used for strategic initiatives. Adjusted free cash flow and adjusted free cash flow margin exclude acquisitions of equipment under financing arrangements, finance leases, and our future contractual commitments. Additionally, adjusted free cash flow does not represent the residual cash flow available for discretionary expenses given our debt obligations and the total increase or decrease in our cash balance for a given period.

Unlevered Adjusted Free Cash Flow and Unlevered Adjusted Free Cash Flow Margin

Unlevered adjusted free cash flow is a non-GAAP financial measure that we define as adjusted free cash flow excluding cash paid for interest and interest income. Unlevered adjusted free cash flow margin is calculated as unlevered adjusted free cash flow divided by total revenue.

We believe that unlevered adjusted free cash flow and unlevered adjusted free cash flow margin provide additional information to adjusted free cash flow about our liquidity and, measured over time, enable management and investors to monitor the underlying business’ growth pattern and ability to generate cash. We further believe that unlevered adjusted free cash flow is an important metric, as it provides a clear view of our cash generation before the impact of financing decisions and many investors and analysts use unlevered adjusted free cash flow as the basis of their enterprise value calculations as they assess the value of our business. Unlevered adjusted free cash flow and unlevered adjusted free cash flow margin exclude certain charges that will be settled in cash, such as interest paid to service our debt and equipment financing obligations. Additionally, unlevered adjusted free cash flow does not represent the residual cash flow available for discretionary expenses given our debt obligations and the total increase or decrease in our cash balance for a given period.

Key Business Metrics:

We utilize the key metrics set forth below to help us evaluate our business and growth, identify trends, formulate financial projections and make strategic decisions.

Customers

We calculate customer count as the average number of customers as of the last day of the month for each month in the most recent quarter. Customers are classified in the following categories based on the amount of their spend in a given month and individual customers may fall within different categories within a reporting period (customer spend in a month in whole dollars):

Digital Native Enterprise Customers: users that spend more than $500 in a month.
$100K+ Customers: users that spend more than $8,333 in a month.
$500K+ Customers: users that spend more than $41,667 in a month.
$1M+ Customers: users that spend more than $83,333 in a month.

ARR

We calculate ARR by multiplying total revenue for the most recent quarter by four.

AI Customer ARR

We calculate AI Customer ARR by multiplying total AI Customer Revenue for the most recent quarter by four. AI Customer Revenue is defined as the total revenue generated from customers who utilize one or more of our AI/ML offerings, inclusive of their revenue from our IaaS and PaaS/SaaS offerings during the period.

Other Metrics:

Remaining Performance Obligation

Remaining performance obligation (“RPO”) represents commitments in customer contracts for future services that have not yet been recognized in the condensed consolidated financial statements. RPO is not necessarily indicative of future revenue growth because it does not account for the timing of customers’ consumption or their usage beyond their contracted capacity. Additionally, RPO may increase when customers transition from usage-based to commitment-based agreements, which does not always reflect incremental revenue growth. RPO is influenced by a number of factors, including the timing and size of renewals, the timing and size of purchases of additional capacity and average contract term. Due to these factors, it is important to review RPO in conjunction with revenue and other financial metrics contained in this release and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent filings and reports we make with the SEC.


DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) (unaudited)

	June 30, 2026			December 31, 2025
Current assets:
Cash and cash equivalents	$	767,026		$	254,475
Accounts receivable, less allowance for credit losses of $6,812 and $6,374, respectively		115,000			90,908
Prepaid expenses and other current assets		135,584			81,598
Total current assets		1,017,610			426,981
Property and equipment, net		1,049,332			589,094
Restricted cash		156			158
Goodwill		350,651			348,674
Intangible assets, net		93,373			99,504
Operating lease right-of-use assets, net		505,697			270,854
Deferred tax assets		93,991			90,310
Other assets		12,243			12,130
Total assets	$	3,123,053		$	1,837,705

Current liabilities:
Accounts payable	$	10,387		$	38,836
Accrued other expenses		70,883			42,679
Deferred revenue		53,039			5,882
Debt, current		311,654			325,109
Operating lease liabilities, current		126,233			108,037
Finance lease liabilities and equipment financing obligations, current		129,777			31,411
Other current liabilities		74,139			67,510
Total current liabilities		776,112			619,464
Deferred tax liabilities		3,952			4,092
Debt, long-term		609,399			970,653
Operating lease liabilities, long-term		352,854			166,895
Finance lease liabilities and equipment financing obligations, long-term		447,943			99,103
Other non-current liabilities		2,062			6,188
Total liabilities		2,192,322			1,866,395
Commitments and contingencies (Note 9)

Preferred stock ($0.000025 par value per share; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2026 and December 31, 2025)		—			—
Common stock ($0.000025 par value per share; 750,000,000 shares authorized; 105,002,427 and 91,947,614 issued and outstanding as of June 30, 2026 and December 31, 2025, respectively)		2			2
Additional paid-in capital		925,014			16,005
Accumulated other comprehensive loss		(1,756	)		(960	)
Retained earnings (Accumulated deficit)		7,471			(43,737	)
Total stockholders’ equity (deficit)		930,731			(28,690	)
Total liabilities and stockholders’ equity	$	3,123,053		$	1,837,705


DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2026			2025			2026			2025
Revenue	$	281,184		$	218,700		$	539,089		$	429,403
Cost of revenue		126,522			87,755			239,717			169,014
Gross profit		154,662			130,945			299,372			260,389
Operating expenses:
Research and development		57,515			39,644			106,345			79,238
Sales and marketing		22,568			19,288			44,237			38,689
General and administrative		45,208			36,394			82,848			69,201
Total operating expenses		125,291			95,326			233,430			187,128

Operating income		29,371			35,619			65,942			73,261

Other (expense) income:
Interest expense		(7,463	)		(2,239	)		(18,016	)		(4,447	)
Loss on extinguishment of debt, net		—			(269	)		(2,700	)		(269	)
Interest income and other income, net		5,234			9,337			6,412			15,283
Other (expense) income, net		(2,229	)		6,829			(14,304	)		10,567

Income before income taxes		27,142			42,448			51,638			83,828
Income tax benefit (expense)		8,295			(5,421	)		(430	)		(8,597	)
Net income attributable to common stockholders	$	35,437		$	37,027		$	51,208		$	75,231
Net income per share attributable to common stockholders
Basic	$	0.34		$	0.41		$	0.52		$	0.82
Diluted	$	0.29		$	0.39		$	0.45		$	0.77
Weighted-average shares used to compute net income per share attributable to common stockholders
Basic		104,611			91,097			98,856			91,538
Diluted		126,548			100,617			118,708			101,521


DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

	Six Months Ended June 30,
		2026			2025
Operating activities
Net income attributable to common stockholders	$	51,208		$	75,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		96,629			61,975
Stock-based compensation		55,231			40,513
Provision for expected credit losses		8,078			8,607
Loss on extinguishment of debt		2,700			269
Operating lease right-of-use assets and liabilities, net		(30,810	)		(13,816	)
Non-cash interest expense		2,960			4,005
Other		3,476			(7,853	)
Changes in operating assets and liabilities:
Accounts receivable		(32,230	)		(17,064	)
Prepaid expenses and other current assets		(53,906	)		1,201
Accounts payable and accrued expenses		6,536			(3,029	)
Deferred revenue		47,157			5,867
Other assets and liabilities		(140	)		631
Net cash provided by operating activities		156,889			156,537

Investing activities
Capital expenditures - property and equipment		(81,576	)		(95,160	)
Capital expenditures - internal-use software		(11,785	)		(3,412	)
Acquisition of equipment under financing arrangements		(51,544	)		—
Purchase of intangible assets		(754	)		(1,835	)
Cash paid for acquisition of businesses, net of cash acquired		(4,042	)		—
Net cash used in investing activities		(149,701	)		(100,407	)

Financing activities
Proceeds from follow-on public offering, net of underwriting discounts and issuance costs		887,888			—
Principal repayment of Term Loan Facility		(500,000	)		—
Proceeds from drawdown of Term Loan Facility		120,000			—
Payment of debt issuance costs		—			(4,081	)
Proceeds related to issuance of common stock under equity incentive plan		3,558			2,771
Proceeds from issuance of common stock under employee stock purchase plan		2,494			2,660
Employee payroll taxes paid related to net settlement of equity awards		(38,406	)		(16,294	)
Proceeds from financing arrangements		51,544			—
Principal repayments of finance leases and financing arrangements		(21,651	)		(2,733	)
Repurchase and retirement of common stock including related costs		—			(79,199	)
Net cash provided by (used in) financing activities		505,427			(96,876	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(66	)		45
Increase (decrease) in cash, cash equivalents and restricted cash		512,549			(40,701	)
Cash, cash equivalents and restricted cash - beginning of period		254,633			430,193
Cash, cash equivalents and restricted cash - end of period	$	767,182		$	389,492


DIGITALOCEAN HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited)

Adjusted Operating Income and Operating Income Margin

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)		2026			2025			2026			2025
Operating income	$	29,371		$	35,619		$	65,942		$	73,261

Adjustments:
Stock-based compensation		32,724			21,081			55,231			40,513
Amortization of acquired intangible assets		5,070			5,031			10,008			10,228
Impairment of certain long-lived assets		311			—			311			—
Adjusted operating income	$	67,476		$	61,731		$	131,492		$	124,002
As a percentage of revenue:
Operating income margin		10	%		16	%		12	%		17	%
Adjusted operating income margin		24	%		28	%		24	%		29	%

Adjusted EBITDA and Adjusted EBITDA Margin

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)		2026			2025			2026			2025
GAAP Net income attributable to common stockholders	$	35,437		$	37,027		$	51,208		$	75,231

Adjustments:
Depreciation and amortization		51,154			32,765			96,629			61,975
Stock-based compensation		32,724			21,081			55,231			40,513
Interest expense		7,463			2,239			18,016			4,447
Income tax (benefit) expense		(8,295	)		5,421			430			8,597
Loss on extinguishment of debt		—			269			2,700			269
Impairment of certain long-lived assets		311			—			311			—
Interest income and other income, net⁽¹⁾		(5,234	)		(9,337	)		(6,412	)		(15,283	)
Adjusted EBITDA	$	113,560		$	89,465		$	218,113		$	175,749
As a percentage of revenue:
Net income margin		13	%		17	%		9	%		18	%
Adjusted EBITDA margin		40	%		41	%		40	%		41	%

____________________
(1)	For the three and six months ended June 30, 2026 and 2025, primarily consists of interest income from our cash and cash equivalents.

Non-GAAP Net Income and Non-GAAP Diluted Net Income Per Share

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands, except per share amounts)		2026			2025			2026			2025
GAAP Net income attributable to common stockholders	$	35,437		$	37,027		$	51,208		$	75,231
Stock-based compensation		32,724			21,081			55,231			40,513
Amortization of acquired intangible assets		5,070			5,031			10,008			10,228
Loss on extinguishment of debt⁽¹⁾		—			269			2,700			269
Impairment of certain long-lived assets		311			—			311			—
Non-GAAP income tax adjustment⁽²⁾		(18,735	)		(5,593	)		(18,752	)		(12,977	)
Non-GAAP Net income	$	54,807		$	57,815		$	100,706		$	113,264

Non-cash charges related to convertible notes⁽³⁾	$	1,118		$	1,596		$	2,190		$	3,191
Non-GAAP Net income used to compute net income per share, diluted	$	55,925		$	59,411		$	102,896		$	116,455

GAAP Net income per share attributable to common stockholders, diluted⁽⁶⁾	$	0.29		$	0.39		$	0.45		$	0.77
Stock-based compensation		0.27			0.21			0.48			0.40
Amortization of acquired intangible assets		0.04			0.05			0.09			0.10
Loss on extinguishment of debt⁽¹⁾		—			—			0.02			—
Impairment of certain long-lived assets		—			—			—			—
Non-cash charges related to convertible notes⁽³⁾		0.01			0.02			0.02			0.03
Non-GAAP income tax adjustment⁽²⁾		(0.16	)		(0.08	)		(0.17	)		(0.15	)
Non-GAAP Net income per share, diluted⁽⁴⁾	$	0.45		$	0.59		$	0.89		$	1.15

GAAP Weighted-average shares used to compute net income per share, diluted		126,548			100,617			118,708			101,521
Add: Weighted-average dilutive effect of potentially dilutive securities		—			—			1,750			—
Less: Anti-dilutive impact of capped call transaction⁽⁵⁾		(3,227	)		—			(4,388	)		—
Non-GAAP Weighted-average shares used to compute net income per share, diluted⁽⁶⁾		123,321			100,617			116,070			101,521

____________________
(1)	For the three and six months ended June 30, 2026, excludes tax impact which is presented in Non-GAAP income tax adjustment.
(2)	For the periods in fiscal year 2026 and 2025, we used a tax rate of 16%, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for each respective year.
(3)	Consists of non-cash interest expense for amortization of debt issuance costs related to our Convertible Notes.
(4)	May not foot due to rounding.
(5)	Excludes the in-the-money portion of our 2030 Convertible Notes for non-GAAP weighted-average diluted shares as they are covered by our capped call transactions. Our outstanding capped call transactions are antidilutive under GAAP, but are expected to mitigate the dilutive effect of our 2030 Convertible Notes, and therefore are included in the calculation of non-GAAP diluted shares outstanding. The capped calls have an antidilutive impact when the average stock price of our common stock in a given period is higher than their exercise price.
(6)	Includes 1,750 and 15,957 of potentially dilutive securities related to our 2026 and 2030 Convertible Notes, respectively, as if the entire principal amount outstanding were converted into shares for the three and six months ended June 30, 2026. Includes 8,403 of potentially dilutive securities related to our 2026 Convertible Notes as if the entire principal amount outstanding were converted into shares for the three and six months ended June 30, 2025. The Company has the election of settling any conversion in cash, shares of our common stock, or a combination of both. Refer to our Quarterly Report on Form 10-Q for the three months ended June 30, 2026 for further details.

Adjusted Free Cash Flow, Unlevered Adjusted Free Cash Flow, Adjusted Free Cash Flow Margin and Unlevered Adjusted Free Cash Flow Margin

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)		2026			2025			2026			2025
GAAP Net cash provided by operating activities	$	109,968		$	92,447		$	156,889		$	156,537
Adjustments:
Capital expenditures - property and equipment		(41,584	)		(33,197	)		(81,576	)		(95,160	)
Capital expenditures - internal-use software development		(7,045	)		(1,383	)		(11,785	)		(3,412	)
Purchase of intangible assets		(754	)		(852	)		(754	)		(1,835	)
Restructuring and other charges		—			—			—			64
Adjusted free cash flow	$	60,585		$	57,015		$	62,774		$	56,194
Plus: Cash paid for interest		4,820			54			14,349			249
Less: Interest income		(6,390	)		(3,202	)		(9,267	)		(6,859	)
Unlevered adjusted free cash flow	$	59,015		$	53,867		$	67,856		$	49,584
As a percentage of revenue:
GAAP Net cash provided by operating activities		39	%		42	%		29	%		36	%
Adjusted free cash flow margin		22	%		26	%		12	%		13	%
Unlevered adjusted free cash flow margin		21	%		25	%		13	%		12	%

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Source: DigitalOcean Holdings, Inc.

DigitalOcean Announces Second Quarter 2026 Financial Results

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