Summary
DigitalOcean's fiscal 2025 second quarter revenue rose 13.6% to $218.7 million. Gross profit was $130.9 million, up 14.7%. Operating income reached $35.6 million, up 59.5%. Net income was $37.0 million, up 93.5%. Diluted EPS was $0.39, up 95.0%. Gross margin was 59.9%, up 0.6 percentage points. Operating margin was 16.3%, up 4.7 percentage points. The quarter showed clear operating leverage as revenue growth outpaced cost growth.
Year to date, revenue was $429.4 million, up 13.8%. Gross profit was $260.4 million, up 16.6%. Operating income was $73.3 million, up 116.3%. Net income was $75.2 million, up 126.1%. Diluted EPS was $0.77, up 120.0%. Gross margin was 60.6%, up 1.4 percentage points. Operating margin was 17.1%, up 8.1 percentage points. Operating cash flow for the six months was $156.5 million, up 13.4%. Capital expenditures were $95.2 million, up 26.0%. In the quarter, operating cash flow was $92.4 million, up 29.6%. Capital expenditures were $33.2 million, up 4.2%. Deferred revenue was $11.3 million, up 65.6%.
The revenue increase came from continued adoption of the company's products by existing customers, which led to higher average usage on the platform, and from a 16% increase in revenue from Higher Spend Customers. Cost of revenue grew mainly because of co-location costs tied to data center expansion. Research and development expenses rose on higher headcount and annual merit-based salary increases. General and administrative expenses fell because the prior-year quarter included acquisition-related deferred compensation and reorganization costs. Other income, net increased mainly from unrealized foreign currency gains, partly offset by lower interest income.
Operational metrics point to a larger and more engaged customer base. The net dollar retention rate was 99%, up from 97%. Higher Spend Customers totaled about 174,000, up from about 160,000. The customer mix included 154,186 Builders, 19,680 Scalers, and 585 Scalers+. Revenue from Higher Spend Customers was 89% of total revenue, up from approximately 87%. The top 25 customers made up approximately 9% of revenue, up from 8%, so customer concentration remains low. Revenue was split 37% North America, 27% Europe, 23% Asia, and 13% rest of world. Customers are spread across approximately 190 countries.
Management's outlook commentary centers on continued investment. The MD&A says research and development and sales and marketing expenses are expected to increase in absolute dollars as the company invests in its platform and product offerings. It also intends to invest additional resources in infrastructure to support the product portfolio and customer base scalability. Additional investments are expected in IaaS, PaaS/SaaS, and AI/ML offerings. Risks include unfavorable macroeconomic conditions, trade tensions and tariffs, supply chain disruptions, inflationary pressures, high interest rates, financial and credit market fluctuations, geopolitical tensions, and political instability. Those factors could reduce business investments in information technology and hurt growth. The company also maintains a full valuation allowance on U.S. federal and state deferred tax assets, and a future release could reduce income tax expense. Liquidity looks adequate. Management believes existing cash, cash flow from operations, and availability under the 2025 Credit Facility will be sufficient for working capital, capital expenditure requirements, and contractual commitments for at least the next 12 months and in the long term. The company entered a new 2025 Credit Facility on May 5, 2025, and terminated the 2022 facility. It plans to use a portion of the undrawn 2025 Credit Facility to repurchase, repay, acquire, or settle a portion of its Convertible Notes. The company also faces execution risk as it expands data center capacity and invests in AI/ML offerings.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $218.7M | $210.7M | +3.8% | $192.5M | +13.6% |
| Gross profit | $130.9M | $129.4M | +1.2% | $117.3M | +11.6% |
| Gross margin | 59.9% | 61.4% | -1.6 pp | 61.0% | -1.1 pp |
| Research & development | $39.6M | $39.6M | +0.1% | $34.0M | +16.5% |
| Sales & marketing | $19.3M | $19.4M | -0.6% | $20.1M | -4.2% |
| General & administrative | $36.4M | $32.8M | +10.9% | $40.8M | -10.9% |
| Total operating expenses | $95.3M | $91.8M | +3.8% | $95.0M | +0.3% |
| Operating income (loss) | $35.6M | $37.6M | -5.4% | $22.3M | +59.5% |
| Operating margin | 16.3% | 17.9% | -1.6 pp | 11.6% | +4.7 pp |
| Net income (loss) | $37.0M | $38.2M | -3.1% | $19.1M | +93.5% |
| Net margin | 16.9% | 18.1% | -1.2 pp | 9.9% | +7.0 pp |
| Diluted EPS | $0.39 | $0.39 | ±$0.00 | $0.20 | +$0.19 |
| Customers | 25 | 25 | ±0.0% | 25 | ±0.0% |
| Net retention rate | 99.0% | 100.0% | -1.0 pp | 97.0% | +2.0 pp |
Risks
MD&A highlights unfavorable economic conditions, including trade tensions, U.S. tariffs and retaliatory actions, inflation, high interest rates, and geopolitical conflicts, that could decrease business investment in information technology and negatively affect growth.
Revenue from Higher Spend Customers was 89% of total revenue in the three months ended June 30, 2025, up from approximately 87% in the prior-year period, so a spending slowdown among these customers could materially impact results.
Data center expansion drove co-location costs up $8.6 million in the quarter and capital expenditures rose 26% year to date, which may continue to pressure gross margin as the company invests in AI/ML and core offerings.
The company continues disciplined investments in AI/ML offerings such as Gradient AI Agentic Cloud and expects additional investments; if these offerings do not drive adoption, returns on the increased research and development and infrastructure spend may be limited.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Net Dollar Retention Rate
ARR
ARPU
Higher Spend Customers
Summary, forecast, risks and KPIs are extracted from DigitalOcean Holdings, Inc.'s SEC filings for Q2 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.