DOCN 10-K & 10-Q changes, risk factors and insider trading

•our ability to attract new customers and retain existing customerscustomers, including increasing their usage of our products;

•general economic conditions, both domestically and internationally, including heightened inflation or changes in interest rates, uncertainty regarding changes in trade policies, and economic conditions specifically affecting industries in which our customers participate;

In order to grow our business, we must continue to expand the usage by our existing customers on our platform, attract new customers in a cost-effective manner and enable these customers to realize the benefits associated with our products and services. Our business is usage-based and it is important for our business and financial results that our paying customers maintain or increase their usage of our platform and purchase additional products from us. Historically, we have relied on our self-service customer acquisition model for a significant majority of our revenue. We complement our self-service customer acquisition model with a sales force focused on inside sales, targeted outside sales and partnership opportunities to drive revenue growth. If our self-service customer acquisition model is not as effective as we anticipate or our sales force is not successful at growing our customer base, specifically our Higher SpendDNE Customers, our future growth will be impacted.

We are focused on expanding the number of Higher SpendDNE Customers on our platform, both through expanding usage by existing customers and attracting new Higher SpendDNE Customers. Net new sales to Higher SpendDNE Customers involve risks that may not be present or that are present to a lesser extent with sales to smaller customers.

Sales to Higher SpendDNE Customers involve risks that may not be present or that are present to a lesser extent with sales to smaller customers, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales. For example, Higher SpendDNE Customers may require considerable time to evaluate and test our solutions and those of our competitors prior to making a decision on whether to subscribe to our platform. As a result, we may spend substantial time and resources on our sales efforts without any assurance that our efforts will produce a sale. Moreover, Higher SpendDNE Customers often begin to deploy our products on a limited basis, but nevertheless demand configuration, integration services and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough across their organization to justify our substantial upfront investment.

It is difficult to predict customer adoption rates and demand for our products and services, the entry of competitive products or services or the future growth rate and size of the Infrastructure-as-a-Service (“IaaS”), Platform-as-a-Service (“PaaS”) and Software-as-a-Service (SaaS), and artificial intelligence and machine learning (“AI/ML”) markets. The expansion of these markets depends on a number of factors, including the cost, performance, and perceived value associated with the markets in which we operate. The market for these applications as a whole, including our platform and products, could be negatively affected by a number of factors, many of which are outside of our control. For example, demand for our products and services could be negatively impacted if we or other providers in our space experience security incidents, loss of customer data, disruptions or other similar problems. If there is a reduction in demand caused by technological challenges, weakening economic conditions, data security or privacy concerns, governmental regulation, competing technologies and products, or decreases in information technology spending or otherwise, either now or in the future, the market for our platform and products might not continue to develop or might develop more slowly than we expect, which would adversely affect our business, financial condition and results of operations.

We intend to continue to devote substantial resources to the market for our Higher SpendDNE Customers and the broader market for growing technology companies. However, these customers and potential customers may have limited budgets and may choose to allocate resources to items other than our solutions, especially in times of economic uncertainty or recessions. If these markets fail to be as lucrative as we project or we are unable to market and sell our services to such customers effectively, our ability to grow our revenues quickly and achieve or maintain profitability will be harmed.

Our artificial intelligence and machine learning (“AI/ML”) products and services may not be successful, which could adversely affect our business operating results or financial condition.

WhileA wegrowing believepart thatof theour business involves AI/ML offeringsproducts and servicesservices, thatand we offerare devoting significant resources to customersdevelop willand drivedeploy significantsuch growthstrategies. in our business, theThe AI/ML landscape is rapidly evolving and may create risks and challenges for our business. If we fail to develop and timely offer the right AI/ML offerings, if such offerings fail to meet our customers’ demands, if such offerings fail to operate as expected, or if our competitors launch AI/ML offerings more quickly or more successfully than we do, we may lose our competitive position, our products may become obsolete, we may experience brand or reputational harm and our business, operating results or financial condition could be adversely affected.

In addition, the markets for AI/ML offerings or AI/ML-enabled products and services may not develop in the manner or time periods we anticipate, or at all. If domestic or global economies worsen, overall spending on the development of AI-related products and services may decrease, which would adversely impact demand for our products and services in these markets. Even if the demand for such products and services develops in the manner or in the time periods we anticipate, if we do not have timely and competitively-priced products and services that meet our customers’ needs, we may miss a significant opportunity and our business, operating results and financial condition could be materially and adversely affected. Also, because the markets for AI/ML-related products and services are still emerging, demand for these products and services may be unpredictable and may vary significantly from one period to another. There can be no assurance that we will realize the desired or anticipated benefits with respect to the significant resources we are devoting to develop and deploy our AI/ML strategies. Accordingly, it is uncertain whether our AI/ML strategies will attract customers or generate revenue required to succeed in this highly competitive and rapidly changing market, and the failure to realize the anticipated benefits could adversely affect our business operating results or financial condition. See Risk Factor entitled “Our increased focus on the development and use of artificial intelligence and machine learning may result in reputational harm, liability or other adverse consequences to our business, results of operations or financial results” below.

In an effort to enhance internal efficiencies, we currently use and may continue to explore additional usage of internally-developed and third-party AI/ML platforms, offerings and tools, including generative AI products (“AI/ML technology”), in our internal operations. AI/ML technology is subject to privacy and data security laws, as well as increasing regulation and scrutiny. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

We have developed policies governing the use of AI/ML technology to help reasonably ensure that such AI/ML technology is developed and used in a trustworthyresponsible manner by our employees, contractors, and authorized agents and that our assets, including intellectual property, competitive information, financial information, personal data we may collect or process, and customer information, are protected. Any failure by our personnel, contractors or other agents to adhere to our established policies could violate confidentiality obligations or applicable laws and regulations (including data privacy laws), jeopardize our intellectual property rights, cause or contribute to unlawful discrimination, result in the misuse of personally identifiable information, or introduce greater vulnerabilities to cybersecurity attacks or malware into our systems. Because the use of AI/ML technology is relatively new and rapidly evolving, we cannot be certain that our policies or adherence to them will offer us sufficient protection or that the use of such technologies will not harm our reputation, financial condition or operating results and certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML. We also could be subject to claims from providers of third-party AI/ML technologies that we are using their products, tools or outputs in a manner that is inconsistent with their terms of use, and such claims may result in costly legal proceedings.

The use of third-party AI/ML technology by our business partners with access to our confidential information, including personal data, customer data, confidential information and trade secrets, may continue to increase. This carries increased risk that it could lead to the misuse or disclosure of such information, which could negatively impact us, including our ability to realize the benefits of our intellectual property. The use of AI/ML technology by our business partners may lead to novel and urgent cybersecurity risks, which could have a material adverse effect on our operations and reputation as well as the operations of any of our business partners. Finally, the use of AI/ML technology also presents emerging ethical issues and if our use of third-party AI/ML technology becomes controversial,controversial or if there is noncompliance with our policies governing the use of AI/ML technology, we may experience brand or reputational harm, competitive harm or legal liability.

We rely on third-party data center providers to help ensure the functionality of our platform and products. If our data center providers fail to meet the requirements of our business, or if our data center facilities experience damage, interruption or a security breach, our ability to provide access to our platform and maintain the performance of our network could be negatively impacted.

•the failure of our disaster recovery and business continuity plans; and

In addition, if we do not optimize and operate these data center facilities efficiently, or if we fail to expand our data centers in a timely manner to meet increased customer demand, it could result in either lack of available capacity (resulting in poor service performance or technical issues) or excess data center capacity (resulting in increased unnecessary costs), both of which could result in the dissatisfaction or loss of customers and cause our business, results of operations and financial condition to suffer. As we continue to add product and service capabilities, our data center networks become increasingly complex and operating them becomes more challenging.

If our systems or those of the third parties with whom we work or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;actions, litigation;litigation, fines and penalties;penalties, disruptions to our business operations;operations, loss of revenue or profits;profits, loss of customers;customers, and other adverse consequences.

In the ordinary course of our business, we and the third parties with whom we work, process, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) proprietary, confidential, and sensitive data, including personal data, customer data, intellectual property, and trade secrets (collectively, “sensitive information”). Security incidents (including breaches of security) or unauthorized access to our platform and products have in the past and may in the future result in the loss of our or our customers’customers’, employees’ or users’ data, litigation, disruptions to our business operations, indemnity obligations, fines, penalties, disputes, regulatory investigations and actions, and other liabilities.

We have in the past and may in the future also be impacted by and the target of cyber-attacks by third parties seeking unauthorized access to our or our customers’customers’, employees’ or users’ sensitive or proprietary data or to disrupt our ability to provide our services. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these will be effective and our security measures, or those of our third parties that process sensitive information on our behalf, could be breached or we could suffer a loss of our sensitive information. We take steps designed to detect, mitigate and remediate vulnerabilities in our information technology systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities.

Cyber-attacks, computer malware, viruses, supply chain attacks, social engineering (including through AI-enabled deep fakes, which may be increasingly more difficult to identify as fake, and spear phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI, and other similar threats have become more prevalent in our industry, particularly against cloud services.

In addition, we must also continue to effectively manage our capital expenditures by maintaining and expanding our data center capacity, servers and equipment, grow in geographies where we currently have a small presence and ensure thatsupport the performance, features and reliability of our service offerings and our customer service to remain competitive in a rapidly changing technological environment. If we fail to manage our growth, the quality of our platform and products may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers and employees.

•geopolitical disputes,disputes and tensions, regulatory restrictions and sanctions disrupting our supply chain;

The markets that we serve are highly competitive and rapidly evolving. With the introduction of new technologies and innovations, we expect the competitive environment to remain intense. We compete primarily with large, diversified technology companies that focus on large enterprise customers and provide cloud computing as just a portion of the products and services that they offer. The primary vendors in this category include Amazon (AWS), Microsoft (Azure), Google (GCP), IBM (IBM Cloud), Alibaba (Alibaba Cloud) and Oracle (Oracle Cloud). We also compete with smaller and/or niche cloud service providers that typically target individuals and smaller businesses, simple use cases and/or narrower geographic markets. Examples in this category include OVHcloud, Akamai (Linode), Hetzner, Vultr, Contabo, Scaleway, UpCloud, and Heroku.Contabo. Our AI/ML offerings compete with providers of AI/ML infrastructure and services, including the same large, diversified technology companies, Amazon (AWS), Microsoft (Azure), and Google (GCP), and smaller more infrastructure-focused companies such as Coreweave and Lambda Labs. Finally, our Managed Hosting offering competes with digital agencies and other managed hosting providers, including Kinsta and WP Engine. We may also face increased competition from other companies that are using AI/ML applications, some of whom may develop more effective methods than we and any of our business partners have, which could have a material adverse effect on our business, results of operations or financial condition.

Our success largely depends on our ability to effectively integrate new members of our executive leadership team and senior management. In 2024, we hired a Chief Executive Officer, Chief Product and Technology Officer, Chief Ecosystem and Growth Officer and Chief Revenue Officer, and in 2026, we hired a new Chief Product and Technology Officer, in addition to other members of senior management. The ability of these members of leadership and senior management to understand our business, operations, and strategic plans will be critical to the Company and our management’s ability to make informed decisions about our strategic direction and operations. Ensuring that executives and management gain detailed knowledge of our operations may take time and resources. An inadequate transition may cause disruption to our business due to, among other things, diverting management’s attention away from the Company’s financial and operational goals or causing a deterioration in morale.

We believe that the successful use of our platform and products requires a high level of support and engagement for many of our customers, particularly our business customers. In order to deliver appropriate customer support and engagement, we must successfully assist our customers in deploying and continuing to use our platform and products, resolving performance issues, addressing interoperability challenges with the customers’ existing IT infrastructure, and responding to security threats and cyber-attacks and performance and reliability problems that may arise from time to time. Because our platform and products are designed to be highly configurable and to rapidly implement customers’ reconfigurations, if customers make errors in configuring our platform and products, they may experience significant disruption to their workloads on our platform. Increased demand for customer support, without corresponding increases in revenue, could increase our costs and adversely affect our business, results of operations, and financial condition.

Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential customers. Adverse changes in macroeconomic conditions can significantly harm demand for our products and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, supply chain disruptions, inflationary pressures, interest rates, financial and credit market fluctuations, volatility in the capital markets, liquidity concerns at, and failures of, banks and other financial institutions, international trade relations, economic sanctions, political turmoil, political instability and transitions of power in regions where we operate, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, the Middle East or elsewhere could cause a decrease in business investments in information technology or otherwise decrease or delay business spending by our current and prospective customers and business partners, reduce demand for or usage of our products and services and negatively affect the growth of our business and our results of operations.

Geopolitical risks, including those arising from trade tension and/or the imposition and enforceability of trade tariffs or other changes in trade policies and related uncertainties (including recent U.S. tariffs imposed or threatened to be imposed andimposed, any retaliatory actions taken by other countriescountries, and uncertainties regarding the ability to obtain refunds for previously paid tariffs that have subsequently been invalidated), terrorist activity or acts of civil or international hostility, and other geopolitical conflicts and developments, including tensions between China and Taiwan, are increasing. While we do not currently have employees or direct operations in any region with ongoing military conflict, we may have customers with business activities in these countries and regions. Based on ongoing military conflicts and associated sanctions imposed by the U.S. government, our ability to receive payments from customers in those regions and our ability to realize revenues from those customers may be impacted. Further, due to political uncertainty and military actions, we and the third parties upon which we rely may be vulnerable to a heightened risk of cyber-attacks, computer malware, viruses, supply chain attacks, social engineering (including spear phishing and ransomware attacks) and general hacking that could materially disrupt our systems and operations.

We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations and financial condition could be materially and adversely affected. The full impact of any conflict, economic slowdown or other factor on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration and its impact on our customers and third-party providers, as well as regional and global economic conditions. AnyMacroeconomic suchand political conditions and uncertainties have in the past adversely affected, and may in the future adversely affect, our business, results of operations and financial condition, and any related impacts or disruptions may also exacerbate the impact of other risks described in this Annual Report on Form 10-K.

If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer. Our failure to successfully manage our international operations and the associated risks could limit the future growth and success of our business.

Our sales are currently primarily denominated in U.S. dollars, and therefore, our revenue is generally not subject to foreign currency risk. However, the current strengthening of the U.S. dollar increases the real cost of our platform to our customers outside of the United States, which could adversely affect our results of operations. Our operating expenses incurred outside the United States are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected. In addition, increased interest rates could adversely affect the value of our investments and cash on hand and increase our borrowing costs, and could also increase our customers' operating costs, which could result in reduced less demand for our products or services, or delays in new orders, renewals or payments due to us. The impact of economic conditions, including the effects of changing interest rates, could adversely affect our business, operating results and financial condition.

Our tax provision could also be impacted by changes in accounting principles, changes in U.S. federal, state, or international tax laws applicable to corporate multinationals, other fundamental law changes currently being considered by many countries, and changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions. For example, the Organisation for Economic Co-operation and Development (“OECD”) has been spearheading a multilateral effort on proposals, commonly referred to as “BEPS 2.0”, which, to the extent implemented, will make important changes to the international tax system. These proposals are based on two “pillars”, involving the reallocation of taxing rights in respect of certain multinational enterprises above a fixed profit margin to the jurisdictions in which they carry on business (Pillar One) (based on the thresholds, we currently expect to be outside the scope of the Pillar One proposals, but could fall within their scope in the future) and imposing a minimum effective corporate tax rate on certain multinational enterprises (Pillar Two). A number of countries in which we conduct business have enacted, or are in the process of enacting, core elements of the Pillar Two rules. The OECD has issued administrative guidance providing transition and safe harbor rules around the implementation of Pillar Two. Based on our current understanding of the minimum revenue thresholds, we currently expect to be outside the scope of the Pillar Two proposals but could fall within their scope in the future, which could increase our tax obligations and require us to incur additional material costs to ensure compliance with any such rules in the countries where we do business. We are monitoring developments and evaluating the potential impacts of these new rules, including on our effective tax rates, and our eligibility to qualify for the transition and safe harbor rules.

As of December 31, 2024,2025, we had net operating losses (“NOL”) carryforwards for federal, state and foreign income tax purposes and other tax credit carryforwards for federal and state tax purposes. Certain of these NOL carryforwards and tax credit carryforwards will expire in various years beginning in 2029 for federal purposes and 2030 for state purposes if not utilized. Our ability to utilize our NOL carryforwards and other tax credit carryforwards to offset taxable income may be subject to certain limitations. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“the Code”), a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs or other tax credits to offset future taxable income. We have experienced ownership changes under Section 382 of the Code in the past and may experience a future ownership change under Section 382 of the Code that could affect our ability to utilize the NOLs to offset our income. Furthermore, our ability to utilize NOLs and tax credits of companies that we have acquired or may acquire in the future may be subject to limitations. There is also a risk that regulatory changes, such as suspensions on the use of NOLs or other tax credits, or other unforeseen reasons, could cause our existing NOLs or tax credits to expire or otherwise be unavailable to reduce current or future income tax liabilities, including for state tax purposes. For these reasons, we may not be able to utilize a material portion of the NOLs and tax credits reflected on our balance sheet, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.

In November 2021, we issued $1.5 billion aggregate principal amount of 0% convertible senior notes due 2026 in a private placement. As of December 31, 2024, we had no outstanding indebtedness, but significant borrowing capacity, under our credit facility with KeyBank National Association, as administrative agent, and the other lenders party thereto. We may not be able to refinance our existing indebtedness because of our amount of debt, debt incurrence restrictions under our debt agreements or adverse conditions in credit markets generally. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would result in an adverse effect on our financial condition and results of operations. Although our creditCredit agreementAgreement contains restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring certain obligations, such as trade payables. In addition, in connection with our acquisition of Paperspace, we acquired a number of equipment leases, which remain outstanding. Pursuant to the terms of the equipment leases, we may be restricted from engaging in certain activities.

The creditCredit agreementAgreement that governs our credit2025 facilityCredit Facility imposes significant operating and financial restrictions on us. These restrictions limit the ability of our subsidiaries, and effectively limit our ability to, among other things:

Our failure to comply with any of the existing restrictions described above or any other restrictions associated with the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in ourus being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or are unable to refinance these borrowings, our results of operations and financial condition could be adversely affected.

Our platform and the public cloud infrastructure on which our platform relies are vulnerable to damage or interruption from catastrophic occurrences, such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, criminal acts, sabotage, other intentional acts of vandalism and misconduct, geopolitical events, disease, and similar events. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of our public cloud providers could result in disruptions, outages, and other performance and quality problems.problems, including the loss of critical data and the inability to deliver our products and services to our customers. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the event of a disaster or emergency, our business would be seriously harmed.harmed and our insurance coverage may not compensate us in full or at all for losses that may occur in the event of any of these potential future catastrophic events.

We provide products and services that enable our customers and users to exchange information and engage in various online activities, and our products and services include substantial user-generated content. For instance, customers and users include content on their Droplets, post or generate content on our website’s community section, and offer applications and integrations through our marketplace. Customer or user content or activity may be infringing, illegal, hostile, offensive, unethical, or inappropriate, may violate our terms of service or a customer’s own policies, or may be intended to, or inadvertently, circumvent or threaten the confidentiality, integrity, security or availability of information or network services of other products, services, or systems, including, for example, by launching various attacks.attacks, and our products may otherwise be subject to fraudulent usage. From time to time, we are subject to legal claims or regulatory enforcement actions arising from the conduct of certain of our customers and may be subject to additional lawsuits or regulatory enforcement actions relating to the content or actions by our customers or users. Even if claims against us are ultimately unsuccessful, defending against such claims will increase our legal expenses and divert management’s attention from the operation of our business, which could adversely impact our business and results of operations, and our brand, reputation, and financial results may be harmed.

We (like other intermediary online service providers) rely primarily on two sets of laws in the United States to shield us from legal liability with respect to user activity. The Digital Millennium Copyright Act (“DMCA”), provides service providers a safe harbor from monetary damages for copyright infringement claims, provided that service providers comply with various requirements designed to stop or discourage infringement on their platforms by their users. Section 230 of the Communications Decency Act (“CDA”), protects providers of an interactive computer service from liability with respect to most types of content provided over their service by others, including users. Both the DMCA safe harbor and Section 230 of the CDA face regular and current, calls for revision. For example, a variety of bills have been introduced in the U.S. Congress that would seek to make changes to the scope of Section 230 of the CDA, including legislation in the U.S. Congress that, if enacted, would narrow the protections of Section 230 of the CDA. Enactment of this legislation or an unfavorable outcome of the FCC rulemaking could limit our ability to rely on the protections of Section 230 of the CDA. Furthermore, recent litigation has created uncertainty with respect to the applicability of DMCA protections to companies that host substantial amounts of user content. For these reasons and others, now or in the future, the DMCA, CDA, and similar provisions may be interpreted as not applying to us or may provide us with incomplete or insufficient protection from claims.

•user data privacy and security issues;

New laws or regulations, or new applications or interpretations of existing laws or regulations, could hinder growth and decrease acceptance, both of the internet and online services, or of our specific products or services, both generally or with respect to certain uses or industries. Such legal changes could increase our costs of doing business, subject our business to increased liability for non-compliance, or prevent us from marketing or delivering our services over the internet or in specific jurisdictions, thereby materially harmingadversely affecting our business and results of operations. In addition, certain jurisdictions may attempt to require us to establish a local corporate presence in the country, which,which if we were to comply, may alsocould increase our exposure to government requestscensorship fordemands, censorshipheightened data security and breach risks, and regulatory enforcement. Failure to datacomply breacheswith such requirements could result in generalfines, and,operational inrestrictions, or the casesuspension or prohibition of noncompliance,our may subject usability to fines or being blocked from doingdo business in thethose region.regions.

Furthermore,In addition, unfavorable developments with evolving laws and regulations affecting AI/ML-related products may limit global adoption, impede our strategy and negatively impact our long-term expectations in this area. For example, there is significant uncertainty in the U.S. courts as to how AI/ML technologies affect intellectual property ownership, including copyright protections, and the use of AI/ML-related technology in the development of our products or implementation of AI/ML features in our products could expose us or our customers to claims of copyright infringement or misappropriation. We may not be able to anticipate how to respond to or comply with these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions. The cost of complying with such frameworks could be significant and may increase our operating expenses.

The cost of complying with such frameworks could be significant and may increase our operating expenses. Because AI/ML technology is highly complex and rapidly developing, it is not possible to predict all legal, operational or technological risks that may arise relating offering AI/ML products. It is also unclear how our status as an infrastructure provider for customers developing and deploying AI/ML applications as opposed to developing such applications ourselves will affect the applicability of these regulations on our offerings.

In the ordinary course of business, we process sensitive information. Our data processing activities subject us to numerousvarious data privacy and security obligations, suchincluding as variousregional laws, guidance, industry standards, external and internal privacy and security policies, contractual requirements, directives, regulations, and other obligations relating to data privacy and security.

DigitalOcean is aan leadingagentic inference cloud computingplatform platform,that offeringhelps simple, scalableAI and approachableDigital on-demandNative infrastructureEnterprises build, run, and platformscale servicesintelligent forapplications developerswith atspeed, growingsimplicity, technologyand companies.predictable Oureconomics. The platform simplifiescombines cloudproduction-ready computing,GPU enablinginfrastructure, oura customersfull-stack cloud, model-first inference workflows, and an agentic experience layer to rapidlyreduce operational complexity and accelerate innovationtime andto productivity.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 approachableapproachable, 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 mission-criticala solutionscomprehensive set of cloud platform capabilities which span across Infrastructure-as-a-Service (“IaaS”), including our Droplet virtual machines, storage and networking offerings; Platform-as-a-Service (“PaaS”) and Software-as-a-Service (“SaaS”), including our Managed Hosting, Managed Database, Managed Kubernetes and Marketplace offerings;offerings. andWe 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 ourLarge GPULanguage Droplets,Models Notebooks(“LLMs”); and GenAIGradient PlatformAI offerings.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 computing 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 businessenterprise customers.

Beginning in the fourth quarter of 2024,2025, we redefinedfurther refined our customer categoriescategory naming and disaggregation to provide more insight into our HigherDNE SpendCustomers and $100K+ Customers, whichformerly referred to as Scalers+, to now includedisclose categoriesthe fornumber Builders,of Scalersour $500K+ Customers and Scalers$1M+ (collectively,Customers. our Higher Spend Customers), and we also changed our methodology for calculating customer count. While this has a de minimis impact on the specific customer count, weWe believe itthese providesannual run-rate revenue (“ARR”) based tiers provide a better representation of the growth of customers on our platform during each reporting period.period Ouras our research and development, sales and marketing and customer support investments are primarily focused on these HigherDNE Spend Customers, and we believe their performance is the best indicator of our future growth and performance. Previously, we had reported Scalers as a single category having a wide spend range, and we had also disclosed the number of Learners as part of our total customer count.Customers. See “HigherDigital SpendNative Enterprise Customers” below for a description of how we previously calculated customer count, definitions ofdefined our customer count and categories, our reasons for such changes, and our customer count calculated usingunder our prior definitiondefinitions for each period presented.

Growing our Higher SpendDNE 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 Higher SpendDNE Customers as a percentage of total revenue was 87%60% in 2025, 55% in 2024, 86%and 53% in 2023 and 85% in 2022.2023. As of December 31, 2024,2025, we had approximately 165,00021,000 Higher SpendDNE Customers using our platform to build, deploy and scale applications. The number of Higher SpendDNE Customers increased from approximately 156,00018,000 as of December 31, 20232024 and 142,00017,000 as of December 31, 2022.2023.

Our average revenue per customer (ARPU, as further described in “ARPU” below), has increased from $82.76 in 2022 to $90.99 in 2023 and $100.71 in 2024. We had no material customer concentration as our top 25 customers made up approximately 8%,10%, 7%8% and 10%7% of our revenue in the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively.

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 companiesenterprises have enabled us to drive organic growth and establish a truly global customer base across a broad range of industries. We focus on customer acquisition, our self-service acquisition funnel, customer support and success, community education, inside sales, targeted outside sales, and partnership and channel development. For the years ended December 31, 2024,2025, 20232024 and 2022,2023, our sales and marketing expense was approximately 9%, 9% and 14% of our revenue, respectively.revenue.

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 Higher SpendDNE Customers, and introducingleveraging anour account management function to provide more direct coverage of our top spending accounts. This deeper relationship with our customers willis helphelping 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 closely monitor our net dollar retention (“NDR”), which reflects our ability to retain and grow revenue from our existing customers. While NDR decreasedincreased from 101%98% induring 2023the year ended December 31, 2024 to 98%100% in 2024 as we lappedduring the effectsyear ofended theDecember 202231, price2025 increases,driven weby improved net expansion. We expect to increase our revenue in the future from existing customers through the introduction of new products and features tailored to our Higher SpendDNE 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 HigherAI SpendNative and Cloud Native DNE Customers

We have a history of, and will continue to invest significantly in, delivering innovative products, features and functionality for our Higher SpendDNE Customers. Our product strategy is anchored in addressing the needs of our Higher SpendDNE Customers and other growingdigital technologynative companiesenterprises 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. In 2024, we released a number of new products and product features, including GPU Droplets, our GenAI platform, Autonomous on our Managed Hosting offering to automatically scale resources based on website traffic, and enhancements to our role-based access control functionality and Backups offering. 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.

Augmenting our Platform thoughthrough 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. For example, in 2024, we announced a partnership with Hugging Face, which allows customers to quickly and easily deploy the most popular third-party models on GPU Droplets and significantly simplifies the model deployment process for our customers. 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.

Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from trade tension and/or the imposition and enforceability of trade tariffsrestrictions or other changes in trade policies and related uncertainties (including recent U.S. tariffs imposed and/or threatened to be imposed andimposed, any retaliatory actions taken by other countriescountries, and uncertainties regarding the ability to obtain refunds for previously paid tariffs that have subsequently been invalidated), changes in gross domestic product growth, supply chain disruptions, inflationary pressures, high interest rates, financial and credit market fluctuations, volatility in the capital markets, liquidity concerns at, and failures of, banks and other financial institutions, internationalgeopolitical trade relations,tensions, political turmoil, political instability and transitions of power in regions where we operate, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, the Middle East or elsewhere, could cause a decrease in business investments in information technology and negatively affect the growth of our business and our results of operations.

While our business model provides some resilience against these factors, weWe 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 conditions on our business, results of operations, and willoverall takefinancial appropriateposition measures,remain as necessary, to minimize potential risk exposure.uncertain.

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. The table below includes the impact of our acquisitions beginning in the year in which they were acquired with respect to the metrics disclosed.

(2)Beginning in the firstfourth quarter of 2023,2024, we redefinedchanged ARPUour tomethodology excludefor Testers.calculating ARR. Prior yearsperiods have been recast to conform toreflect the neweffects definition.of the change.

HigherDigital SpendNative Enterprise Customers

We refer to ourcustomers Builders,spending Scalersmore andthan Scalers+$500 customersin a given month collectively as our HigherDigital SpendNative Enterprise (“DNE”) Customers. We believe the total number of our Higher SpendDNE Customers is an important indicator of the growth of our business and future revenue opportunity, and the trends relating to our Builders,$100K+ ScalersCustomers, $500K+ Customers and Scalers$1M+ isCustomers are of particular importance to us as these customers representcomprise a significant majority of our revenue and revenue growth, and they are representative of growingthe technologyCloud companiesnative and AI native DNEs that scalehave scaled on our platform and use multiple products. Beginning in the fourth quarter of 2024, we changed our methodology for calculating customer count as the average number of customers as of the last day of the month for each month in the most recent quarter. We changed our definition because we believe this method is a more accurate reflection of our results during such period as compared to our previously disclosed customer count for the last month of the period. Our modified definition is less susceptible to variability each month, and therefore is more reliable when comparing period-to-period results.platform.

The following table provides a mapping of our current definitions and categories of customers to our prior definitions and categories of customers. Customers are now 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):

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue from our existing customers. We have a history of retaining customers for multiple years and in many cases increasing their spend with us over time. To help us measure our performance in this area, we monitor our net dollar retention rate. We calculate net dollar retention rate monthly by starting with thetotal 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 Period Revenue. 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.

We offer mission-criticala solutionscomprehensive set of cloud platform capabilities which span across Infrastructure-as-a-Service (IaaS),IaaS, including our Droplet virtual machines, storage and networking offerings; Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS),SaaS, including our 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 artificialGradient intelligenceAI and machine learning (AI/ML), including our GPU Droplets, Notebooks and GenAI Platform offerings.Agents. We continue to invest in our platform to further penetrate the growing markets in which we operate.

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 for research and development activities,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 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.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 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 expenses,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.

Restructuring and other charges consist primarily of personnel costs, such as notice period, employee severance payments and termination benefits, as well as stock-based compensation related to vesting of certain equity awards. The restructuring plan was substantially completed in 2023.

Other income, net consists primarily of gain on partial extinguishment of our 2026 Convertible Notes, interest income on our money market funds, amortization of deferreddebt financingissuance feescosts, cash interest expense on our convertibleTerm notes,Loan A, credit facilities and equipment financing obligations, and gains or losses on foreign currency exchange.

As a result, the Consolidatedconsolidated Statementsstatements of Operationsoperations for the year ended December 31, 2023 have been recast for prior periods presented to reflect the effects of the changes in cost of revenue, gross profit, sales and marketing, research and development and total operating expenses. There was no change in income from operations, net income attributable to common stockholders or net income per share attributable to common stockholders for the year ended December 31, 2023 as a result of these reclassifications. The Consolidatedconsolidated Balancebalance Sheets,sheets, Consolidatedconsolidated Statementsstatements of Comprehensivecomprehensive Income,income, Consolidatedconsolidated Statementsstatements of Changeschanges in Stockholders’stockholders’ Equity,equity, and the Consolidatedconsolidated Statementsstatements of Cashcash Flowsflows were not affected by changes in the presentation of these costs.

Revenue increased $87.7 million, or 13%, for the year ended December 31, 20242025 compared to the2024 yeardue endedto December 31, 2023. Thean increase inof revenue was primarily driven by a 11% increase in ARPU to $100.71 from $90.99; and a 15% increase24% in revenue from HigherDNE Spend Customers. The increase in ARPU was primarilyCustomers driven by continued adoption of our products byfrom our existing customers leading to higher average usage of our platform.

Research and development expenses increased $5.6 million, or 4%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023. The change is primarily2024 due to increases of $2.9$14.7 million in professional servicespersonnel costs driven by higher headcount, $3.0 million in software costs, and $1.5 million in personnel costs, mainly driven by increased headcount, and $1.3 million in other operating costs.

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 64%67% in the three months ended MarchJune 31,30, 2026, up from approximately 57%59% in the three months ended MarchJune 31,30, 2025. As of MarchJune 31,30, 2026, we had approximately 22,000 DNE Customers using our platform to build, deploy and scale applications. The number of DNE Customers increased from approximately 20,000 as of MarchJune 31,30, 2025 to approximately 22,000 as of MarchJune 31,30, 2026.

We had no material customer concentration as our top 25 customers made up approximately 16%20% and 9% of our revenue in the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Our annual run-rate revenue (“ARR”) as of MarchJune 31,30, 2026 was $1,032$1,125 million, up from $843$875 million as of MarchJune 31,30, 2025. Our AI Customer ARR as of MarchJune 31,30, 2026 was $170$234 million, up from $53$75 million as of MarchJune 31,30, 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 MarchJune 31,30, 2026 and 2025, our sales and marketing expense was approximately 8% of our revenue.

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 MarchJune 31,30, 2026, 44%47% of our revenue was generated from North America, 24%22% from Europe, 22% from Asia and 10%9% from the rest of the world.

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 closely monitor our net dollar retention (“NDR”), which reflects our ability to retain and grow revenue from our existing customers. NDR increased from 100% during the three months ended March 31, 2025 to 101% during the three months ended March 31, 2026 driven by improved net expansion. 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.

Macroeconomic and Geopolitical Conditions

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.

Research and development expenses consist primarily of personnel costs including salaries, bonuses, benefitsbenefits, 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.

Income Tax Benefit (Expense)

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Revenue increased $47.2$62.5 million, or 22%,29%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The increase was driven by a 35%45% increase in revenue from our DNE Customers primarily attributable to the addition of new customerscustomers, 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 increased for the three months ended MarchJune 31,30, 2026 compared to 2025 primarily due to data center expansions which drove increases of $15.6$17.2 million in depreciation and amortization related to data center infrastructure additions, $9.0$12.4 million in co-location costs, $3.6$3.4 million in third-party licenses and partnership expenses, $2.9 million in ancillary equipment costscosts, and $3.7$3.2 million in other costs, net. Gross profit decreased to 56%55% for the three months ended MarchJune 31,30, 2026 from 61%60% for the three months ended MarchJune 31,30, 2025. The decline in gross margin resulted from incurrence of costs for data center expansions in advance of the ramp in revenue from new data centers.

SalesResearch and marketingdevelopment expenses increased for the three months ended MarchJune 31,30, 2026 compared to 2025 due to an increaseincreases of $1.9$17.8 million in personnel costs driven by higherheadcount headcountgrowth, stock-based compensation for new hire and ongoing grants and annual merit-based salary raises, $2.1 million in third-party development resources and an increase of $0.3$1.4 million in other costs, net.net, partially offset by $3.5 million in additional capitalized internal-use software development costs.

GeneralSales and administrativemarketing expenses increased for the three months ended MarchJune 31,30, 2026 compared to 2025 due to increases of $3.2 million in professional services costs and $1.6$1.3 million in personnel costs driven by higherheadcount headcountgrowth and annual merit-based salary raises.raises, $1.3 million in depreciation and amortization related to purchased software, and $1.0 million in other costs, net.

Other expense, net was $12.1$2.2 million for the three months ended MarchJune 31,30, 2026, compared to other income, net of $3.7$6.8 million for the three months ended MarchJune 31,30, 2025. The change is primarily due to ana $8.3net decrease of $7.2 million in unrealized gains related to foreign currency fluctuations from our operations and an increase of $5.2 million in interest expense mostly driven by interest on our Termfinance Loan Facilityleases and equipment financing arrangements, aoffset $4.1by $3.2 million increasehigher ininterest unrealizedincome losses relateddue to foreignhigher currencyinvestment fluctuationsbalance from ourthe operations, a $2.7 million loss incurred on extinguishmentproceeds of our Termpublic Loanequity Facility,offering and a $0.8 million decreasecompleted in interestMarch income resulting from lower average interest rates.2026.

Income tax expense increaseddecreased $5.5$8.2 million, or 175%,95%, for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. The Company’sdecrease currentin quarterincome provisiontax reflects a normalized statutory rate applied to our pre-tax income, plus permanent items, whereas the prior period provisionexpense was characterizedprimarily driven by aan muchincrease lowerin effectiveexcess tax ratebenefits dueon tostock-based the valuation allowance.compensation.

We have funded our operations since inception primarily with cash flow generated by operations, offerings of our equity and debt securities, 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, and capital expenditures, including our investments in AI/ML and other core product offerings.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 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 paid and payable.million.

We used the proceeds from our 2026 Follow-on Offering to repay $500.0 million of principal outstanding of our Term Loan Facility.Facility Forduring furtherthe informationthree refermonths toended NoteMarch 6.31, Debt in our condensed consolidated financial statements.2026.

On May 4, 2026, the Companywe 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” therein to provide that capitalized leases shall be deemed to be an amount equal to 25% of the capitalized amountamount. thereof.During the three months ended June 30, 2026, we issued a letter of credit under our Revolving Facility for $5.9 million. In July 2026, we issued an additional letter of credit of $9.7 million under our Revolving Facility.

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 have been repurchased during the threesix months ended MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, the Companywe had $668.4$2,759.3 million of estimated undiscounted fixed payment obligations,obligations mostlyprimarily related tofor leases of co-location space at data center facilities,facilities that have not yet commenced and were not included onin the condensed consolidated balance sheets. These leases are expectedscheduled to commence between AprilJuly 2026 and MayJune 2027,2028, and have a weighted-average lease term of 9.811.2 years.

SubsequentAs of June 30, 2026, we expect to Marchreceive 31,servers 2026,and therelated Companyequipment enteredunder intofinance leases primarily for co-location space at data center facilities with total estimated undiscounted payments of $1,273.1$281.6 million.million Thesethat were not included in the condensed consolidated balance sheets. The leases arecommenced expectedin to commence between AprilJuly 2026 and June 2027, and have a weighted-average lease term of 11.04.9 years.

As of MarchJune 31,30, 2026, we had $741.4$767.0 million in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash and money market funds.

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 taxes.interest payments on finance leases, equipment financing obligations and debt.

Net cash provided by operating activities was $46.9$156.9 million and $64.1$156.5 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The change was primarily driven by increased cash collections from higher revenues, partially offset by higher co-location costs resulting from data center expansions,expansions and higher personnel costs due to increased headcount and annual merit-based salary raises, partially offset by increased cash collections from higher revenues.raises.

Net cash used in investing activities was $60.6$149.7 million and $65.0$100.4 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The change was primarily driven by $19.3a $5.2 million decrease in cash payments for capital expenditures, partially offset by an increase of $11.8$51.5 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.

Net cash provided by financing activities was $500.6$505.4 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash used in financing activities of $67.2$96.9 million for the threesix months ended MarchJune 31,30, 2025. The change was primarily driven by proceeds of $888.8$887.9 million from our equity follow-on offering, $120.0 million drawdown on our Term Loan Facility and $11.8$51.5 million from equipment financing arrangements, partially offset by a $500.0 million repayment of our Term Loan Facility, $11.1$38.4 million payments of employee payroll taxes related to net share settlement of equity awards and $9.9$21.7 million of principal repayments for finance leases and financing arrangements for data center equipment.

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 thatthose disclosed under Note 6. DebtDebt, Note 7. Operating Leases, Note 8. Finance Leases and Equipment Financing Obligations, and Note 7.9. Commitments and Contingencies, in our condensed consolidated financial statements.

Adjusted operating income is a new non-GAAP financial measure used for the first time in this Form 10-Q. We are introducing this new non-GAAP financial measure because 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.

(1)For the three and six months ended MarchJune 31,30, 2026 and 2025, primarily consists of interest income from our cash and cash equivalents.

______________ (1)For the three and six months ended MarchJune 31,30, 2026, excludes tax impact which is presented in Non-GAAP income tax adjustment.

(6)Includes 1,750 and 15,957 of potentially dilutive securities related to our 2026 and 2030 Convertible NotesNotes, respectively, as if the entire principal amount outstanding were converted into shares for the three and six months ended MarchJune 31,30, 2026. Includes 8,403 of potentially dilutive securities related to our 2026 Convertible Notes as if the entire principal amount outstanding were converted into shares for the three and six months ended MarchJune 31,30, 2025. 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 10.12. Net Income per Share Attributable to Common Stockholders in our condensed consolidated financial statements.