DigitalOcean raises revenue outlook as AI demand drives 221% customer revenue surge

DigitalOcean raises 2026 and 2027 revenue outlook after AI-driven Q1 beat - SiliconANGLE

DigitalOcean raises 2026 and 2027 revenue outlook after AI-driven Q1 beat Shares in DigitalOcean Holdings Inc. closed regular trading up slightly more than 40% today after the developer-oriented cloud infrastructure provider topped Wall Street targets in its fiscal 2026 first quarter and lifted its revenue outlook for both 2026 and 2027 on what it called accelerating demand for inference and agentic artificial intelligence workloads. For the quarter that ended on March 31, DigitalOcean reported adjusted earnings per share of 44 cents, down from 56 cents per share in the same quarter of last year, on revenue of $258 million, up 22% year-over-year. Analysts had been expecting earnings of 26 cents per share and revenue of $249.68 million. The headline numbers were overshadowed by the company's artificial intelligence metrics. AI customer annual run-rate revenue jumped 221% from a year earlier to $170 million, while annual recurring revenue from customers spending more than $1 million annually rose 179% to $183 million. Total annual recurring revenue ended the quarter at $1.03 billion, also up 22%. The company added a record $62 million in incremental organic annual recurring revenue during the quarter. "The inference and agentic era needs its own cloud," DigitalOcean Chief Executive Officer Paddy Srinivasan said in the company's earnings release, pointing to the April debut of the DigitalOcean AI-Native Cloud, a platform spanning infrastructure, core cloud services, inference, data and managed agents. The launch was paired with the acquisition of agentic AI infrastructure startup Katanemo Labs Inc. and the rollout of an Inference Engine with a new Inference Router for scaling agentic workloads. DigitalOcean said it added approximately 60 megawatts of incremental committed data center capacity during the quarter, set to come online through 2027. Remaining performance obligations rose to $243 million from $14 million a year earlier, with $167 million expected to be recognized over the next 12 months. The company raised its full-year 2026 revenue guidance to a range of $1.13 billion to $1.145 billion, growth of 25% to 27% and now expects 2027 revenue to grow more than 50%, up from prior guidance of about 30%. For its fiscal 2026 second quarter, DigitalOcean said it expected adjusted earnings per share of 20 cents to 23 cents and revenue of $272 million to $274 million. DigitalOcean also closed a follow-on offering of 11.9 million shares during the quarter, raising net proceeds of $888 million, $500 million of which was used to repay term loan principal. The company's cash and equivalents stood at $741 million as of March 31. DigitalOcean ended the quarter with more than 650,000 customers across 20 data centers in five regions.

DigitalOcean Growth Outlook Strengthens, 'Agentic AI Beneficiary' Says Analyst - DigitalOcean Holdings (N

The firm increased its price forecast to $200 from $107 in a Wednesday note. The update follows management's decision to raise fiscal 2026 revenue guidance to 25%-27% growth. Analyst Wamsi Mohan now expects fiscal 2027 revenue to surge above 50% year-over-year. Expanding Capacity To Meet AI Demand DigitalOcean is aggressively scaling its physical infrastructure. Management announced an additional 60 megawatt (MW) of capacity expansions. This brings the total committed capacity to approximately 135MW. Mohan said the shift toward more central processing unit (CPU) infrastructure in an inference- and agentic-driven environment could drive upside to the previously guided $13 million annual recurring revenue (ARR) per megawatt. The firm noted that higher inferencing workloads should drive meaningful long-term revenue and free cash flow growth. Focus On Agentic AI And High-Value Tiers The analyst highlighted the company's evolution into an "Agentic AI beneficiary." DigitalOcean recently signed Cursor as a customer, signaling a shift toward orchestration and agent-driven demand. Customer metrics reinforce the shift, with DigitalOcean expanding its $1 million-plus ARR cohort by 179%, now accounting for 18% of total ARR. Meanwhile, the $500,000-plus cohort grew 132%. Investment Costs and Margin Pressure The growth comes with significant upfront costs. DigitalOcean will incur $100 million in non-recurring charges in fiscal 2026. These funds will outfit data centers with liquid cooling for next-generation servers. The report noted that free cash flow margins could come under incremental pressure, but added that finance leases better align the timing of investments with revenue generation. The company aims to keep leverage below 4 times net debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) while sustaining EBITDA margins of around 40%. Revised Valuation And Estimates BofA updated its fiscal 2026 earnings per share estimate to $1.29, up from $1.11. The new $200 price forecast is based on 37 times calendar 2028 estimated enterprise value to adjusted free cash flow. DOCN Stock Price Activity: DigitalOcean Holdings shares were up 0.23% at $153.12 at the time of publication on Wednesday. The stock is trading near its 52-week high of $153.47, according to Benzinga Pro data. Image via Shutterstock This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.