DigitalOcean Holdings Inc.
11/03/2026 | Press release | Distributed by Public on 11/03/2026 07:56
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be considered together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, our audited consolidated financial statements and the related notes, and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. Actual results could differ materially from those discussed below.
Overview
DigitalOcean is an AI-Native Cloud, purpose-built for inference and agentic workloads, that brings infrastructure, core cloud services, inference, data, and agents together in one integrated stack that is open throughout, giving builders the best of the AI ecosystem in one place. The platform combines production-ready GPU infrastructure, a full-stack cloud, model-first inference workflows, and an agentic experience layer to reduce operational complexity and accelerate time to production. Our customers include growing technology companies across numerous industry verticals ranging from online gaming to fintech to cybersecurity, among many others, and leverage our platform for a wide variety of use cases, such as building and hosting websites, developing new web and mobile applications, integrating AI into their businesses, and building AI products and applications, among many others. We believe that being simple, scalable, and approachable, while offering a comprehensive range of integrated cloud and AI products, are our key differentiators, driving a broad range of customers around the world whose needs are not being fully met by larger cloud providers to build and grow their businesses on our platform.
We offer a comprehensive set of cloud platform capabilities which span across Infrastructure-as-a-Service ("IaaS"), including Droplet virtual machines, storage and networking offerings; Platform-as-a-Service ("PaaS") and Software-as-a-Service ("SaaS"), including Managed Hosting, Managed Database, Managed Kubernetes and Marketplace offerings. We also offer a comprehensive artificial intelligence and machine learning ("AI/ML") platform - DigitalOcean Gradient® AI Agentic Cloud, which includes Gradient AI Infrastructure with offerings such as GPU Droplets and Bare Metal GPUs; the Gradient AI Platform which offers various building block services including Large Language Models ("LLMs"); and Gradient AI Agents. We continue to invest in our platform to further penetrate the growing markets in which we operate.
We generate revenue primarily from the usage of our agentic inference cloud platform by our customers. We recognize revenue largely based on the customer utilization of our offerings. While our pricing is primarily consumption-based and the majority of our customers use our platform on a month-to-month basis, a growing number of customers are using our platform for larger workloads and some of these customers are opting to enter into committed contracts, committing to a minimum spend on our platform.
We serve a large number of customers that range in size from growing or scaled businesses that generate millions of dollars in revenue and serve millions of their own customers to individual developers testing or learning new technology for their own development. Thousands of new users come to DigitalOcean every month with some users intending only to utilize our platform for a discrete task, and other users are part of new or existing businesses that intend to operate their production and test workloads on our platform to support their business. Given the wide range of users and their associated spend, we classify customers based on their spend in a given month, which we have found to be a good proxy that distinguishes between casual users and substantial enterprise customers.
Our total customer count is represented by the number of Digital Native Enterprise ("DNE") Customers, which are users that spend more than $500 in a month. We further disaggregate our DNE Customers into the following categories - $100K+ Customers, $500K+ Customers and $1M+ Customers. See further discussion in "Digital Native Enterprise Customers" below.
Growing our DNE Customers is a critical focus for us, and we have successfully increased the number of these customers and their percentage of our total revenue. Revenue from our DNE Customers as a percentage of total revenue was 69% in the three months ended September 30, 2026, up from approximately 60% in the three months ended September 30, 2025. As of September 30, 2026, we had approximately 22,000 DNE Customers using our platform to build, deploy and scale applications, an increase from approximately 21,000 as of September 30, 2025.
We had no material customer concentration as our top 25 customers made up approximately 27% and 11% of our revenue in the three months ended September 30, 2026 and 2025, respectively.
Our annual run-rate revenue ("ARR") as of September 30, 2026 was $1,285 million, up from $919 million as of September 30, 2025. Our AI Customer ARR as of September 30, 2026 was $376 million, up from $97 million as of September 30, 2025. See further discussion in "ARR and AI Customer ARR" below.
We have a highly efficient self-service customer acquisition model, which we complement with a sales force focused on inside sales, targeted outside sales and partnership opportunities to drive revenue growth. The efficiency of our go-to-market model and our focus on the needs of growing technology enterprises have enabled us to drive organic growth and establish a truly global customer base across a broad range of industries. For the three months ended September 30, 2026 and 2025, our sales and marketing expense was approximately 8% and 9% of our revenue, respectively.
Our customers are spread across approximately 190 countries and around two-thirds of our revenue has historically come from customers located outside the United States. For the three months ended September 30, 2026, 49% of our revenue was generated from North America, 20% from Europe, 23% from Asia and 8% from the rest of the world.
Key Factors Affecting Our Performance
Increasing Usage by Our Existing Customers
Our existing customer base represents a significant opportunity for further sales expansion through increased usage of our platform and adoption of additional product offerings. We are highly focused on gaining a better understanding of the needs and growth plans of our existing customers, increasing our feature velocity and shaping our product roadmap around the needs of DNE Customers, and leveraging our account management function to provide more direct coverage of our top spending accounts. This deeper relationship with our customers is helping us to identify opportunities to educate our customer base on ways to utilize the platform more effectively for their individual use cases, as well as provide a feedback loop to inform our product roadmap, in order to build trust with customers and encourage them to run more of their critical cloud workloads on our platform. We expect to increase our revenue in the future from existing customers through the introduction of new products and features tailored to our DNE Customers through expanded customer outreach, and targeted services to support our customers in migrating additional workloads from other cloud providers to DigitalOcean.
Growing Our Base of AI-Native and Cloud-Native DNE Customers
We believe there is a substantial opportunity to further expand our customer base. We are investing in strategies that we believe will drive adoption by new AI-Native and Cloud-Native DNE Customers, a dedicated AI sales team with deep AI expertise to help prospective customers understand our offerings and the process to onboard onto our platform, marketing initiatives that further optimize our self-service revenue funnel to identify potential DNE Customers, enhanced research and development to build our product roadmap around the needs of DNE Customers, and the expansion of our migration services team to support additional migrations to our platform from other cloud providers.
Investing in Our Platform and Product Offerings
We have a history of, and will continue to invest significantly in, delivering innovative products, features and functionality for our DNE Customers. Our product strategy is anchored in addressing the needs of our DNE Customers and other digital native enterprises and on continuously innovating to meet those needs in a simple, scalable and approachable way. We have accelerated the pace of product innovation and made disciplined investments to expand our offerings for our IaaS and PaaS offerings, as well as our newer AI/ML offerings.
The market opportunity for our services continues to expand and we expect to make additional investments to offer an enhanced and tailored suite of IaaS, PaaS/SaaS and AI/ML offerings that address the changing needs of our customers.
Driving Increased Adoption Through Our Community Ecosystem
We attract a large number of developers to our website and platform, and we are committed to supporting and expanding this community of innovators and technologists by continuing to produce high-quality educational content and hosting developer-focused programs and events around the world. Supporting and educating the developer community is not only one of our values, but it also fosters brand loyalty, expands our customer base and drives increased adoption of our products.
Augmenting Our Platform through Strategic Partnerships and Acquisitions
In addition to organic growth, we believe that strategic partnerships and acquisitions will allow us to accelerate our key platform, product and marketing initiatives. In recent years, we completed acquisitions of Paperspace, which launched our AI/ML offerings, and Cloudways, which added our Managed Hosting offering to our platform. In addition, we have entered into partnerships to augment our product offerings. We intend to actively pursue both strategic partnerships and acquisitions that we believe will be complementary to our business, accelerate customer acquisition, increase usage of our platform and/or expand our product offerings in our core markets.
Macroeconomic and Geopolitical Conditions
Unfavorable conditions in the economy, both in the United States and abroad, could cause a decrease in business investments in information technology and negatively affect the growth of our business and our results of operations. These conditions include: changes in gross domestic product growth; inflationary pressures and high interest rates; supply chain disruptions; political and local opposition to data center infrastructure; financial and credit market fluctuations, volatility in the capital markets, and liquidity concerns at, or failures of, banks and other financial institutions; trade tension and the imposition, enforceability, or threatened imposition of tariffs, export controls, sanctions, and other trade restrictions or retaliatory actions for those measures by other countries; and geopolitical conditions, including ongoing military conflicts
involving Russia, Ukraine, Iran, and the Middle East, political turmoil, political instability or transitions of power in regions where we operate, potential shutdowns of the U.S. federal government, natural catastrophes, and outbreaks of contagious diseases.
We will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and our results of operations. The implications of macroeconomic and geopolitical conditions on our business, results of operations, and overall financial position remain uncertain.
Key Business Metrics
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. We are not aware of any uniform standards for calculating these key metrics, and other companies may not calculate similarly titled metrics in a consistent manner, which may hinder comparability.
___________
| Three Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
|
Digital Native Enterprise Customers(1)
|
22,374 | 20,825 | |||||||||
|
$100K+ Customers(1)
|
655 | 590 | |||||||||
|
$500K+ Customers(1)
|
100 | 68 | |||||||||
|
$1M+ Customers(1)
|
51 | 26 | |||||||||
| ARR (in millions) | $ | 1,285 | $ | 919 | |||||||
|
AI Customer ARR (in millions)
|
$ | 376 | $ | 97 | |||||||
(1)Customer count. Beginning in the fourth quarter of 2025, we redefined our total customer count, customer categories naming and disaggregation, and excluded the number of customers using certain legacy Bare Metal CPU offerings. Prior periods have been recast to reflect the effects of such changes.
Digital Native Enterprise Customers
We refer to customers spending more than $500 in a given month collectively as our Digital Native Enterprise ("DNE") Customers. We believe the total number of our DNE Customers is an important indicator of the growth of our business and future revenue opportunity, and the trends relating to our $100K+ Customers, $500K+ Customers and $1M+ Customers are of particular importance to us as these customers comprise a significant majority of our revenue and revenue growth, and are representative of the Cloud-Native and AI-Native DNEs that have scaled on our platform.
We calculate customer count as the average number of customers as of the last day of the month for each month in the most recent quarter. Customers are classified in the following categories based on the amount of their spend in a given month and individual customers may fall within different categories within a reporting period (customer spend in a month in whole dollars):
•DNE Customers: users that spend more than $500 in a month.
•$100K+ Customers: users that spend more than $8,333 in a month.
•$500K+ Customers: users that spend more than $41,667 in a month.
•$1M+ Customers: users that spend more than $83,333 in a month.
ARR and AI Customer ARR
Given the recurring nature of our business, we view ARR as an important indicator of our current progress towards meeting our revenue targets and projected growth rate going forward. We calculate ARR by multiplying total revenue for the most recent quarter by four.
We view AI Customer ARR as an important indicator of our growth in customers using AI-related products across our AI-Native Cloud and a key driver of our revenue targets and projected growth rate going forward.
We calculate AI Customer ARR by multiplying total AI Customer Revenue for the most recent quarter by four. AI Customer Revenue is defined as the total revenue generated from customers who utilize one or more of our AI/ML offerings, inclusive of their revenue from our IaaS and PaaS/SaaS offerings during the period.
Components of Results of Operations
Revenue
We offer a comprehensive set of cloud platform capabilities which span across IaaS, including Droplet virtual machines, storage and networking offerings; PaaS and SaaS, including Managed Hosting, Managed Database, Managed Kubernetes and Marketplace offerings. We also offer a comprehensive AI/ML platform - DigitalOcean Gradient® AI Agentic Cloud, which includes Gradient AI Infrastructure with offerings such as GPU Droplets and Bare Metal GPUs; the Gradient AI Platform which offers various building block services including LLMs; and Gradient AI Agents. We continue to invest in our platform to further penetrate the growing markets in which we operate.
We may offer sales incentives in the form of promotional and referral credits and grant credits to encourage customers to use our services. These types of promotional and referral credits typically expire in two months or less if not used. For credits earned with a purchase, they are recorded as contract liabilities when earned and recognized at the earlier of redemption or expiration. The majority of credits are redeemed in the month they are earned.
Cost of Revenue
Cost of revenue consists primarily of fees related to operating our data center facilities, personnel costs of our employees providing customer support or operating our facilities, and partnership expenses. Cost of revenue includes depreciation of our data center equipment and amortization of acquired technology and capitalized internal-use software development costs. Data center facility fees include data center rental fees, power costs, maintenance fees, network, bandwidth and ancillary equipment. Personnel costs include salaries, bonuses, benefits, and stock-based compensation.
We intend to continue to invest additional resources in our infrastructure to support our product portfolio and the scalability of our customer base. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of personnel costs including salaries, bonuses, benefits, and stock-based compensation. Research and development expenses also include amortization of capitalized internal-use software development costs, which are amortized over three years, professional services, software, as well as costs related to our efforts to add new features to our existing offerings, develop new offerings, and ensure the security, performance, and reliability of our global cloud platform. We expect research and development expenses to increase in absolute dollars as we continue to invest in our platform and product offerings.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel costs of our sales and marketing and customer success employees, including salaries, bonuses, benefits, commissions and stock-based compensation. Sales and marketing expenses also include costs for marketing programs, advertising, amortization of acquired customer relationships and purchased software used for sales and marketing purposes, professional services and software. We expect sales and marketing expenses to increase in absolute dollars as we enhance our product offerings and implement new marketing and sales strategies.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs of our human resources, legal, finance and other administrative functions, including salaries, bonuses, benefits, and stock-based compensation. General and administrative expenses also include payment processing fees, provision for expected credit losses, professional services, software, business insurance, depreciation and amortization, rent and facilities costs, acquisition-related compensation, and other administrative costs. General and administrative expenses may increase in absolute dollars as we continue to grow our business.
Other (Expense) Income, net
Other (expense) income, net consists primarily of induced conversion expense related to the partial repurchase of 2030 Convertible Notes, loss on extinguishment of our Term Loan Facility, cash interest expense on our Term Loan Facility, credit facilities, finance leases and equipment financing obligations, amortization of debt issuance costs, interest income on our money market funds, accretion of our marketable securities, and gains or losses on foreign currency exchange.
Income Tax Benefit (Expense)
Income tax expense consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes. Our income tax benefit consists primarily of the release of a valuation allowance related to our U.S. deferred tax assets.
Results of Operations
The following table sets forth our results of operations for the periods presented:
___________________
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | $ | 321,192 | $ | 229,634 | $ | 860,281 | $ | 659,037 | |||||||||||||||
|
Cost of revenue(1)
|
160,122 | 92,701 | 399,839 | 261,715 | |||||||||||||||||||
|
Gross profit
|
161,070 | 136,933 | 460,442 | 397,322 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
|
Research and development(1)
|
58,786 | 38,119 | 165,131 | 117,357 | |||||||||||||||||||
|
Sales and marketing(1)
|
24,207 | 21,228 | 68,444 | 59,917 | |||||||||||||||||||
|
General and administrative(1)
|
45,052 | 32,654 | 127,900 | 101,855 | |||||||||||||||||||
|
Total operating expenses
|
128,045 | 92,001 | 361,475 | 279,129 | |||||||||||||||||||
| Operating income | 33,025 | 44,932 | 98,967 | 118,193 | |||||||||||||||||||
| Other income (expense), net | (69,450) | 45,382 | (83,754) | 55,949 | |||||||||||||||||||
| Income (loss) before income taxes | (36,425) | 90,314 | 15,213 | 174,142 | |||||||||||||||||||
| Income tax benefit (expense) | (6,184) | 68,057 | (6,614) | 59,460 | |||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (42,609) | $ | 158,371 | $ | 8,599 | $ | 233,602 | |||||||||||||||
(1) Includes stock-based compensation as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 1,138 | $ | 1,225 | $ | 4,410 | $ | 4,042 | |||||||||||||||
| Research and development | 17,195 | 8,536 | 43,049 | 26,261 | |||||||||||||||||||
| Sales and marketing | 3,041 | 3,188 | 7,826 | 8,823 | |||||||||||||||||||
| General and administrative | 14,671 | 6,851 | 35,991 | 21,187 | |||||||||||||||||||
| Total stock-based compensation | $ | 36,045 | $ | 19,800 | $ | 91,276 | $ | 60,313 | |||||||||||||||
The following table sets forth our results of operations as a percentage of revenue for the periods presented:
__________________
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Cost of revenue | 50 | 40 | 46 | 40 | |||||||||||||||||||
|
Gross profit
|
50 | 60 | 54 | 60 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 18 | 17 | 19 | 18 | |||||||||||||||||||
| Sales and marketing | 8 | 9 | 8 | 9 | |||||||||||||||||||
| General and administrative | 14 | 14 | 15 | 15 | |||||||||||||||||||
| Total operating expenses | 40 | 40 | 42 | 42 | |||||||||||||||||||
|
Operating income
|
10 | 20 | 12 | 18 | |||||||||||||||||||
| Other income (expense), net | (22) | 20 | (10) | 8 | |||||||||||||||||||
|
Income (loss) before income taxes(1)
|
(11) | 39 | 2 | 26 | |||||||||||||||||||
| Income tax benefit (expense) | (2) | 30 | (1) | 9 | |||||||||||||||||||
| Net income attributable to common stockholders | (13 | %) | 69 | % | 1 | % | 35 | % | |||||||||||||||
(1) May not foot due to rounding.
Comparison of the Three Months Ended September 30, 2026 and 2025
Revenue
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | $ | 321,192 | $ | 229,634 | $ | 91,558 | 40 | % | |||||||||||||||
Revenue increased for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was driven by a 61% increase in revenue from our DNE Customers primarily attributable to the addition of new customers, including our expanding AI Customer base, and the continued adoption of our products by our existing customers leading to higher average usage on our platform.
Cost of Revenue
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 160,122 | $ | 92,701 | $ | 67,421 | 73 | % | |||||||||||||||
Cost of revenue increased for the three months ended September 30, 2026 compared to 2025 primarily due to data center expansions which drove increases of $38.2 million in depreciation and amortization related to data center infrastructure additions, $19.1 million in co-location costs, $6.2 million in third-party licenses, $1.3 million in partnership expenses, $1.3 million in ancillary equipment costs, and $1.4 million in other costs, net. Gross profit decreased to 50% for the three months ended September 30, 2026 from 60% for the three months ended September 30, 2025. The decline in gross margin resulted from incurrence of costs for data center expansions in advance of the expected ramp in revenue from new data centers.
Operating Expenses
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Research and development | $ | 58,786 | $ | 38,119 | $ | 20,667 | 54 | % | |||||||||||||||
| Sales and marketing | 24,207 | 21,228 | 2,979 | 14 | % | ||||||||||||||||||
| General and administrative | 45,052 | 32,654 | 12,398 | 38 | % | ||||||||||||||||||
| Total operating expenses | $ | 128,045 | $ | 92,001 | $ | 36,044 | 39 | % | |||||||||||||||
Research and development expenses increased for the three months ended September 30, 2026 compared to 2025 due to increases of $19.9 million in personnel costs driven by headcount growth, stock-based compensation for new hire and ongoing grants, and annual merit-based salary raises, $2.2 million in third-party development resources, and $1.8 million in software costs, partially offset by $3.2 million in additional capitalized internal-use software development costs.
Sales and marketing expenses increased for the three months ended September 30, 2026 compared to 2025 primarily due to increases of $1.7 million in advertising and promotion costs and $1.4 million in depreciation and amortization related to purchased software.
General and administrative expenses increased for the three months ended September 30, 2026 compared to 2025 due to an increase of $9.7 million in personnel costs driven by headcount growth, stock-based compensation for new hire and ongoing grants, and annual merit-based salary raises, and $2.7 million in other costs, net.
Other (Expense) Income, net
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Other (expense) income, net | $ | (69,450) | $ | 45,382 | $ | (114,832) | (253 | %) | |||||||||||||||
Other expense, net was $69.5 million for the three months ended September 30, 2026, compared to other income, net of $45.4 million for the three months ended September 30, 2025. The change was primarily due to induced conversion expense of $57.1 million related to the partial repurchase of our 2030 Convertible Notes, gain on partial extinguishment of our 2026 Convertible Notes of $48.4 million recognized in 2025, and an increase of $11.4 million in interest expense primarily driven by interest on our finance leases and equipment financing arrangements, partially offset by $2.5 million higher interest income due to higher investment balance from the proceeds of our public equity offering completed in March 2026 and accretion of our marketable securities.
The induced conversion expense recognized on the partial repurchase of our 2030 Convertible Notes decreased basic and diluted net income per share attributable to common stockholders by $0.50 during the three months ended September 30, 2026.
The gain on partial extinguishment of our 2026 Convertible Notes increased basic net income per share attributable to common stockholders by $0.51 and diluted net income per share attributable to common stockholders by $0.44 during the three months ended September 30, 2025.
Income Tax (Expense) Benefit
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Income tax (expense) benefit | $ | (6,184) | $ | 68,057 | $ | (74,241) | (109 | %) | |||||||||||||||
Income tax expense was $6.2 million for the three months ended September 30, 2026 compared to income tax benefit of $68.1 million for the three months ended September 30, 2025. The increase in income tax expense was primarily driven by the $69.9 million release of our valuation allowance related to our U.S. deferred tax assets as a discrete deferred tax benefit in the prior year. In the current year, the $57.1 million induced conversion expense carries no tax benefit, which increased tax expense. This was partially offset by an increase in excess tax benefits from stock-based compensation.
The tax benefit related to the release of the valuation allowance increased basic net income per share attributable to common stockholders by $0.77 and diluted net income per share attributable to common stockholders by $0.66 during the three months ended September 30, 2025.
Comparison of the Nine Months Ended September 30, 2026 and 2025
Revenue
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | $ | 860,281 | $ | 659,037 | $ | 201,244 | 31 | % | |||||||||||||||
Revenue increased for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was driven by a 48% increase in revenue from our DNE Customers primarily attributable to the addition of new customers and the continued adoption of our products by our existing customers leading to higher average usage on our platform.
Cost of Revenue
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 399,839 | $ | 261,715 | $ | 138,124 | 53 | % | |||||||||||||||
Cost of revenue increased for the nine months ended September 30, 2026 compared to 2025 primarily due to data center expansions which drove increases of $70.9 million in depreciation and amortization related to data center infrastructure additions, $40.5 million in co-location costs, $9.6 million in third-party licenses, $7.8 million in ancillary equipment costs, $3.9 million in partnership expenses, $3.4 million in personnel costs driven by headcount growth, and $2.0 million in other costs, net. Gross profit decreased to 54% for the nine months ended September 30, 2026 from 60% for the nine months ended September 30, 2025. The decline in gross margin resulted from incurrence of costs for data center expansions in advance of the expected ramp in revenue from new data centers.
Operating Expenses
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Research and development | $ | 165,131 | $ | 117,357 | $ | 47,774 | 41 | % | |||||||||||||||
| Sales and marketing | 68,444 | 59,917 | 8,527 | 14 | % | ||||||||||||||||||
| General and administrative | 127,900 | 101,855 | 26,045 | 26 | % | ||||||||||||||||||
| Total operating expenses | $ | 361,475 | $ | 279,129 | $ | 82,346 | 30 | % | |||||||||||||||
Research and development expenses increased for the nine months ended September 30, 2026 compared to 2025 due to increases of $48.1 million in personnel costs driven by headcount growth, stock-based compensation for new hire and ongoing grants, and annual merit-based salary raises, $3.4 million in software costs, $3.3 million in third-party development resources and $0.9 million in other costs, net, partially offset by $7.9 million in additional capitalized internal-use software development costs.
Sales and marketing expenses increased for the nine months ended September 30, 2026 compared to 2025 due to increases of $3.9 million in personnel costs driven by headcount growth and annual merit-based salary raises, $3.7 million in depreciation and amortization related to purchased software, and $0.9 million in other costs, net.
General and administrative expenses increased for the nine months ended September 30, 2026 compared to 2025 due to increases of $20.3 million in personnel costs driven by headcount growth, stock-based compensation for new hire and ongoing grants, and annual merit-based salary raises, $4.5 million in professional services costs related to consulting and legal fees, and $1.2 million in other costs, net.
Other (Expense) Income, net
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Other (expense) income, net | $ | (83,754) | $ | 55,949 | $ | (139,703) | (250 | %) | |||||||||||||||
Other expense, net was $83.8 million for the nine months ended September 30, 2026, compared to other income, net of $55.9 million for the nine months ended September 30, 2025. The change was primarily due to induced conversion expense of $57.1 million related to the partial repurchase of our 2030 Convertible Notes, gain on partial extinguishment of our 2026 Convertible Notes of $48.1 million recognized in 2025, an increase of $24.9 million in interest expense primarily driven by interest on our finance leases and equipment financing arrangements, a decrease of $10.1 million in net unrealized gains related to foreign currency fluctuations from our operations, a loss of $2.7 million on the extinguishment of our Term Loan Facility, and an increase of $1.6 million in other expenses, net, partially offset by a $4.9 million increase in interest income due to higher investment balance from the proceeds of our public equity offering completed in March 2026 and accretion of our marketable securities.
The induced conversion expense recognized on the partial repurchase of our 2030 Convertible Notes decreased basic net income per share attributable to common stockholders by $0.55 and diluted net income per share attributable to common stockholders by $0.53 during the nine months ended September 30, 2026.
The gain on partial extinguishment of our 2026 Convertible Notes increased basic net income per share attributable to common stockholders by $0.50 and diluted net income per share attributable to common stockholders by $0.45 during the nine months ended September 30, 2025.
Income Tax (Expense) Benefit
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Income tax (expense) benefit | $ | (6,614) | $ | 59,460 | $ | (66,074) | (111 | %) | |||||||||||||||
Income tax expense was $6.6 million for the nine months ended September 30, 2026 compared to the income tax benefit of $59.5 million for the nine months ended September 30, 2025. The increase in income tax expense was primarily driven by the $69.9 million release of our valuation allowance related to our U.S. deferred tax assets as a discrete deferred tax benefit in the prior year. This was partially offset by excess tax benefits from stock-based compensation.
The tax benefit related to the release of the valuation allowance increased basic net income per share attributable to common stockholders by $0.77 and diluted net income per share attributable to common stockholders by $0.68 during the nine months ended September 30, 2025.
Liquidity and Capital Resources
We have funded our operations since inception primarily with cash flow generated by operations, offerings of our equity and debt securities, and borrowings under our credit facilities, equipment financing arrangements and finance leases. Cash provided from these sources is used primarily for operating expenses, such as personnel and co-location costs, capital expenditures, including our investments in AI/ML and other core product offerings, and principal repayments of finance leases and equipment financing obligations for servers and related equipment. From time to time, we may also use excess cash and/or debt for share repurchases and investments in marketable securities and cash equivalents.
In February 2026, we borrowed an additional $120.0 million under our Term Loan Facility.
In March 2026, we completed a public equity offering in which we issued and sold 11,948,052 shares of common stock, inclusive of the exercised over-allotment option, at a public offering price of $77.00 per share ("2026 Follow-on Offering"). We received net proceeds of $887.9 million after deducting underwriting discounts and commissions of $31.1 million and other issuance costs of $1.1 million.
We used the proceeds from our 2026 Follow-on Offering to repay $500.0 million of principal outstanding of our
Term Loan Facility during the three months ended March 31, 2026.
On May 4, 2026, we entered into an amendment to our Credit Agreement (the "First Amendment"). The First Amendment amends the Credit Agreement to, among other modifications, (i) provide for a $112.5 million increase in the Revolving Facility thereunder, (ii) provide for a $50.0 million increase in the letter of credit sublimit thereunder and (iii) amend the definition of "Indebtedness" to provide that capitalized leases shall be deemed to be an amount equal to 25% of the capitalized amount.
On July 23, 2026, we repurchased $471.8 million in aggregate principal amount of our 2030 Convertible Notes using the $1.47 billion net proceeds from a concurrent registered direct offering of 12,543,915 shares of our common stock at $117.54 per share. Cash on hand was used to pay transaction-related fees of $4.2 million. Upon completion, the repurchased notes were retired. Notwithstanding the partial repurchase of our 2030 Convertible Notes, we did not take any action on our 2030 Capped Calls and they continue to remain outstanding. The 2030 Capped Calls expire on August 15, 2030, unless exercised or called prior to that date.
On September 10, 2026, we entered into an agreement with MUFG Americas Capital Leasing & Finance, LLC, as lessor, MUFG Bank, Ltd., as administrative agent and collateral agent, and the other parties thereto for up to $725.0 million of committed financing to fund purchases of data center equipment (the "Equipment Lease Facility"), including an accordion feature permitting us to increase the committed financing by up to an additional $300.0 million to $1,025.0 million in the aggregate (the "Equipment Lease Facility"). The Equipment Lease Facility matures on September 10, 2030 and we may request advances until September 10, 2027. As of September 30, 2026, we had not drawn advances under the Equipment Lease Facility. On October 6, 2026, we exercised an additional $60.0 million of the accordion feature, increasing the total committed financing to $785.0 million.
During the three and nine months ended September 30, 2026, we were issued letters of credit of $9.7 million and $15.6 million under the letter of credit sublimit of our Revolving Facility, respectively. For further information refer to Note 7. Debt in our condensed consolidated financial statements.
As of September 30, 2026, we had $465.5 million aggregate principal amount of our 2030 Convertible Notes and 2026 Convertible Notes outstanding, with $312.3 million aggregate principal amount of our 2026 Convertible Notes maturing within the next 12 months. We plan to repurchase, repay, acquire or otherwise settle the remaining outstanding principal of our 2026 Convertible Notes by using cash on hand and cash generated from our operations. As of September 30, 2026, the circumstances allowing holders to convert the 2030 Convertible Notes were met.
We have historically repurchased our common stock pursuant to repurchase programs approved by our Board of Directors. In August 2025, we adopted the 2025 Share Buyback Program which authorizes the repurchase of up to $100.0 million of our common stock. The 2025 Share Buyback Program will expire on July 31, 2027. No shares were repurchased during the nine months ended September 30, 2026.
As of September 30, 2026, we had $666.1 million in cash and cash equivalents, $178.6 million in marketable securities, as well as $396.9 million of available borrowing capacity available under our Revolving Facility and $725 million of available commitments under our Equipment Lease Facility. On October 6, 2026, we exercised an additional $60.0 million of the accordion feature under our Equipment Lease Facility, increasing the total available borrowing capacity to $785.0 million. Our cash and cash equivalents primarily consist of cash and money market funds. Our marketable securities consist of U.S. Treasury securities and commercial paper. We believe our existing cash and cash equivalents, cash flow from operations and availability under our Revolving Facility and Equipment Lease Facility will be sufficient to support our requirements for working capital and capital expenditures, outstanding contractual commitments, debt and finance lease liabilities and equipment financing obligations both over the next 12 months and beyond.
As of September 30, 2026, we had $2,955.2 million of estimated undiscounted fixed payment obligations primarily for leases of co-location space at data center facilities that have not yet commenced and were not included in the condensed consolidated balance sheets. These leases are scheduled to commence between November 2026 and June 2028, and have a weighted-average lease term of 11.1 years.
In October 2026, the Company entered into agreements to receive servers and related equipment under (i) finance leases with total estimated undiscounted payments of $20.0 million, commencing between November 2026 and November 2027, with a weighted-average lease term of 5.0 years, and (ii) equipment financing arrangements with total estimated undiscounted payments of $33.0 million commencing in November 2026 with a weighted-average lease term of 5.0 years.
We continually evaluate our capital needs and may decide to raise additional capital to fund working capital, capital expenditures, strategic initiatives, and/or the growth of our business. Financing alternatives may include public or private offerings of equity, equity-linked or debt securities or credit facilities.
From time to time, we may seek to retire or purchase our outstanding equity or debt, including the repurchase of our common stock or outstanding convertible notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material. Further, any such purchases or exchanges may result in us acquiring and retiring a substantial amount of such indebtedness, which could impact the trading liquidity of such indebtedness.
The following table summarizes our cash flows for the periods presented:
| Nine Months Ended September 30, | |||||||||||
|
(In thousands)
|
2026 | 2025 | |||||||||
| Net cash provided by operating activities | $ | 318,116 | $ | 252,324 | |||||||
| Net cash used in investing activities | (381,974) | (138,772) | |||||||||
| Net cash provided by (used in) financing activities | 475,796 | (307,177) | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 411,619 | (193,632) | |||||||||
Operating Activities
Our largest source of operating cash is cash collections from sales to our customers. Our primary uses of cash from operating activities are for personnel costs, data center co-location costs, payment processing fees, bandwidth and connectivity, server maintenance, software licensing fees, taxes and interest payments on finance leases, equipment financing obligations and debt.
Net cash provided by operating activities was $318.1 million and $252.3 million for the nine months ended September 30, 2026 and 2025, respectively. The change was primarily driven by higher revenues and advance payments from customers, partially offset by higher co-location costs resulting from data center expansions and higher personnel costs due to increased headcount and annual merit-based salary raises.
Investing Activities
Net cash used in investing activities was $382.0 million and $138.8 million for the nine months ended September 30, 2026 and 2025, respectively. The change was primarily driven by purchases of marketable securities of $177.6 million, a $14.9 million increase in cash payments for capital expenditures, an increase of $47.5 million in cash payments for the acquisition of equipment under financing arrangements (for which we received an equivalent amount of proceeds discussed below in "Financing Activities"), and a $4.0 million payment for acquisition of an AI-related business.
Financing Activities
Net cash provided by financing activities was $475.8 million for the nine months ended September 30, 2026, compared to net cash used in financing activities of $307.2 million for the nine months ended September 30, 2025. The change was primarily driven by proceeds of $1,473.9 million from our direct offering for induced conversion of 2030 Convertible Notes, proceeds of $887.9 million from our 2026 Follow-on Offering, $120.0 million drawdown on our Term Loan Facility and $75.1 million from equipment financing arrangements, partially offset by a $1,478.1 million settlement payment of the 2030 convertible senior notes, $500.0 million repayment of our Term Loan Facility, $62.1 million of payments of employee payroll taxes related to net share settlement of equity awards and $39.9 million of principal repayments for finance leases and financing arrangements for data center equipment.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments as compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 other than those disclosed under Note 7. Debt, Note 8. Operating Leases, Note 9. Finance Leases and Equipment Financing Obligations, and Note 10. Commitments and Contingencies, in our condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies as compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Recently Issued and Adopted Accounting Pronouncements
For information on recently issued and adopted accounting pronouncements see Note 2. Summary of Significant Accounting Policies, in our notes to condensed consolidated financial statements included in Part I, Item 1. "Financial Statements" included in this Quarterly Report on Form 10-Q.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including: (i) adjusted operating income and adjusted operating income margin, (ii) adjusted EBITDA and adjusted EBITDA margin and (iii) non-GAAP net income and non-GAAP diluted net income per share. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
We believe that adjusted operating income margin and adjusted EBITDA, when taken together with our GAAP financial results, provide meaningful supplemental information regarding our operating performance (including our long-term performance in the case of adjusted operating income) and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted operating income and adjusted EBITDA is helpful to our investors as they are measures used by management in assessing the health of our business, evaluating our operating performance, and for internal planning and forecasting purposes.
We believe non-GAAP net income and non-GAAP diluted net income per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of unusual or non-recurring items from period to period for reasons unrelated to overall operating performance.
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 each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.
Adjusted Operating Income and Adjusted Operating Income Margin
We define adjusted operating income as operating income, adjusted to exclude stock-based compensation, amortization of acquired intangible assets, acquisition related compensation, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets and other charges. We define adjusted operating income margin as adjusted operating income as a percentage of revenue.
The following table presents a reconciliation of operating income, the most directly comparable financial measure stated in accordance with GAAP, to adjusted operating income for each of the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Operating income | $ | 33,025 | $ | 44,932 | $ | 98,967 | $ | 118,193 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Stock-based compensation | 36,045 | 19,800 | 91,276 | 60,313 | |||||||||||||||||||
| Amortization of acquired intangible assets | 5,071 | 4,914 | 15,079 | 15,142 | |||||||||||||||||||
| Impairment of certain long-lived assets | - | - | 311 | - | |||||||||||||||||||
| Adjusted operating income | $ | 74,141 | $ | 69,646 | $ | 205,633 | $ | 193,648 | |||||||||||||||
| As a percentage of revenue: | |||||||||||||||||||||||
| Operating income margin | 10 | % | 20 | % | 12 | % | 18 | % | |||||||||||||||
| Adjusted operating income margin | 23 | % | 30 | % | 24 | % | 29 | % | |||||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted EBITDA as net income 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 (benefit), restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, interest income and other income, net, (gain) loss on extinguishment of debt, net, induced conversion expense, and other charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue.
The following table presents a reconciliation of net income attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA for each of the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| GAAP Net income (loss) attributable to common stockholders | $ | (42,609) | $ | 158,371 | $ | 8,599 | $ | 233,602 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization | 75,142 | 35,060 | 171,771 | 97,035 | |||||||||||||||||||
| Stock-based compensation | 36,045 | 19,800 | 91,276 | 60,313 | |||||||||||||||||||
| Induced conversion expense | 57,110 | - | 57,110 | - | |||||||||||||||||||
| Interest expense | 16,408 | 5,042 | 34,424 | 9,489 | |||||||||||||||||||
| Income tax (benefit) expense | 6,184 | (68,057) | 6,614 | (59,460) | |||||||||||||||||||
| Loss (gain) on extinguishment of debt, net | - | (48,373) | 2,700 | (48,104) | |||||||||||||||||||
| Impairment of certain long-lived assets | - | - | 311 | - | |||||||||||||||||||
|
Interest income and other income, net(1)
|
(4,068) | (2,051) | (10,480) | (17,334) | |||||||||||||||||||
| Adjusted EBITDA | $ | 144,212 | $ | 99,792 | $ | 362,325 | $ | 275,541 | |||||||||||||||
| As a percentage of revenue: | |||||||||||||||||||||||
| Net income (loss) margin | (13 | %) | 69 | % | 1 | % | 35 | % | |||||||||||||||
| Adjusted EBITDA margin | 45 | % | 43 | % | 42 | % | 42 | % | |||||||||||||||
___________________
(1)For the three and nine months ended September 30, 2026, primarily consists of interest income from our cash and cash equivalents and accretion income from our marketable securities. For the three and nine months ended September 30, 2025, primarily consists of interest income from our cash and cash equivalents.
Non-GAAP Net Income and Non-GAAP Diluted Net Income Per Share
We define non-GAAP net income as net income attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, (gain) loss on extinguishment of debt, net, induced conversion expense and other charges. In addition to these exclusions, we subtract an assumed non-GAAP provision for income taxes to calculate non-GAAP net income that excludes the current period income tax benefit (expense). We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision in order to provide better consistency across reporting periods. 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 and, beginning in the first quarter of 2026, excludes the in-the-money portion of our 2030 Convertible Notes as they are covered by our capped call transactions, which are expected to mitigate the dilutive effect of our 2030 Convertible Notes.
The following table presents a reconciliation of net income attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to non-GAAP net income for each of the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| GAAP Net income (loss) attributable to common stockholders | $ | (42,609) | $ | 158,371 | $ | 8,599 | $ | 233,602 | |||||||||||||||
| Stock-based compensation | 36,045 | 19,800 | 91,276 | 60,313 | |||||||||||||||||||
| Induced conversion expense | 57,110 | - | 57,110 | - | |||||||||||||||||||
| Amortization of acquired intangible assets | 5,071 | 4,914 | 15,079 | 15,142 | |||||||||||||||||||
|
Loss (gain) on extinguishment of debt, net(1)
|
- | (48,373) | 2,700 | (48,104) | |||||||||||||||||||
| Impairment of certain long-lived assets | - | - | 311 | - | |||||||||||||||||||
|
Other charges(7)
|
3,387 | - | 3,387 | - | |||||||||||||||||||
|
Non-GAAP income tax adjustment(2)
|
(4,246) | (78,722) | (22,998) | (91,699) | |||||||||||||||||||
| Non-GAAP Net income | $ | 54,758 | $ | 55,990 | $ | 155,464 | $ | 169,254 | |||||||||||||||
|
Non-cash charges related to convertible notes(3)
|
$ | 678 | $ | 1,320 | $ | 2,868 | $ | 4,511 | |||||||||||||||
| Non-GAAP Net income used to compute net income per share, diluted | $ | 55,436 | $ | 57,310 | $ | 158,332 | $ | 173,765 | |||||||||||||||
|
GAAP Net income (loss) per share attributable to common stockholders, diluted(6)
|
$ | (0.37) | $ | 1.51 | $ | 0.08 | $ | 2.31 | |||||||||||||||
| Stock-based compensation | 0.29 | 0.19 | 0.77 | 0.59 | |||||||||||||||||||
| Induced conversion expense | 0.46 | - | 0.48 | - | |||||||||||||||||||
| Amortization of acquired intangible assets | 0.04 | 0.05 | 0.13 | 0.15 | |||||||||||||||||||
|
Loss (gain) on extinguishment of debt, net(1)
|
- | (0.46) | 0.02 | (0.47) | |||||||||||||||||||
| Impairment of certain long-lived assets | - | - | - | - | |||||||||||||||||||
|
Non-cash charges related to convertible notes(3)
|
0.01 | 0.01 | 0.02 | 0.04 | |||||||||||||||||||
|
Other charges(7)
|
0.03 | - | 0.03 | - | |||||||||||||||||||
|
Non-GAAP income tax adjustment(2)
|
(0.01) | (0.76) | (0.20) | (0.93) | |||||||||||||||||||
|
Non-GAAP Net income per share, diluted(4)
|
$ | 0.45 | $ | 0.54 | $ | 1.33 | $ | 1.69 | |||||||||||||||
| GAAP Weighted-average shares used to compute net income per share, diluted | 114,682 | 105,520 | 108,049 | 103,036 | |||||||||||||||||||
| Add: Weighted-average dilutive effect of potentially dilutive securities | 12,152 | - | 14,662 | - | |||||||||||||||||||
|
Less: Anti-dilutive impact of capped call transaction(5)
|
(3,470) | - | (4,024) | - | |||||||||||||||||||
|
Non-GAAP Weighted-average shares used to compute net income per share, diluted(6)
|
123,364 | 105,520 | 118,687 | 103,036 | |||||||||||||||||||
(1)For the three and nine months ended September 30, 2026, excludes tax impact which is presented in Non-GAAP income tax adjustment.
(2)For the periods in fiscal year 2026 and 2025, we used a tax rate of 16%, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for each respective year.
(3)Consists of non-cash interest expense for amortization of debt issuance costs related to our Convertible Notes.
(4)May not foot due to rounding.
(5)Excludes the in-the-money portion of our 2030 Convertible Notes for non-GAAP weighted-average diluted shares as they are covered by our capped call transactions. Our outstanding capped call transactions are antidilutive under GAAP, but are expected to mitigate the dilutive effect of our 2030 Convertible Notes, and therefore are included in the calculation of non-GAAP diluted shares outstanding. The capped calls have an antidilutive impact when the average stock price of our common stock in a given period is higher than their exercise price.
(6)Includes the potentially dilutive effect of our convertible notes as if the entire principal amount outstanding were converted into shares for all periods presented. The Company has the election of settling any conversion in cash, shares of our common stock, or a combination of both. For further information refer to Note 13. Net Income per Share Attributable to Common Stockholders in our condensed consolidated financial statements.
(7)Consist of charges associated with the wind-down of our legacy dedicated bare metal CPU offering.
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