Q2 2026 DigitalOcean Holdings Inc Earnings Call Transcript
Key Points
- Revenue growth accelerated to 29% year-over-year in Q2, more than double the growth rate from the same period last year, with record incremental ARR of $93 million.
- Inference services grew nearly 800% year-over-year, with the inference engine gaining over 6,000 customers and token volume increasing 30x in 60 days.
- AI customer ARR reached $234 million, growing over 200% year-over-year, with 85% of that ARR coming from non-bare metal services, indicating a shift to higher-margin offerings.
- The company raised its full-year 2026 revenue outlook to approximately 30% growth, with an exit growth rate of 35% or more in Q4, and expressed increased confidence in 50%+ growth for 2027.
- Strengthened balance sheet by retiring $472 million of convertible notes with minimal dilution, reducing net leverage to 0.7 times, and secured 20 megawatts of additional capacity, bringing total committed capacity to 155 megawatts.
- Net dollar retention (NDR) was only 102%, a three-year high but still low, and the company has stopped highlighting it as a key metric, indicating challenges in expanding existing customer spend.
- Supply chain challenges persist across the industry, which could impact the timely delivery of future capacity and growth plans.
- The company's growth is increasingly dependent on a small number of large customers, with the top 25 customers representing 20% of ARR, posing concentration risk.
- Adjusted EBITDA margin is expected to decline to 38-39% in Q3 and approximately 39% for the full year, down from 40% in Q2, due to investments in capacity and go-to-market.
- The company acknowledged that it is premature to provide formal 2027 guidance, and the 50%+ growth estimate is subject to significant uncertainty regarding data center timing and capacity availability.
Hello, everyone. Thank you for joining us and welcome to the DigitalOcean-second quarter 2026 earnings conference call. (Operator Instructions)
I will now hand the conference over to Radu Patrichi, Head of Investor Relations. Radu, please go ahead.
Thank you, and good morning. Thank you all for joining us today to review DigitalOcean second-quarter 2026 results. Joining me on the call today are Paddy Srinivasan, our Chief Executive Officer; and Matt Steinfort, our Chief Financial Officer. For those of you following along, an accompanying slide presentation is available on the webcast.
Before we begin, let me remind you that certain statements made on today's call may be considered forward-looking, which reflect management's best judgment based on currently available information. Our actual results may differ materially from those projected in forward-looking statements, including our financial outlook.
I direct your
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