DigitalOcean's stock declined 3.4% despite beating Q4 2025 earnings expectations. The company reported quarterly revenue of $242 million, up 18% year-over-year, and full-year revenue of $901 million. AI customer ARR reached $120 million, up 150% year-over-year and representing 12% of total ARR. The company exceeded revenue guidance and raised fiscal 2026 revenue growth guidance while introducing fiscal 2027 targets. However, the stock fell primarily due to EPS guidance coming in below analyst expectations. Management warned of a near-term slowdown in profitability due to increased data center capital expenditures. Multiple analysts raised price targets following the results, including Cantor Fitzgerald to $83, Goldman Sachs to $78, Barclays to $69, and Stifel to $57, though Stifel maintained a Hold rating.
Read full analysisDigitalOcean's stock declined 3.4% despite beating Q4 2025 earnings expectations. The company reported quarterly revenue of $242 million, up 18% year-over-year, and full-year revenue of $901 million. AI customer ARR reached $120 million, up 150% year-over-year and representing 12% of total ARR. The company exceeded revenue guidance and raised fiscal 2026 revenue growth guidance while introducing fiscal 2027 targets. However, the stock fell primarily due to EPS guidance coming in below analyst expectations. Management warned of a near-term slowdown in profitability due to increased data center capital expenditures. Multiple analysts raised price targets following the results, including Cantor Fitzgerald to $83, Goldman Sachs to $78, Barclays to $69, and Stifel to $57, though Stifel maintained a Hold rating.
DigitalOcean is a cloud infrastructure provider originally built for developers and small-to-medium businesses, offering simpler and more transparent pricing than hyperscale rivals like AWS. Under CEO Paddy Srinivasan, the company has pivoted toward AI infrastructure, with AI customer ARR reaching $120 million (up 150% year over year) and now representing 12% of total revenue. The current investor debate centers on whether the margin compression required to fund this AI-driven data center expansion will be justified by the accelerating top-line growth.