DigitalOcean Reports $257.9 Million Revenue in Q1 2026, 22% Increase Year-Over-Year

DigitalOcean Holdings, Inc. reported a revenue of $257.9 million for the first quarter of 2026, marking a 22% increase from $210.7 million in the same period of 2025. The growth was primarily driven by a 35% rise in revenue from Digital Native Enterprise (DNE) customers, attributed to both the acquisition of new customers and increased usage from existing clients. However, the company's net income decreased to $15.8 million, or $0.15 per diluted share, down from $38.2 million, or $0.39 per diluted share, in the prior year. This decline in profitability was influenced by a significant rise in interest expenses and costs associated with data center expansions.

The company's total operating expenses rose to $108.1 million, an 18% increase compared to $91.8 million in the previous year. This increase was driven by higher personnel costs in research and development, sales and marketing, and general administrative functions. Notably, research and development expenses alone increased by 23% to $48.8 million, reflecting the company's commitment to enhancing its product offerings and infrastructure. The gross profit margin also contracted to 56% from 61%, primarily due to increased costs related to data center expansions that preceded revenue growth from new facilities.

DigitalOcean's customer base continues to expand, with approximately 22,000 DNE customers as of March 31, 2026, up from 20,000 a year earlier. The company reported an annual run-rate revenue (ARR) of $1.032 billion, a significant increase from $843 million in the prior year. The growth in ARR was complemented by a notable increase in AI customer ARR, which rose to $170 million from $53 million. The company also reported a net dollar retention rate of 101%, indicating a slight improvement from 100% in the previous year, suggesting effective customer retention and expansion strategies.

In terms of strategic developments, DigitalOcean completed a follow-on public offering in March 2026, raising approximately $887.9 million in net proceeds. These funds were primarily used to repay $500 million of its Term Loan Facility. The company also drew down an additional $120 million under this facility during the quarter. As of March 31, 2026, DigitalOcean had $741.4 million in cash and cash equivalents, positioning it well for future investments and operational needs. The company remains focused on expanding its product offerings and customer base, particularly in the AI and cloud-native sectors, while navigating macroeconomic challenges that could impact growth.