DigitalOcean 2025 Q2 Earnings Strong Performance as Net Income Surges 93%

DigitalOcean (DOCN) reported its 2025 Q2 earnings on August 6, 2025. The company beat expectations with strong revenue and profitability growth. It also raised its full-year revenue and EBITDA margin guidance, reflecting confidence in its long-term momentum.

Revenue
DigitalOcean’s total revenue for the second quarter of 2025 grew by 13.6% year-over-year to $218.70 million, compared to $192.48 million in the same period of 2024. This reflects sustained demand across its core cloud and AI services. Notably, the Scalers+ segment, which targets high-spend digital-native enterprises, saw 35% year-over-year revenue growth and now accounts for 24% of total revenue.

Earnings/Net Income
DigitalOcean’s earnings performance showed significant improvement, with net income surging to $37.03 million in Q2 2025, up 93.5% from $19.14 million in Q2 2024. The company’s non-GAAP diluted earnings per share (EPS) increased by 95.2% to $0.41, compared to $0.21 in the prior-year period. The impressive net income growth highlights DigitalOcean’s improving cost management and operational efficiency, demonstrating strong earnings strength.

Price Action
DigitalOcean’s stock price surged 28.88% on the day following the earnings report, closing at $34.81. This marked a significant one-day jump and a continuation of strong momentum with a 22.31% gain for the week and 19.21% month-to-date. The sharp price increase reflects investor optimism over the company’s improved profitability and strategic positioning in the AI infrastructure space.

Post Earnings Price Action Review
Despite the strong earnings report, a strategy of buying shares on the earnings release date and holding for 30 days has historically underperformed. Over the past three years, such a strategy returned -38.92%, significantly lagging behind the 48.58% benchmark return. This negative excess return of -87.51% and an annualized return of -15.65% indicates the strategy has not been effective in capturing long-term value. The Sharpe ratio of -0.26 and maximum drawdown of 0.00% further suggest a high-risk, low-reward profile, despite relatively low volatility of 60.99%.

CEO Commentary
Paddy Srinivasan, CEO of DigitalOcean, emphasized the company’s strong performance in Q2 2025, citing a 14% year-over-year revenue increase, record incremental ARR since Q4 2022, and a doubling of AI/ML revenue. He highlighted the Scalers+ segment's 35% growth and noted that the company is balancing growth with profitability. Srinivasan expressed confidence in maintaining high growth and free cash flow margins, reinforcing the company's long-term strategic direction.

Guidance
DigitalOcean raised its full-year 2025 revenue guidance to between $888 million and $892 million, and expects adjusted EBITDA margin of 39% to 40%. For Q3 2025, the company forecasts revenue in the range of $226 million to $227 million, with adjusted EBITDA margin of 39% to 40%, and non-GAAP diluted net income per share between $0.45 and $0.50. The company also anticipates a full-year adjusted free cash flow margin of 17% to 19%.

Additional News
On August 6, 2025, DigitalOcean reported a 28.88% surge in its stock price following the release of its strong Q2 earnings and raised full-year guidance. The cloud provider’s core cloud and AI services saw robust growth, with revenue increasing 14% year-over-year to $218.70 million. Notably, Scalers+ revenue rose 35%, now representing nearly a quarter of total revenue. The company reported $37.03 million in net income, with a 17% net margin and 41% adjusted EBITDA margin. DigitalOcean also highlighted the launch of its Gradient AI platform and a new partnership with AMD for AI infrastructure. The company ended the quarter with $388 million in cash and cash equivalents, and expects continued product innovation and customer retention improvements.