Digital Ocean on surging RPO as large cloud deals accelerate expansion (DOCN)
DigitalOcean higher after saying it expects record Q2 results, including remaining performance obligations above $800 mln, more than 10x the prior-year level, and revenue growth of approximately 29%, ahead of the roughly 25% consensus pace.
That growth rate implies revenue near $282-283 mln, above the prior $272-274 mln guidance range, while adjusted EBITDA margin and non-GAAP EPS are expected at or above their previous high ends and stronger customer momentum should lift the company’s exit-2026 growth outlook.
Backlog quality: RPO is expected to exceed $800 mln, up from $243 mln in Q1, while weighted-average contract life expanded from 1.6 years in Q2 2025 to more than three years. The increase improves visibility, although revenue recognition will still depend on customer consumption over time.
Customer commitments: Management cited multiple nine-figure annual commitments for inference and cloud products, indicating that larger customers are moving toward more substantial deployments. However, DOCN did not disclose the number of customers, contract terms, or expected revenue-conversion timing.
Revenue acceleration: Implied Q2 revenue of roughly $282.5 mln would represent approximately 29% yr/yr growth, accelerating from 22% in Q1 and 14% in 2Q25.
Capacity expansion: DOCN secured another 20 MW for late 2027 and early 2028, raising committed data-center capacity to approximately 155 MW. That extends its growth runway but also increases the importance of timely deployment, utilization, and attractive returns on added infrastructure.
Operating setup: In Q1, AI customer ARR increased 221% yr/yr to $170 mln, with more than 80% tied to inference services and core cloud, while adjusted EBITDA margin reached 41%. The company also raised FY26 revenue guidance to $1.130-1.145 bln and had already targeted roughly 30% exit growth.
What to watch: The formal Q2 report should clarify the pace of RPO conversion, customer concentration, pricing, utilization, and whether management raises full-year or exit-growth expectations.
Briefing.com Analyst Insight
DOCN’s preliminary update provides stronger evidence that its AI infrastructure strategy is moving from demand promise to contracted scale.
The combination of accelerating revenue, a sharp sequential increase in RPO, longer contract duration, and above-plan profitability gives investors greater confidence in the company’s growth visibility. The central question now is execution. DOCN must convert large commitments into recognized revenue while bringing capacity online on schedule and preserving attractive unit economics. The next earnings report should show whether the company can sustain rising ARR per megawatt, broaden its customer base, and translate infrastructure expansion into durable operating leverage.