DigitalOcean (DOCN) Stock Soars 16% on Blowout Q1 Performance and Raised Outlook

Table of Contents Shares of DigitalOcean (DOCN) rallied approximately 16% in early trading on May 5 following the cloud infrastructure company’s first quarter 2026 earnings report that substantially exceeded analyst projections. DigitalOcean Holdings, Inc., DOCN The company delivered quarterly revenue of $257.9 million, marking a 22.4% increase from the year-ago period and surpassing the Street’s $249.7 million projection. Adjusted earnings per share registered at $0.44, demolishing the consensus forecast of $0.26 by 67.7%. Shares were changing hands near $127.51 in the wake of the announcement. $DOCN Q1’26 EARNINGS HIGHLIGHTS 🔹 Revenue: $258M (Est. $249.68M) 🟢; +22% YoY🔹 Adj. EPS: $0.44 (Est. $0.26) 🟢🔹 ARR: $1.032B; +22% YoY🔹 AI Customer ARR: $170M; +221% YoY🔹 Million+ Dollar Customer ARR: $183M; +179% YoY🔹 Incremental Organic ARR: Record $62M Q2 Guide:… pic.twitter.com/NxthJb4AtK — Wall St Engine (@wallstengine) May 5, 2026 Adjusted operating income reached $59.08 million, exceeding the $48 million estimate by 23.1%. Meanwhile, adjusted EBITDA expanded 21% to reach $105 million. The operating margin registered at 14.2%, representing a decline from the 17.9% recorded in the comparable quarter of the previous year. Free cash flow margin also contracted, sliding to 0.8% from the prior quarter’s 11.1%. Annual Recurring Revenue totaled $1.03 billion, advancing 22.4% year over year while topping analyst projections. Billings similarly registered at $258.3 million, reflecting 22.4% YoY expansion. Annual recurring revenue from AI customers skyrocketed 221% year over year to $170 million. ARR from customers spending over one million dollars annually grew 179% to $183 million — metrics that evidently resonated with investors. CEO Paddy Srinivasan attributed the results to the platform’s strategic positioning for the transition toward inference and agentic AI applications. “The Inference and agentic era needs its own cloud. DigitalOcean built it,” he stated. For the second quarter of 2026, DigitalOcean projected revenue between $272 million and $274 million, with the $273 million midpoint representing a 4.8% premium to the $260.9 million analyst consensus. Second quarter adjusted earnings per share guidance ranged from $0.20 to $0.23, with the $0.215 midpoint trailing the $0.23 consensus marginally. The full-year 2026 revenue outlook was increased to a range of $1.13 billion to $1.145 billion, up from the previous $1.09 billion forecast. The $1.1375 billion midpoint remains below the $1.43 billion analyst consensus. Full-year adjusted EPS guidance was boosted to a $1.15 midpoint, representing a 31.4% lift from the prior outlook and exceeding the $0.99 consensus. Management also established a 2027 revenue growth objective exceeding 50%. Throughout the quarter, DigitalOcean finalized a secondary offering of 11.9 million shares, generating net proceeds of $888 million. The company allocated $500 million of those funds toward retiring its Term Loan Facility. Customer acquisition metrics remained robust, with a CAC payback period of 9.3 months. The company’s self-service business model continues to maintain low customer onboarding expenses. Wall Street analysts are forecasting revenue growth of 23% over the coming 12 months, representing an uptick from the two-year trajectory. The five-year compounded annual revenue growth rate stands at 22.8%, while the annualized growth rate over the past two years measures 15.4%.