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Todayʼs agenda 3 Paddy SrinivasanChief Executive OfficerMarket Opportunity & Growth Strategy BratinSahaChief Product and Technology OfficerProduct, Innovation and AI Larry DʼAngeloChief Revenue OfficerGo-to-market Matt SteinfortChief Financial OfficerFinancial Strength & Outlook BREAK Wade WegnerChief Ecosystem and Growth OfficerCustomer Showcase Q&AAll Speakers
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Safe Harbor 4 This presentation and accompanying oral presentation contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,ˮ “believe,ˮ “contemplate,ˮ “continue,ˮ “could,ˮ “estimate,ˮ “expect,ˮ “intend,ˮ “may,ˮ “plan,ˮ “potential,ˮ “predict,ˮ “project,ˮ “should,ˮ “target,ˮ “willˮ or “wouldˮ or the negative of these words or other similar terms or expressions.The forward-looking statements contained in this presentation and accompanying oral presentationare subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. Further information on these and additional risks, uncertainties, assumptions and other factors that could cause actual results or outcomes to differ materially from those included in or contemplated by the forward-looking statements contained in this presentation and accompanying oral presentationare included under the caption “Risk Factorsˮ and elsewhere in our Annual Report on Form 10K for the year ended December 31, 2024 filed with the Securities and Exchange Commission SEC) on February 25, 2025, and subsequent filings and reports we make with the SEC.We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this presentation and accompanying oral presentation. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur. The forward-looking statements made in this presentation relate only to events as of the date on which the statements are made. Readers are cautioned not to put undue reliance on forward-looking statements, and we assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result ofnew information, future events, or otherwise, unless required by law.This presentation includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties as well as our own estimates of potential market opportunities. All ofthe market data used involves a number ofassumptions and limitations, and you are cautioned not to give undue weight to such data, industry publications and third-partyresearch, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions. In addition to the financial information presented in accordance with U.S. generally accepted accounting principles GAAP, thispresentation and accompanying oral presentation includes certainnon-GAAP financial measures. These measures are presented for supplemental informational purposes only, have limitations as analytical tools andshould not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Our calculations of each of these measures may differ from the calculations of measures with the same or similar titles by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results.A reconciliation of non-GAAP measures to the most directly comparable GAAP measures are included in the Appendix to this presentation and can be found in our filings with the SEC.We have not provided the forward-looking GAAP equivalents for certain forward-looking non-GAAP measures presented in this presentation or the accompanying oral presentation, or a GAAP reconciliation, as a result ofthe uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense. Accordingly, a reconciliation of these non-GAAP guidance metrics to their corresponding forward-looking GAAP equivalents is not available without unreasonable effort. However, it is important to note that material changestoreconciling items could have a significant effect on future GAAP results.
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Started by serving the DigitalNative Ecosystem1Started with the value proposition of simplicity, startup friendly business model, &customer obsession2Targeted developers & startups with Product Led Growth 3Scaled to Digital Native Enterpriseswithnew product capabilities and GTM motions4Successfully harnessed market andtechnology shifts5 6 Scaled to Digital Native Enterpriseswithnew product capabilities and GTM motions4Successfully harnessed market andtechnology shifts5
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 7
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8 Cloud runs the world
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9 …but the cloud has left some customers behind
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10 complex Cloud can be too
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expensiveCloud can be too 11
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12 intimidating Cloud can be too
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13 AI …. and there is one thing that is More complexMore expensiveMore intimidating
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Our mission is to simplify cloud and AI so builders can spend more time creating softwarethat changes the world 14
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$820MARR 17%Adjusted free cash flow margin 17 data centersand growing 638k+ Customers across 190 countries 165kDigital Native Enterprise customers 3MActive Developers on the DO Platform 15 Notes: Financial and customer data as of Q4 2024; See Appendix for definition of annual run-rate revenue ARR; Customers across 190 countries based on customer count forourLearners, Builders, Scalers and Scalers+ customer categories; Digital Native Enterprise customers based on ourHigher Spend Customers; Active Developer count is the unique count of users who signed in to the console, performed an action in the console, or used the API over the last 24 months. See Appendix for definitions.
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Large and growing market 16 $400Bin 2025, growing 23%1 AIEXPANSION AIEXPANSION NONTECH ENTERPRISESDIGITAL NATIVESDO Focus Medium enterprises Individuals & Small enterprises $140B$260B Public Cloud Market Large enterprises 1IDC Software and Public Cloud Services Spending Guide Feb 20252DNE Count & Segmentation estimated based on ZoomInfo cloud spend estimates 4M Digital Native Enterprises2 Our focus is on: $140BDigital Native Enterprises2 165KDNEs on DO
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Public Cloud –Market Needs 17 Cloud is an IT Enabler Opex Cloud is a mission critical product enablerCOGS NONTECH ENTERPRISESDIGITAL NATIVESDO Focus Public Cloud Market Technology spend is ~5% of revenue1and typically managed by IT / CIOs Traditional EnterprisesDigital Native Enterprises Technology spend is 1/3 of expenses2, driven by business units 1Traditional IT spend estimated based on IDCʼs Tech Buyer Survey Spotlight: Debunking the Myth of IT Spending as a Percentage ofRevenue Mar 20242DNE spend estimated based on IDC's 2024 Digital-Native Business Trends Feb 2024
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Unmet needs of Digital Native Enterprises 18 Scalable, full featured cloud with enterprise-grade SLAs for mission critical products Scalable Trusted cloud partner without a walled garden, offering transparent costs, 247 support, and an open ecosystem Approachable Unmet need Simple cloud lifecycle management for lean teams without heavy DevOps, CloudOps, or FinOps resources Simple
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Addressing the needs of the Digital Native Enterprises 19
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$100K ARR Customers 431 504 Q4 23Q4 24 17%$500K ARR Customers 4864 Q4 23Q4 24 33%$1M ARR Customers 1425 Q4 2 3Q4 2 4 79% Increasing traction with largerDigital Native Enterprises Note: $100k+ ARR Customers based onScalers+ customer category, which also includes $500k+ ARR customers and $1M ARR customers. See Appendix for definitions.20 37% YoYARR Growth61% YoYARR Growth92% YoYARR Growth
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 22
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Refreshed management team Paddy Srinivasan Chief Executive Officer Bratin Saha Chief Product and Technology Officer Larry DʼAngelo Chief Revenue Officer Wade WegnerChief Ecosystem and Growth Officer 23 Matt Steinfort Chief Financial Officer
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24 Continued reacceleration of growth Revenue Growth Customer ExpansionCustomer Acquisition The two contributing pillars are Product and GTM
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Product is the foundation Address needs of larger customers Core Cloud Inferencing Cloud GenAI Platform AI Agents AI 25
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Core Cloud Innovation Multi-cloud support Network File Systems Enterprise SLAs Advanced networking configurations Higher performance databases, storage & Managed Hosting Public Cloud Market NONTECH ENTERPRISESDIGITAL NATIVES Medium enterprises Individuals & Small enterprises Large enterprises 45%Adoption with $100k+ ARR Core DO customers1 Past Focus Current Focus 261 Adoption of Q3 2024 Core DO new features on Core DO Scaler+ accounts by the end of Q4 2024
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Medium enterprises 10xNONTECH ENTERPRISESDIGITAL NATIVESIndividuals & Small enterprises 27 Public Cloud MarketAI is going to be in every software application DO's customers are mostly consuming AI in their software (inference) vs building new LLM models (training) Many more enterprises will need inference vs trainingBUILDERSof AI models USERSof AI Models Large enterprises xTRAINING INFERENCE AI Everywhere
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28 DigitalOcean AI Cloud InfrastructureGPUStorageNetwork Inferencing Infrastructure Platform GenAI Platform Applications VersioningLLM RoutingVector DBGuardrailsEvaluations App UX AgentsWorkflowsDevtoolsMarketplaceControl PaneAgentic Apps TRAININGEpisodicINFERENCINGContinuous ServerlessNetworkGPU StorageCPUDatabases
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Learners Builders Scalers Scalers+ PLG Customer Acquisition Product Led Growth PLG) to acquire, nurture and grow customers Note: See Appendix for definitions of our Testers, Learners, Builders, Scalers and Scalers+ customer categories.30 TestersSign-upsUnique visitors PLG Customer Expansion
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Adding new customer acquisition motions 31 Testers60k+monthly active accounts Sign-ups150Kper month Unique visitors4M per month World-class PLG20%of 2024 new customer revenue came from non-PLG channels Technology partnersOutbound sales for AIChannel partners
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Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Enhancing how we grow our base Note: See Appendix for net dollar retention NDR) definition.32 Named account expansionMigration teamPropensity based farming 1800 bpsNDR of $100K+ customers in 2024
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 33
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We manage to a Weighted Rule of 40 34 1 pt. Revenue Growth1 pt. Adjusted FCF Margin 3Xvaluable
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27.7%WeightedRule of 40 202435%WeightedRule of 40 2027E12.7%Revenue Growth 17.3%AdjustedFCF Margin 1820%Revenue Growth Mid-teensAdjusted FCF Margin 40%WeightedRule of 40 20%Revenue Growth High-teensAdjusted FCFMargin Managing business over long-term to 40% Weighted Rule of 40 35 2027 Note: See Appendix for Weighted Rule of 40 definition.
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 36
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37 DevOpsCloudOpsFinOps
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOceanprovides a durable 30%+ lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 39
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOceanprovides a durable 30%+ lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 40
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41 complexCloud can be too expensiveintimidatingfor many customers
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Hyperscalerusage requires thousands of decisions Storage IP addressBandwidth Compute DigitalOcean Droplet: 1 click setup DigitalOceancustomers donʼt need dedicated CloudOps42
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DigitalOcean Simpler & more approachable Hyperscalers User builds their computer 43
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Hyper scale begets hyper complexity Notes: IDC Software and Public Cloud Services Spending Guide Feb 2025; Goldman Sachs; Segmentation estimated based on ZoomInfocloud spend estimates. 44 NONTECH ENTERPRISESDIGITAL NATIVESDO Focus Medium enterprises Individuals & Small enterprises Public Cloud Market Large enterprises Digital native focus avoids IT sprawl complexity Require building blocks to support IT sprawl of large enterprises Customer segment enables DigitalOceanʼsdurable differentiation
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Hyperscalers1 DigitalOcean 451AWS data transfer cost based on Duckbillgroup. Product complexity begets costcomplexity
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46 DigitalOceancustomers donʼt need dedicated FinOps HyperscalerDigitalOceanNumerous componentsVariableIncremental SimpleFlatPredictable
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CostComplexity 47 Hyper scale begets highTCO HighFinOps costs ProductComplexity HighCloudOps costs Hyper scale
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Cloud customers cite TCO as #1 problem 48 70%of companies needa FinOps teamto optimize cloud spend 71%Optimizing existing use of cloud58%Migrating more workloads to cloud48%Progressing on a cloud-first strategy44%Better financial reporting on cloud costs Top Cloud Problems Note: Based on Flexera State of the Cloud Report 2024 for SMB and Enterprise companies published in March 2024. Reportindicatesthat51% of companies have a FinOps team with an additional 20% planning to form one in the next 12 months.
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Payback period in migratingfrom hyperscalers6 months DigitalOceanreduces TCO by 30% Notes: Based on Forrester Total Economic Impact™study commissioned by DigitalOcean, 2022. Annual TCO saving is calculated from year 2 by comparing TCO on hyperscalervs the TCO on DO. Customers such as Nobid, Picap, Meiro, and Eglogicshave reported 30%+ reduction in TCO with DigitalOceanservices. 49 BenefitsSavings over HyperscalersLower infrastructure cost 16%Increased productivity 5%Savings on dedicated CloudOps/FinOps10%Cumulative31%
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOceanprovides a durable 30%+ lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 51
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Product velocity increased 5X Yo Y 1Three features out of 56 were launched on April 1 as a result of a code freeze instituted on March 27 due to Investor Day preparation which will be counted asQ2 features in the earnings report.52 Known causes of customer churn addressed by Q2ʼ25 More enterprise features in H2ʼ25 and beyond Rapid innovation without increasingR&D cost10 304249561 20 24 -Q120 24 -Q220 24 -Q320 24 -Q420 25 -Q1 Number of features launched
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Enterprise experience:database performance4.5 3.163 0.67 Dig italOceanGC PAWSAzure 40,768 30,81127,28820,960 Dig italOceanAWSGC PAzure DO outperforms the nearest hyperscalerby 30% DO outperforms the nearest hyperscalerby 42% SeveralPaaS (data cloud)innovations launching this yearNotes: We used a popular open-source database benchmark for online transactions OLTP) called Sysbench. The benchmark creates a database of 80 million rows (approx16GB size), such that the database fits entirely in memory. In this configuration, same for all providers, all reads queries are served from memory and writes go to storage. RW ratio for operations is 72. The database is created using managed MySQL services for each cloud provider with the same host configuration of 8vCPU, 32GB memory and 190 GB solid-state storage. The benchmark client executes on a separate client host in the same data center as the database host. We ran 2 iterations on separate days. Throughput/Sec Higher is better)Throughput/$ Higher is better) 53
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DigitalOcean: HyperscalerSLA at 30% lower cost Notes: this table compares DigitalOcean'savailability to a hyperscaler'sSLA to show that DigitalOceanis now in a position to provide a similar SLA. The actual SLAs and timing will be decided later.1 DigitalOceanmetrics snapshot was taken on March 31, 2025. 2 AWS SLA data is sourced from the official AWS website using their single instance availability metric. DigitalOceanProductDBaaS MongoDB AWSProductDocumentDB DigitalOceanlast 30 days availability1AWSSLA2 99.97%99.9%DropletEC2 Instances)99.99%99.5%DOKSEKS99.99%99.95%Load BalancersELB Single99.99%99.9%SpacesS3 Standard)99.99%99.9%VolumesEBS Volume99.99%99.9% AI driven optimization reduced service downtimeby 3.5XYoY 54
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H2 revenue from featureslaunched in 202427% of the incremental Q4 revenue came from new features NDR Increased from 97% to 99% 198205 20 24 -Q320 24 -Q420 25 -Q1E Revenue (in $M) 55 New features:3.3%of quarterly revenue New features:4.1%of quarterly revenue New features:4.1%of forecasted quarterly revenue
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOceanprovides a durable 30%+ lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 56
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Evolution of transformational technologies 57 Application Platform Infrastructure Internet Internet Internet PC PC PC Smartphone Smartphone Smartphone Gen AI Apps/Agents Agentic Platform GPU Gen AI Apps/Agents Agentic Platform GPU Infra Agents will create effect in AII P A
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Agents will automate human work 58 Quality/Cost of AI improvingexponentially YoYTypical customer support interaction today Human agent: $31AI agent: $0.012 Every digital native enterprise will need to reinvent themselves with agents 1Based onU.S. average customer service salary of $20/hrfor a 10-minute call.2Based on agent pricing of $1 per million tokens.
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Agents will drive cloud TAM expansion 59 $329BITAnnual Salaries$200BHR Annual Salaries $1100BSales & MarketingAnnual Salaries… Agents will drive cloud spend of tens of billions of dollars Human salaries make up the Agentic AI TAM Note: Annual salaries sources: Turing, Statista, ZipRecruiter
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Understanding agents 60 Understand language commands Perform the actions Acquire information to do the job Plan actions to do the job 1 2 4 3
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Agents building blocks 61 Understand language commands Perform the actions Acquire information to do the job Plan actions to dothe job 1 2 4 3 Language Model SW orchestration code Process dataRetrieve data from datastore SW application logicPlanning Model
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Understand language commands Perform the actions Acquire information to do the job Plan actions to do the job Agents infrastructure requirements 62 1 2 4 3 Language Model SW orchestration code GPU CPU Process dataRetrieve data from datastore SW application logicPlanning Model Database and StorageCPU CPUGPU
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CPU, GPU, storage, database, and other application infrastructure colocatedfor maximum efficiency Agents datacenter requirement 63 GPU GPUCPUCPU CPUDatabase and Storage Agents will drive lots ofGPU inference >> 10Xtraining
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64 InfrastructureGPUStorageNetwork Inferencing Infrastructure Platform GenAI Platform Applications VersioningLLM RoutingVector DBGuardrailsEvaluations App UX AgentsWorkflowsDevtoolsMarketplaceControl PaneAgentic Apps TRAININGEpisodicINFERENCINGContinuous ServerlessNetworkGPU StorageCPUDatabases Puck moving that way
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DigitalOcean is well positioned for where AI is headed 65 Niche CloudsGPU, Neo, Edge, Network) Multiple ill-suited for Agentic inference Hops Data center hosting apps GPU Inference well-suited for Agentic inference GPU Inference
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DigitalOcean GenAI Infrastructure 66 GPUCPUObjectStorage DO GenAIInfrastructure GPU Purpose builtinference fleet for Agents Up to80% lower TCO for inference1 GenAI Infrastructure is a lot more than GPUs DigitalOcean GenAI Infrastructure SoftwareVector databaseSearch IndexServerlessHigh performance database 1Based on comparison ofthe AWS P5.48xlarge H100) instance pricing in the US East region, using the publicly available AWS Pricing Calculator, against DigitalOceanʼsH100 instance pricing for 1-year terms.
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GPUCPUObject Storage DO GenAIInfrastructure GPU DigitalOcean GenAI Infrastructure SoftwareVector databaseSearch IndexServerlessHigh performance database DigitalOcean GenAI Infrastructure Software DigitalOcean GenAI Platform 67 DO GenAIPlatformDO GenAI PlatformMistral LLM Multi-agent routing Knowledge Bases Deepseek LLM Guardrails Function calling Llama LLM Public and private endpoints Agent evaluations Agent insights Agent versioning OpenAI client compatibility Serverless inferencing1 click agent setupOpenAI LLMAnthropic LLM Significant DigitalOceaninnovation on top of GPUs and LLMs The list includes features launching in Q2 2025.
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DigitalOcean GenAI Platform is differentiated 68 GPU 2X better gross margin $1 of GPU revenue drives $1 of other revenue GPU 3X better payback period DO GenAI platform economicsCompared to AWS Bedrock1 •Takes 50%less time to build agents •10%better accuracy on text, tabular data and images•55% more content types handled 1Internal benchmark study conducted in Q1 2025 across representative agent-building workloads using AWS Bedrock and leading alternatives. Time-to-build was measured for creating an Agent with Knowledge Base. Accuracy was evaluated using independent public data sets with domain-specific tasks for searching across text, tabular, graphical, and multimodal data. Results showed DO GenAIPlatform outperformed Bedrock by 2.3% on graphical accuracy, 19.6% on text accuracy,and 15.4% on tabular accuracy for an overall average accuracy performance greater than 10%.
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DigitalOcean GenAI Platform: Customer use cases 69 Other Specialized Agents Customer Support Business Analysis•Analyze financial documents •Sales and marketing data•Customer reviews and feedback•Business metrics and KPIs Coding & Development In just 8 weeks…2,000 Customers6,000Agents •Question answering systems•Help desk assistants•Technical support representatives •Software development across multiple languages•Multilingual developer support •Specialized technical guidance for specific programming frameworks •Recruitment & Talent Matching•Domain-specific Product Experts•E-commerce sales & Order Processing•JSON/Structured Output Generators•Language-Specific Educational Tutors
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOceanprovides a durable 30%+ lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 71
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Fundamental paradigm shifts 72 Natural language and agents will disrupt Softwareand Cloud Natural languageas code 1 Agentsautomating human work 2
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Cloudways agent: reinventing webhosting 741Customers have to debug up to one issue per week, spend an hour each, and assuming $50/hrsalary. DO EfficiencyDO gets 300,000 hoursof support contactsa year thatmaybe automated away Highly differentiated productNatural language will be the interface for the next generation of products New revenue streamDevelopers spend up to $200/month1on application maintenanceDO will monetize Cloudways agents through a paid offering
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75 DO.Next: Where we are headed New revenue streamfor DigitalOcean Doubling downon our DNA of simplifying the cloud experience Differentiated AI value for customers Unlike hyperscalers, our customer workflows are a good fitfor DO.Next
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Cost optimizations 1Internal measurement comparing developers with and without GenAIusage. Reducing cost per head •India R&D center opened Mar 25•50% of new hires in low-cost geos•Coding 40% improvement1•Operations 37% improvement•Prolong asset life using AI 240 bps)•Datacenter optimizations 110 bps) Continue to optimize costs in ‘26 and beyond Improving productivity with AIGross margin improvements 76
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Key takeaways …All while optimizingour cost structure Rapid product innovation accelerating revenue growth in the core DigitalOcean cloud AIʼs move to Agents is well aligned with DigitalOceanʼscore strengths enabling a differentiated AI offering DigitalOcean provides a durable 30% lower TCO than hyperscalers DO.Nextwill reinvent the cloud through a highly differentiated developer experience 231 4 77
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Named account management will drive 57% growth from customer expansion Will remainhighly efficientas we scale Key takeaways Augment world-class PLG funnel to drive 13% growth from customer acquisition 2 31 79
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Durable and highly efficient Product Led Growth engine 2.2Magic Number7%S&M as % of Revenue$97MARR13%Revenue Growth Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Testers60k+monthly active accounts Sign-ups150Kper month Unique visitors4M per month 80Notes: All data as ofQ4 2024; See Appendix for Magic Number calculation methodology; S&M as % of revenue is Non-GAAP. SeeAppendix for definitions and reconciliations.
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Being top of mind in the developer community powers customer acquisition Testers60k+monthly active accounts Sign-ups150Kper month Unique visitors4M per month 37M annual visits to our community hub featuring 8,000technical tutorialsHacktoberfestpositions us as a leading voice in open source, engaging65K developers annually across171countriesTop 3in Share of Voice, consistently winning against hyperscalersStack Overflow 2024 Developer Survey shows 12%of developers actively use DO today 81
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Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Our PLG engine helps drive organic customer expansionFull product stack of simple,scalableIaaS, PaaS, and AI solutions thatmeet growing customer needs Dedicated support gives customers comfort & support over their mission critical infrastructure Consumption based pricing makes cloud approachable -customers pay only for what they useCompelling TCO enables customers to invest in their own enterprise growth 82
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Result is large and growing customer base Note: Total Monthly Customers based onLearners, Builders, Scalers and Scalers+ customer count as of the fourth quarter of each period presented. See Appendix for definitions. Total Monthly Customers 000s17% Number of Higher Spend Customers $600 ARR 000s 98 165 20 21 20 24 68% 272 504 20 21 20 24 Number of Scalers+ $100K ARR Customers85%544 638 20 2120 24 3rdLargestCloud 83
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Focused on growing our Higher Spend Customers Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customersHigher Spend Customers make up88%of revenue and are growing at16% 84Note: Percentages based on Q424 quarterly results and year-over-year changes.
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The bigger customers get, the stickier they become 1Financial data for Q4 2024.Note: See Appendix for definitions ofChurn and Net Expansion.85 7%12% 37% BuildersScalersScalers+ YoY Revenue Growt h1 98% 100%101% BuildersScalersScalers+ Net Dollar Retention Average Products3.05.06.5Annual Churn13%7%4%Annual Net Expansion11%6%5%
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2022-122023-012023-022023-032023-042023-052023-062023-072023-082023-092023-102023-112023-122024-012024-022024-032024-042024-052024-062024-072024-082024-092024-102024-112024-12 Strong track record of scaling with our customers 86 1357911131517192123252729313335373941434547495153555759616365676971Jan 2020 Dec 2024 $1.0MARR $606K ARR Dec 2024Dec 2022 $520KARR 2022-122023-012023-022023-032023-042023-052023-062023-072023-082023-092023-102023-112023-122024-012024-022024-032024-042024-052024-062024-072024-082024-092024-102024-112024-12Dec 2024Dec 2022 $177KARR 11 / 1/ 2212 / 1/ 221/ 1/ 232/ 1/ 233/ 1/ 234/ 1/ 235/ 1/ 236/ 1/ 237/ 1/ 238/ 1/ 239/ 1/ 2310 / 1/ 2311 / 1/ 2312 / 1/ 231/ 1/ 242/ 1/ 243/ 1/ 244/ 1/ 245/ 1/ 246/ 1/ 247/ 1/ 248/ 1/ 249/ 1/ 2410 / 1/ 2411 / 1/ 2412 / 1/ 24Nov 2022 Dec 2024
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88 Continued reacceleration of growth 2027E Revenue Growth 57%Customer Expansion1820%Target13%Customer Acquisition The two contributing pillars are Product and GTM
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Augment world-class PLG funnel to drive 13% growth from customer acquisition Named account management drives 57% growth from customer expansion Will remainhighly efficientas we scale Key takeaways2 3 89 1
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How weʼre driving growth: Acquisition Testers60k+monthly active accounts Sign-ups150Kper month Unique visitors4M per month Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Technology partners2World-class PLG funnel1 Channel partners4Outbound sales for AI 3 90
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Continued improvements to world-class PLG funnel 91 Optimized Acquisition Deepen focus on high-LTV enterprise customers Scale strategic partnerships (Hugging Face, Laravel) Optimize SEM targeting for maximum ROI Content & CommunityAdd AI-focused technical content Expand social media presence Increase live-streamed coding sessions Events & Outreach Revitalize global community meetups Target strategic presence at key industry events Expand workshops and webinars
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Technology partners open new front doors Deploy powerful, leading AI models in just minutes on DO with 1Click GPU DropletsSeamlessly deploy Laravel, one of the most popular PHP frameworks, on DO Hugging Face380 millioncommunity downloads Laravel8 millionAI Builders> 1,500,000publicmodels and > 200,000organizations> 5,000 active accountson DO through Forge 92
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Leverage partners whoprovide complementary AI/ML offerings New logo acquisition team drives AI growth 93 Spun up first outbound sales team in 2024 Drove 160% ARR growth in Q4 2024Lean team of outbound sales reps, focused on AITarget early-stage seed and venture backed companies
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Channel partners bring in new Scalers+ 94 Partners resell DigitalOcean offerings and provide complementary services on top of ourinfrastructure 9 new Scaler+ customers added through channel partners in 3 months since launch
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Adding new customer acquisition motions 95 Testers60k+monthly active accounts Sign-ups150Kper month Unique visitors4M per month World-class PLG20%of 2024 new customer revenue came from non-PLG channels Technology partnersOutbound sales for AIChannel partners
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Efforts are paying off with accelerating growth from new customers 96 YoY Growth in Revenue from Customers within their first 12 months 24.2% 9.3% Jan 2023 Dec 2024
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Named account management drives 57% growth from customer expansion Will remain highly efficientas we scale Key takeaways Augment world-class PLG funnel to drive 13% growth from customeracquisition 2 31 97
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How weʼre driving growth: Expansion Testers60k+ monthly active accounts Sign-ups150Kper month Unique visitors4M per month Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Farm unassigned accounts3 2Migration team Expand named accounts 1 98
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Assigned coverage for top 8,000 ScalersNamed Accounts Coverage Impact: 120 bps NDR increaseAug to Dec 2024 from net expansion on namedaccounts Increasing account coverage as we optimize the model Leveraging "propensity to spend" models to prioritize additional coverage in next 5,000 accounts Extended coverage to top 3,000 accounts by revenue8,000Q1 2025 Technical Account ManagersGrowth Account Managers1,5003,000Q1 2025 4501H 2024 2H 2024 99 Note: Number of named accounts based on internal estimates.
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Migration team to seamlessly move Hyperscalerworkloads to DO 100 30% costsavingsLower TCOFree hands-onmigration servicesDedicated premium support
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Farming the base for the next Scalers+ 102 Models help identify the highest propensity to grow,turning Builders intoScalers Models + many more AttachSSH keyWorkloadsophisticationSpeed to adopt new features and products Alerts signal increased spend potential: Alerts Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers
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Learners$0$600 ARR | 450k+ customers Builders$600$6k ARR |147k customers Scalers$6k -$100k ARR |18k customers Scalers+ $100k+ ARR | 500+ customers Enhancing how we grow our base 103 Named account expansionMigration teamUnassigned accounts farming 1800 bpsNDR of Scalers+ in 2024
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Efforts are reaccelerating Scalers+ growth Enabling their growth via new productsand increased engagementacross our GTM teams 37%ARR growth of Scalers+ in Q4 of 2024 104 Scalers+ NDR Scalers+ Net Expansion increased from 10.6%to8% over the past 12 months Jan 24Feb 24Mar 24Apr 24May 24Jun 24Jul 24Aug 24Sep 24Oct 24Nov 24Dec 24 VPC PeeringGlobal LoadBalancer84% 102% InternalLoadBalancerDropletAutoscalePools Premium Storage &Memory OptimizedDropletsDailyBackups RBACStandardRoles Note: Scalers+ NDR includes Core DigitalOceancustomers only; this excludes Managed Hosting
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Named account management drives 57% growth from customerexpansion Will remain highly efficientas we scale Key takeaways Augment world-class PLG funnel to drive 13% growth from customer acquisition 2 31 105
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Will remain highly efficient as we scale 106 Acquisition Motions Expansion Motions Adding $100M in incremental ARR in 2025Adding 20 roles in 2025, repurposing many others –Inside Sales drivenS&M remains 78%of revenue Will nail before we scale Will maintain best in class efficiency World-class PLG funnel1Technology partners2 Channel partners4New logo acquisition team 3 Expand named accounts1Migration team 2Farm unassigned accounts3 Note: S&M as % of revenueis Non-GAAP.See Appendix fordefinitions and reconciliations.
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Named account management drives 57% growth from customer expansion Will remain highly efficientas we scale Key takeaways Augment world-class PLG funnel to drive 13% growth from customer acquisition 2 31 107
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 110
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$820MQ4 2024 ARRwith large, diversified and growing customer base Financial strength with material growth potential Expanding margins, and cash flow, with 419% increase in non-GAAP EPSsince IPO (in millions) $429 $576 $693 $781 2021202220232024 Revenue 32%35%40%42% 2021202220232024 aEBITDAMargin $0.37 $0.91 $1.59 $1.92 2021202220232024 Non-GAAP EPS $25 M$78 M $156 M$135 M 2021202220232024 Adjusted Free Cash Flow and Margin 6%13% 22%17% 38% 28% 24% 10% Nor th Ame ricaEur opeAsiaROW by geographyRevenue22% 36%30% 12% Sc aler s+Sc aler sBuil dersLearners/Testers by cohortRevenue 111 Q4 2024 Q4 2024
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$820M ARR in Q4 2024 Durable, highly efficient growth engineWorld-class Product Led Growth engine driving13 points growth from new customersHighly efficient customer acquisition model with non-GAAP Sales & Marketingat 7% of revenueMaterial expansion opportunity with loyal customer base, low and steady 11% churnAI creates new growth vector, growing AI/ML ARR over 160% YoYin Q4 2024 DigitalOcean ARR 112Notes: Financials for2024, except as otherwise noted; We define new customers revenue as revenue from all customers that are intheir first 12 months on our platform.We define installed base revenue as revenue from all customers that are in their 13th or greater month on our platform. Q4 2012 Q4 2024Installed Base Re venueNew Cus tomers Revenu e
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Weighted Rule of 40 is North StarAccelerating revenue growth with disciplined investment27.7%WeightedRuleof 40 202412.7%Revenue growth 17.3%AdjustedFCF margin 113
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Reaffirming Q1 and 2025 guidance 114 Q1 2025E2025ERevenue$207209M$870890MRevenue Growth1213%11.514%aEBITDAMargin3840%3740%aFCFMargin 1618%Non-GAAP EPS$0.41$0.46$1.85$1.95 NA
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Compelling medium-term targets Note: See Appendix for definition of net leverage.115 Achieve35%weighted Rule of 40 by 2027 Sustain aEBITDAmargin at 40% and maintain mid-teensadjusted FCF marginReduce net leverage to 2.5x Drive Core DigitalOcean NDR 100%and get additional expansion from durable, recurring AI revenue Maintain 13% growth from new customer revenueDeliver 1820%top-line growth
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 116
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35%35% 11.514%1820% 20 2120 2220 2320 2420 25 E20 27 E GrowthLevers Customer AcquisitionCustomer ExpansionPric e IncreaseM&A Starts with re-accelerating organic growth Note: Organic Revenue Growth from Customer Acquisition and Customer Expansion excludes estimated impacts from M&A, Core DigitalOceancloud products' July 2022 price increase, and Managed Hosting products' April 2023 price increase117 20%13%
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$66 $71 $76 $96 20 2120 2220 2320 2420 25 E20 27 E Augmenting our durable customer acquisition engine Note: Organic Revenue Growth from Customer Acquisition and Customer Expansion excludes estimated impacts from M&A, Core DigitalOceancloud products' July 2022 price increase, and Managed Hosting products' April 2023 price increase118 Organic Revenue Growth from New Customers (in millions) % GrowthContribution21%17%13%14%1213%13% Product Drivers: Go-to-market Drivers: Outbound sales for AI World-class PLG funnelTechnical partnerships 26% Channel partnerships Provide hyperscalerSLAs at 30% lower cost Increased product velocity AI/ML products
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Re-invigorating expansion in the base Note: Organic Revenue Growth from Customer Acquisition and Customer Expansion excludes estimated impacts from M&A, Core DigitalOcean cloud products' July 2022 price increase, and Managed Hosting products' April 2023 price increase119 Product Drivers: Go-to-market Drivers: Farm unassigned accounts HyperscalerSLAs at 30% lower cost Increased product velocity Migration team (top 8K) Organic Revenue Growth from Existing Customers(in millions) % GrowthContribution14%7%6%2%01%57% $44 $31 $35$17 20 2120 2220 2320 2420 25 E20 27 E Expand named accounts (top 8K) AI/ML products
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Accelerating growth through new product & go-to-market motions 120 Go-to-market PLG funnel Launch -20232024 onwardPLG funnelTechnology partnersDirect salesChannel partners Product StrategyDeveloper focused product roadmapDigital Native Enterprises focused product roadmapAI/ML productsDO.NEXT
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Revenue growth algorithm 2027E 2025E Long term 1213%Customer Acquisition01%Customer Expansion11.514%Total 13%Customer Acquisition57%Customer Expansion1820%Total 20%Total 121
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 122
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Demonstrated ability todrive margin improvement 123 20212024Improvement aFCFMargin6%17% Non-GAAP Gross Margin61%62%aEBITDAMargin32%42%CapEx% of Revenue25%24%Stock-Based Compensation14%12%1,100 bps 100 bps1,000 bps100 bps200 bps
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Note: Other includes ancillary costs, revenue share programs, third-party license fees, personnel costs for data center employees, and certain other costs. Have further Cost of Revenue efficiency opportunities 124 Key Drivers: Utilization increases 38% 2024 Non-GAAP Cost of Revenue as % Revenue OtherBandwidth Depreciation Colocation & Power Data center optimization Supplier diversity Bandwidth consolidation
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Increasing mix of higher value-add services 125 Key Drivers Faster growing, higher value PaaS services Higher value Platform and Application layer AI GenAI& inferencing pull through of Core Cloud Core Cloud Revenue Mix AI/ML Revenue Mix PaaSIaaS2027E More Material Platform and ApplicationsLess Infrastructure+ Pull through Cloud revenue 2024 Some PlatformMaterial Infrastructure 6% YoY 30% YoY
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Ongoing operating leverage potential Note: Cost per employee includes cash compensation and related benefits.126 77% 23% 202142%58%2024 U.S. vs International Headcount InternationalU.S. OpExleverage will continue to be margin improvement driverActions to drive this leverage: Growth in lower cost talent markets Control overhead costs Deploy AI automationContinually rebalance investments towards growth Costper EmployeeNon-GAAP G&A as % of Revenue17%14% 20 2120 24 $174K$134K 20 2120 24
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Maintaining OpExwhile accelerating growth Note: Non-GAAP OpExfor fiscal year2021not previously disclosed.127 OpExPriorities: Focused investmentto accelerateproduct roadmap and launch new go-to-market motions Will continue to optimize OpExover medium-term Non-GAAP OpExas a percent of revenue 48%46%34%34% 20 2120 2220 2320 2420 25 E20 27 E R&DS&MG&A
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Healthy aEBITDAmargins 128 aEBITDAImprovement Drivers Revenue growth Gross margin expansion Mix shift to higher value-added productsOperating expense efficiencies 32%35% 40%42%40% 20 2120 2220 2320 2420 27 E aEBITDAMargin
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CapExsteady while investing to drive growth 129 25%21%18% 24% 202 1202 2202 3202 4202 5E202 7E CapExas % of Revenue Continued capital efficiency in Core Cloud Thoughtful AI investment to fuel growth
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Solid free cash flow growth 130 Increasing medium term investment, delivering mid-teens aFCFmargin to drive growthLong term, expect to return to high-teens aFCFmargin % Revenue6%13%22%17%Mid-teens $25 $78 $156$135 $0$2 0$4 0$6 0$8 0$1 00$1 20$1 40$1 60$1 80$2 00 202 1202 2202 3202 4 202 7E aFCF(in millions)
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Clear capital allocation priorities 131 Invest to driveORGANIC GROWTH ContinueSHARE REPURCHASES Keep dry powder for value accretive tuck-inACQUISITIONS and reducing leverageBALANCE SHEET FLEXIBILITY While maintaining
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132 Effectively managing equity and dilution Non-GAAP Weighted Average Shares Outstanding(in Millions)Stock Based Compensation% Revenue) 14%18%17%12% 2021202220232024 600 bps 13% $1.5B in repurchasessince IPO,largely offsetting dilutionMaterially reduced SBC as a percent of revenue 118118 105103 2021202220232024 Note: For the 2023 period stock-based compensation presented excludes$31.3 million reversal related to the former CEOʼs forfeited MRSU award as well as $3.9 million from restructuring related expense. See Appendix for details and for definitions.
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Any near-term M&A would accelerate our product roadmap Strategic considerations: Product roadmap accelerationTalent / technical capabilitiesCustomersGeographic reach Financial considerations: Revenue growthAdjusted FCF impactBuy vs. Build133
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On path to lower leverage Note: LQA = last quarter annualized; See Appendix for other definitions.134 Medium-term aspirations:Maintain balance sheet flexibilityFund organic growth and buybacksDrive net leverage to 2.5x by 2027 Net LeverageNet Debt / 4Q LQA aEBITDA 1.7 6.5 3.93.1 2.5X 20 2120 2220 2320 2420 25 E20 27 E2025E
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Maintaining balance sheet strength and flexibility 135 Key Termsof Existing Debt $1.5Bzero coupon convertible bond $179conversion price Due in December 2026 Likely to address 2026 convertible debt before itgoes current
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Driving attractive shareholder returns 136 aFCFMargin Revenue Growth Weighted Rule of 40 1820% 35% Mid-teens 2027E 11.514% 2530% 1618% 2025E 20% 40% High-teens Long term DriversEnhancing go-to-market motions that augment PLG Product innovation focused on larger customers AI/ML as material growth lever Cost of revenue optimization Driving further operating leverage as we scale Increasing mix of higher value-added products Continue to prioritize growth vs aFCFmarginWillingness to increase investment to drive durable, differentiated revenue growth
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Key takeaways Acceleratinggrowthwith product innovation & new GTM motions focused on our largest customers On path to 1820% growth by 2027 and targeting 40% Rule of 40 over the long term Compellingmarketposition servingthe unmet needs of Digital Native Enterprises inCloud & AI 2 31 137
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140 Customers
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DigitalOcean Customer Showcase GroupCustomers1 Autonoma2 NoBid3 Picap4 Scribe Instructions1.Check the back of your badge for your Group #2.Check the table below to see where you start3.Proceed to your customer booth What to Expect●Short presentation from each customer●Opportunity to ask questions●Rotate to the next booth after 10 minutes 141
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143 Appendix
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Key Business Metrics 144 We utilize the key metrics set forth below to help us evaluate our business and growth, identify trends, formulate financial projections and make strategic decisions. These metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, these metrics may differ from estimates published by third parties or from similarlytitled metrics of our competitors due to differences in methodology.Customer Count isthe average number of customers as of the last day of the month for each month in the most recent quarter. Customer Categories are based on the amount of customer spend in a given month and individual customers may fall within different categories within a reporting period:•Testers: users that spend less than or equal to $50 in a month and have been on our platform for three months or less.•Learners: users that spend less than or equal to $50 in a month and have been on our platform for more than three months.•Builders: users that spend more than $50 and less than or equal to $500 in a month.•Scalers: users that spend more than $500 and less than or equal to $8,333 in a month.•Scalers+: users that spend more than $8,333 in a month.Higher Spend Customerscomprise of the total customer count of our Builders, Scalers and Scalers+ customers.Average Revenue per Customer ARPU We calculate ARPU on a monthly basis as our total revenue from Learners, Builders, Scalers and Scalers+ in that period divided by the total number of Learners, Builders, Scalers and Scalers+ customers determined as of the last day of that month. For a quarterly or annual period, ARPU is determined as the weighted average monthly ARPU over such three or 12-month period.Annual Run-Rate ARR We calculate ARR by multiplying the revenue for the most recent quarter by four. For our ARR calculations, we include the total revenue from all customers, including Testers, Learners, Builders, Scalers, and Scalers+.Net Dollar Retention Rate NDR We calculate net dollar retention rate monthly by starting with the revenue from all customers, including Testers, Learners, Builders, Scalers and Scalers+ for our IaaS and PaaS/SaaS offerings during the corresponding month 12 months prior, or the Prior PeriodRevenue. We then calculate the revenue from these same customers as of the current month, or the Current Period Revenue, including any expansion and net of any contraction or attrition from these customers over the last 12 months. The calculation also includes revenue from customers that generated revenue before, but not in, the corresponding month 12 months prior, but subsequently generated revenue in the current month and are therefore reflected in the Current Period Revenue. We include this group of re-engaged customers in this calculation because some of our customers use our platform for projects that stop and start over time. We then divide the total Current Period Revenue by the total Prior Period Revenue to arrive at the net dollar retention rate for the relevant month. For a quarterly or annual period, the net dollar retention rate is determined as the average monthly net dollar retention rates over such three or 12-month period.
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Other Referenced Metrics 145 Weighted Rule of 40 We calculate weighted rule of 40 by summingour revenue growth rate and our adjusted free cash flow margin for an annual period.Revenue growth rate is weighted 1.5x and our adjusted free cash flow margin is weighted 0.5x.Net Leverage We calculate net leverage as Net Debt divided by Q4 adjusted EBITDA multiplied by 4, i.e. last quarter annualized. Net debt is calculated as Total debt less cash and cash equivalents. Churn We calculate churn as attrition attributable to our NDR. See prior slide for NDR definition.Net ExpansionWe calculate net expansion as expansion from existing NDR customers net of contraction from that same set of customers. See prior slide for NDR definition.Magic Number We calculate magic number as the annualized incremental quarterly revenue divided by prior quarter's Non-GAAP S&M spend.
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Non-GAAP Financial Measures 146 Adjusted EBITDAand Adjusted EBITDA Margin We define adjusted EBITDA as net income (loss) attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, acquisition related compensation, acquisition and integration related costs, income tax expense, loss on extinguishment of debt, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets,revaluation of warrants, release of VAT reserve, interest income and other income (expense), net. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue.Adjusted Free Cash Flowand Adjusted Free Cash Flow Margin We define adjusted free cash flow as net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, purchase of intangible assets, and excluding cash paid for restructuring and other charges, acquisition related compensation, restructuring related charges, and acquisition and integration related costs. Adjusted free cash flow margin iscalculated as adjusted free cash flow divided by total revenue.Non-GAAP Net Income and Non-GAAP Diluted Net Income per Share We define non-GAAP netincome as net (loss) income attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, loss on extinguishment of debt, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets,revaluation of warrants, release of VAT reserve, and other unusual or non-recurring transactions as they occur. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of our stock options, RSUs, PRSUs, and Convertible Notes.Non-GAAP Operating Expenses we define non-GAAP operating expensesas GAAP operating expenses, excludingstock-based compensation, acquisition related compensation, amortization of acquired intangible assets, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, and other unusual or non-recurring transactions as they occur.
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147 Adjusted EBITDA and Adjusted EBITDA Margin1 For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEOʼs forfeited MRSU award that is reported in Restructuring related charges, as well as $3.9 million that is reported in Restructuring and other charges.For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. 2 For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEOʼs forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs. For the year ended December 31, 2024, primarily consists of executive reorganization charges.3 Immediately prior to the IPO, all shares of the convertible preferred stock then outstanding automatically converted into shares of common stock, and the redeemable convertible preferred stock warrants automatically converted into common stock warrants. Therefore, as the warrants no longer permitted the holder to purchase redeemable shares of preferred stock, the warrant liability was remeasured and reclassified to Additional paid-in capital. The common stock warrants were fully exercised during the year ended December 31, 2021.4 Relates to the resolution of certain tax matters in certain jurisdictions with relevant authorities.5 For the year ended December 31, 2021, amounts are attributable to third-party consulting costs to enhance our finance function. For the years ended December 31, 2022, 2023 and 2024, primarily consists of interest and accretion income from our cash and cash equivalents and marketable securities.
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148 Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin 1 For the year ended December 31, 2023, primarily consists of salary continuation charges and executive reorganization charges, including CEO search firm fees and other legal and professional service costs. For the year ended December 31, 2024, primarily consists of executive reorganization charges.
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149 Non-GAAP Net Income 1 For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEOʼs forfeited MRSU award that is reported in Restructuring related charges, as well as $3.9 million that is reported in Restructuring and other charges, in the table above. For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. 2 For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEOʼs forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs. For the year ended December 31, 2024, primarily consists of executive reorganization charges. 3 Immediately prior to the IPO, all shares of the convertible preferred stock then outstanding automatically converted into shares of common stock, and the redeemable convertible preferred stock warrants automatically converted into common stock warrants. Therefore, as the warrants no longer permitted the holder to purchase redeemable shares of preferred stock, the warrant liability was remeasured and reclassified to Additional paid-in capital. The common stock warrants were fully exercised during the year ended December 31, 2021.4 Relates to the resolution of certain tax matters in certain jurisdictions with relevant authorities.5Prior to 2023, we calculated the income tax effects of non-GAAP adjustments based on the applicable statutory tax rate for the relevant jurisdiction, except for those items which were non-taxable or subject to valuation allowances for which the tax expense (benefit) was calculated at 0%. As a result, U.S. income tax effects of non-GAAP adjustments were subject to a valuation allowance and, therefore, were taxed at 0%.For the years ended December 31, 2023 and 2024, we used a tax rate of 17% and 16%, respectively, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2023 and 2024, respectively.6 Consists of non-cash interest expense for amortization of deferred financing fees related to the Convertible Notes.
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150 Non-GAAP Diluted Net Income Per Share 1 For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEOʼs forfeited MRSU award that is reported in Restructuring related charges, as well as $3.9 million that is reported in Restructuring and other charges, in the table above. For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. 2 For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEOʼs forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs. For the year ended December 31, 2024, primarily consists of executive reorganization charges. 3 Immediately prior to the IPO, all shares of the convertible preferred stock then outstanding automatically converted into shares of common stock, and the redeemable convertible preferred stock warrants automatically converted into common stock warrants. Therefore, as the warrants no longer permitted the holder to purchase redeemable shares of preferred stock, the warrant liability was remeasured and reclassified to Additional paid-in capital. The common stock warrants were fully exercised during the year ended December 31, 2021.4 Relates to the resolution of certain tax matters in certain jurisdictions with relevant authorities.5 Prior to 2023, we calculated the income tax effects of non-GAAP adjustments based on the applicable statutory tax rate for the relevant jurisdiction, except for those items which were non-taxable or subject to valuation allowances for which the tax expense (benefit) was calculated at 0%. As a result, U.S. income tax effects of non-GAAP adjustments were subject to a valuation allowance and, therefore, were taxed at 0%.For the years ended December 31, 2023 and 2024, we used a tax rate of 17% and 16%, respectively, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2023 and 2024, respectively. 6 Consists of non-cash interest expense for amortization of deferred financing fees related to the Convertible Notes.
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151 GAAP to Non-GAAP Operating Expenses1 Beginning in the first quarter of 2023, we redefined non-GAAP cost of revenue to include depreciation of our data center equipment. Results for the year ended December 31, 2021 have been recast to conform to current presentation.
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152 GAAP to Non-GAAP Operating Expenses (cont.) 1 For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEOʼsforfeited MRSU award that is reported in Restructuring related charges. For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges.2For the year ended December 31, 2023, non-GAAP stock-based compensation excludes $3.9 million, as it is presented in Restructuring and other charges.