DigitalOcean Raises Outlook as Revenue Growth Accelerates
Remaining performance obligations reached $894 million, more than 12 times the year-earlier level.
DigitalOcean Holdings (DOCN), the cloud-computing company, raised its full-year outlook after second-quarter revenue growth accelerated to 29%.
The quarter extended DigitalOcean’s shift toward larger customers and longer contracts. Annual recurring revenue rose to $1.125 billion, while record incremental ARR increased 50% from the first quarter to $93 million. The company signed its first nine-figure annual customer commitments, extending the weighted-average contract life to more than three years from 1.6 years.
Revenue rose to $281 million from a year earlier, accelerating from 22% growth in the first quarter. Diluted earnings fell to $0.29 a share from $0.39 a share a year earlier, while adjusted earnings declined to $0.45 a share from $0.59 a share.
AI Customer ARR climbed about 38% sequentially to $234 million, though its year-over-year growth rate eased to 212%. Inference and core cloud accounted for 85% of that ARR, and early Inference Engine customers increased token consumption about 30-fold over 60 days.
Growth became more concentrated among high-spending customers. ARR from customers contributing at least $1 million increased about 42% from the first quarter to $259 million, with year-over-year growth accelerating to 214%. That cohort’s share of revenue rose to 23% from 18% even as customer-count growth moderated.
Higher infrastructure costs weighed on profitability. Gross profit rose to $154.7 million, while gross margin narrowed to about 55% as cost of revenue increased 44%. Adjusted operating margin fell to 24% from 28% a year earlier, and adjusted EBITDA margin slipped to 40% despite faster EBITDA growth.
Operating cash flow increased to $110 million from $47 million in the first quarter, and adjusted free cash flow rose to $61 million from $2 million. Their respective margins expanded sequentially to 39% and 22%.
DigitalOcean now expects 2026 revenue of $1.170 billion to $1.180 billion, representing growth of 30% to 31%, compared with its previous 26% growth outlook. Third-quarter guidance calls for revenue of $304 million to $307 million and an adjusted EBITDA margin of 38% to 39%, while the company expects revenue growth of at least 35% by the fourth quarter. DigitalOcean also added 20 megawatts of committed data-center capacity for 2027 and 2028, bringing the total to about 155 megawatts.