10q10k10q10k.net

What changed in DigitalOcean Holdings, Inc.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of DigitalOcean Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+581 added−585 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-25)

Top changes in DigitalOcean Holdings, Inc.'s 2025 10-K

581 paragraphs added · 585 removed · 409 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

159 edited+95 added−91 removed79 unchanged
Biggest changeThe components of deferred tax assets and liabilities are as follows: December 31, 2024 2023 Deferred tax assets: Accounts receivable $ 1,261 $ 1,223 Accrued expenses 2,354 982 Capitalized research and development 44,724 30,918 Operating lease liability 32,398 44,443 Net operating loss carryforwards 11,498 28,222 Stock-based compensation 3,389 5,419 Tax credit carryforwards 17,778 18,338 Depreciation and amortization 18,538 — Other 2,593 989 Gross deferred tax assets 134,533 130,534 Less: valuation allowance (109,541) (60,520) Total net deferred tax asset $ 24,992 $ 70,014 Deferred tax liability Depreciation and amortization $ — $ (31,808) Operating lease ROU asset (28,915) (39,745) Total deferred tax liability (28,915) (71,553) Total net deferred tax liability $ (3,923) $ (1,539) As of December 31, 2024, the Company had approximately $26,216 in federal net operating loss (NOL) carryforwards and $15,689 in federal tax credits.
Biggest changeR&D tax credits 3,402 2,810 Valuation allowance release related to acquisition — 1,074 Acquisition related compensation (2,659) (7,811) Impact of intra-entity intellectual property rights transfer 59,627 — Other (3,814) 15 Total income tax (expense) $ (13,207) $ (7,367) Income taxes paid (net of refunds received) for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 are as follows: Federal $ 2,000 State 1,872 Foreign 2,410 Total $ 6,282 Income taxes paid (net of refunds received) for the years ended December 31, 2024, and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 were $19,667 and $2,723, respectively. 107 The components of deferred tax assets and liabilities are as follows: December 31, 2025 2024 Deferred tax assets: Accounts receivable $ 1,334 $ 1,261 Accrued expenses 1,771 2,354 Capitalized research and development 34,541 44,724 Operating lease liability 62,689 32,398 Net operating loss carryforwards 7,030 11,498 Stock-based compensation 3,362 3,389 Tax credit carryforwards 6,498 17,778 Depreciation and amortization 10,788 18,538 Capped call 17,445 — Other 2,365 2,593 Gross deferred tax assets 147,823 134,533 Less: valuation allowance — (109,541) Total net deferred tax asset $ 147,823 $ 24,992 Deferred tax liability Operating lease ROU asset $ (61,605) $ (28,915) Total deferred tax liability (61,605) (28,915) Total net deferred tax asset (liability) $ 86,218 $ (3,923) The Company’s income tax benefit was $52,600 for the year ended December 31, 2025.
General and administrative expenses also include payment processing fees, provision for expected credit losses, professional services, software, business insurance, depreciation and amortization expenses, rent and facilities costs, acquisition-related compensation, and other administrative costs.
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.
Holders of these Convertible Notes may convert their Convertible Notes at their option at any time prior to the close of the business day immediately preceding June 1, 2026, only under the following circumstances: 1. during any calendar quarter commencing after the calendar quarter ending on March 31, 2022, if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter on each applicable trading day; 2. during the five business day period after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the common stock on such trading day and the conversion rate on such trading day; 3. if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; and 4. upon the occurrence of specified corporate events or distributions on the common stock.
Holders of the 2026 Convertible Notes may convert their 2026 Convertible Notes at their option at any time prior to the close of the business day immediately preceding June 1, 2026, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022, if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price of the 2026 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the common stock on such trading day and the conversion rate on such trading day; (3) if the Company calls such 2026 Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; and (4) upon the occurrence of specified corporate events or distributions on the common stock.
The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after December 2, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price then in effect on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date.
The Company may redeem for cash all or any portion of the 2026 Convertible Notes, at its option, on or after December 2, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price then in effect on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Convertible Notes to be redeemed, plus any accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification , for further details. (2) Amount includes $31,279 of recognized stock-based compensation related to the Company’s former CEO’s MRSUs that was estimated to be forfeited and therefore reversed for the year ended December 31, 2023. 104 Note 13.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification, for further details. (2) Amount includes $31,279 of recognized stock-based compensation related to the Company’s former CEO’s MRSUs that was estimated to be forfeited and therefore reversed for the year ended December 31, 2023. Note 13.
Capitalization of Internal-Use Software Development Costs Capitalization of costs incurred in connection with software developed for internal-use commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended.
Internal-Use Software Capitalization of costs incurred in connection with software developed for internal use commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended.
Revenue Revenue Disaggregation Based on the information provided to and reviewed by the Company’s Chief Executive Officer, its Chief Operating Decision Maker, the Company believes that the nature, amount, timing and uncertainty of its revenue and cash flows and how they are affected by economic factors is most appropriately depicted based on the category of its customers.
Revenue Revenue Disaggregation Based on the information provided to and reviewed by the Company’s Chief Executive Officer (“CEO”), its chief operating decision maker, the Company believes that the nature, amount, timing and uncertainty of its revenue and cash flows and how they are affected by economic factors is most appropriately depicted based on the category of its customers.
Stock-based compensation expense for stock options is recognized on a straight-line basis over the requisite service period. Restricted Stock Units The Company grants restricted stock units (RSUs) as incentive awards to its employees. RSUs are payable in shares of the Company’s common stock as the periodic vesting requirements are satisfied.
Stock-based compensation expense for stock options is recognized on a straight-line basis over the requisite service period. Restricted Stock Units The Company grants restricted stock units (“RSUs”) as incentive awards to its employees. RSUs are payable in shares of the Company’s common stock as the periodic vesting requirements are satisfied.
The Company has reclassified $7,972 and $3,448 from sales and marketing and research and development, respectively, to cost of revenue for the year ended December 31, 2023.We believe this refined methodology better reflects the nature of the costs and financial performance of the Company as it operates.
The Company reclassified $7,972 and $3,448 from sales and marketing and research and development, respectively, to cost of revenue for the year ended December 31, 2023. We believe this refined methodology better reflects the nature of the costs and financial performance of the Company as it operates.
Employee Stock Purchase Plan The Company offers an Employee Stock Purchase Plan (ESPP) that permits eligible employees to purchase shares of the Company’s common stock at a discount. The fair value of awards under the ESPP is calculated at the beginning of each offering period. The Company estimates the fair value of the awards using the Black-Scholes option valuation model.
Employee Stock Purchase Plan The Company offers an Employee Stock Purchase Plan (“ESPP”) that permits eligible employees to purchase shares of the Company’s common stock at a discount. The fair value of awards under the ESPP is calculated at the beginning of each offering period. The Company estimates the fair value of the awards using the Black-Scholes option valuation model.
Each $1 of principal of the Convertible Notes will initially be convertible into 5.6018 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $178.51 per share, subject to adjustment as set forth in the indenture governing the Convertible Notes.
Each $1 of principal of the 2026 Convertible Notes will initially be convertible into 5.6018 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $178.51 per share, subject to adjustment as set forth in the indenture governing the Convertible Notes.
Srinivasan received an MRSU with an estimated grant date fair value of approximately $8,000, which vests upon the satisfaction of certain service conditions and the achievement of certain Company stock price goals during a five-year performance period, as described below.
Srinivasan received an MRSU award with an estimated grant date fair value of approximately $8,000, which vests upon the satisfaction of certain service conditions and the achievement of certain Company stock price goals during a five year performance period, as described below.
Such estimates include, but are not limited to, those related to revenue recognition, accounts receivable and related reserves, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, accounting for stock-based compensation including estimation of the probability of performance vesting conditions, the incremental borrowing rate used to determine lease liabilities, valuation allowances against deferred tax assets, fair value of financial instruments, and the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations.
Such estimates include, but are not limited to, those related to revenue recognition, accounts receivable and related reserves, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, accounting for stock-based compensation including estimation of forfeiture rates and the probability of performance vesting conditions, the incremental borrowing rate used to determine lease liabilities, valuation allowances against deferred tax assets, fair value of financial instruments, and the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations.
The Company records 78 changes in the estimate to the allowance for expected credit losses through provision for expected credit losses and reverses the accounts receivable and related allowance after the potential for recovery is considered remote.
The Company records changes in the estimate to the allowance for expected credit losses through provision for expected credit losses and reverses the accounts receivable and related allowance after the potential for recovery is considered remote.
Upon conversion of the Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.
Upon conversion of the 2026 Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.
Additionally, no customer accounted for 10% or more of total revenue during the years ended December 31, 2024, 2023 and 2022, respectively. Stock-Based Compensation Compensation expense related to stock-based transactions, including employee, consultant, and non-employee director stock option awards, is measured based on fair value. Stock-based compensation expense is recognized net of estimated forfeitures in the Consolidated Statements of Operations.
Additionally, no customer accounted for 10% or more of total revenue during the years ended December 31, 2025, 2024 and 2023, respectively. Stock-Based Compensation Compensation expense related to stock-based transactions, including employee, consultant, and non-employee director stock option awards, is measured based on fair value. Stock-based compensation expense is recognized net of estimated forfeitures in the consolidated statements of operations.
The Company believes that the financial institutions that hold its cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company’s customer base consists of a significant number of geographically dispersed customers. No customer represented 10% or more of accounts receivable, net as of December 31, 2024 and 2023.
The Company believes that the financial institutions that hold its cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company’s customer base consists of a significant number of geographically dispersed customers. No customer represented 10% or more of accounts receivable, net as of December 31, 2025 and 2024.
Stock-based compensation is based on awards expected to be purchased at the beginning of the offering period, and therefore is reduced when participants withdraw during the offering period.
Stock-based compensation expense is based on awards expected to be purchased at the beginning of the offering period, and therefore is reduced when participants withdraw during the offering period.
Subsequent to the measurement period or the final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the provision for income taxes in our consolidated statement of operations and could have a material impact on the results of operations and financial position.
Subsequent to the measurement period or the final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the provision for income taxes in the Company’s consolidated statement of operations and could have a material impact on the results of operations and financial position.
Research and development expenses also include amortization of capitalized internal-use software development costs for research and development activities, which are amortized over three years, professional services, software, as well as costs related to the Company’s efforts to add new features to existing offerings, develop new offerings, and ensure the security, performance, and reliability of the Company’s global cloud platform.
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 the Company’s efforts to add new features to existing offerings, develop new offerings, and ensure the security, performance, and reliability of the Company’s global cloud platform.
Stock-based compensation expense for RSUs is recognized on a straight-line basis over the requisite service period. 84 Performance-Based Restricted Stock Units The Company grants performance-based restricted stock units (PRSUs) primarily to members of the executive team and, in limited instances, to other employees in connection with a specific transaction.
Stock-based compensation expense for RSUs is recognized on a straight-line basis over the requisite service period. 84 Performance-Based Restricted Stock Units The Company grants performance-based restricted stock units (“PRSUs”) primarily to members of the executive team and, in limited instances, to other employees in connection with a specific transaction.
Stockholders’ Equity Common Stock The Company’s amended and restated certificate of incorporation authorizes the issuance of common and preferred stock. Holders of common stock are entitled to one vote per share. As of December 31, 2024 and 2023, the Company was authorized to issue 750,000,000 shares of common stock with a par value of $0.000025 per share.
Stockholders’ Equity Common Stock The Company’s amended and restated certificate of incorporation authorizes the issuance of common and preferred stock. Holders of common stock are entitled to one vote per share. As of December 31, 2025 and 2024, the Company was authorized to issue 750,000,000 shares of common stock with a par value of $0.000025 per share.
Concentration of Credit Risk The amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, marketable securities, restricted cash, and trade accounts receivable are exposed to concentrations of credit risk. Although the Company maintains cash and cash equivalents with multiple financial institutions, the deposits, at times, may exceed federally insured limits.
Concentration of Credit Risk The amounts reflected in the consolidated balance sheets for cash and cash equivalents, restricted cash, and trade accounts receivable are exposed to concentrations of credit risk. Although the Company maintains cash and cash equivalents with multiple financial institutions, the deposits, at times, may exceed federally insured limits.
If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount of the reporting unit exceeds its fair value, up to the amount of goodwill of the reporting unit. Indefinite-lived intangible assets consist of Internet Protocol (IP) addresses needed for customers to host their server online.
If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount of the reporting unit exceeds its fair value, up to the amount of goodwill of the reporting unit. Indefinite-lived intangible assets consist of Internet Protocol (“IP”) addresses needed for customers to host their server online.
No impairment charges for goodwill and indefinite-lived intangible assets have been recorded during the years ended December 31, 2024, 2023 or 2022. Definite-Lived Intangible Assets Intangible assets with definite lives consist of acquired developed technology, trade name, customer relationships, content and brand.
No impairment charges for goodwill and indefinite-lived intangible assets have been recorded during the years ended December 31, 2025, 2024 or 2023. Definite-Lived Intangible Assets Intangible assets with definite lives consist of acquired developed technology, trade name, customer relationships, content and brand.
For the years ended December 31, 2024 and 2023, the Company recorded an acquisition-related compensation expense of $5,985 and $4,135, respectively, included in General and administrative in the accompanying Consolidated Statements of Operations. All contingent compensation costs were paid during the year ended December 31, 2024.
For the years ended December 31, 2024 and 2023, the Company recorded acquisition-related compensation expense of $5,985 and $4,135, respectively, included in general and administrative expenses in the accompanying consolidated statements of operations. All contingent compensation costs were paid during the year ended December 31, 2024.
The Company uses the U.S. Treasury yield for our risk-free interest rate that corresponds with the expected term. The Company utilizes a dividend yield of zero, as the Company does not currently issue dividends, nor does the Company expect to do so in the future.
The Company uses the U.S. Treasury yield for its risk-free interest rate that corresponds with the expected term. The Company utilizes a dividend yield of zero, as the Company does not currently issue dividends, nor does the Company expect to do so in the future.
ESPP In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (ESPP).
ESPP In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (“ESPP”).
Certain tax attributes may be subject to an annual limitation as a result of the issuance of stock, which may constitute a change of ownership as defined under Internal Revenue Code Section 382. The Internal Revenue Code Section 382 study is in process as of December 31, 2024.
Certain tax attributes may be subject to an annual limitation as a result of the issuance of stock, which may constitute a change of ownership as defined under Internal Revenue Code Section 382. The Internal Revenue Code Section 382 study is in process as of December 31, 2025.
Employee Benefit Plan The Company offers U.S. employees a voluntary retirement savings plan under Section 401(k) of the Internal Revenue Code (401(k) Plan), which permits employees to elect to contribute a portion of their pre-tax wages to the 401(k) Plan.
Employee Benefit Plan The Company offers U.S. employees a voluntary retirement savings plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”), which permits employees to elect to contribute a portion of their pre-tax wages to the 401(k) Plan.
Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.
The amendments should be applied on a prospective basis for financial statements issued after the adoption date, although retrospective application is permitted. The Company is currently evaluating the impact of adoption on its financial disclosures. Note 3.
The amendments should be applied on a prospective basis for financial statements issued after the adoption date, although retrospective application is permitted. The Company is currently evaluating the impact of adoption on its financial disclosures.
Basic and diluted net loss per common share attributable to common stockholders is presented in conformity with the treasury stock method required for stock-based compensation, and in conformity with the if-converted method required for the convertible notes.
Basic and diluted net income per common share attributable to common stockholders is presented in conformity with the treasury stock method required for stock-based compensation, and in conformity with the if-converted method required for convertible notes.
Note 10. Commitments and Contingencies Purchase Commitments As of December 31, 2024, the Company had long-term commitments and purchase orders with various software license, bandwidth, network services and third-party license vendors.
Note 10. Commitments and Contingencies Purchase Commitments As of December 31, 2025, the Company had long-term commitments and purchase orders with various software license, bandwidth, network services and third-party license vendors.
The Tax Act requires an entity to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low Taxed Income (GILTI) as a current period expense when incurred (the period cost method) or (2) factoring such amounts into an entity’s measurement of its deferred taxes (the deferred method).
The Tax Act requires an entity to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low Taxed Income (“GILTI”) as a current period expense when incurred (the period cost method) or (2) factoring such amounts into an entity’s measurement of its deferred taxes (“the deferred method”).
All purchased shares were retired and are reflected as a reduction of Common stock for the par value of shares, with the excess applied to additional paid-in capital and accumulated deficit. Note 12. Stock-Based Compensation Equity Incentive Plan In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Equity Incentive Plan (2021 Plan).
All purchased shares were retired and are reflected as a reduction of common stock for the par value of shares, with the excess applied to additional paid-in capital. Note 12. Stock-Based Compensation Equity Incentive Plan In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Equity Incentive Plan (“2021 Plan”).
Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include accounts of the Company and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include accounts of the Company and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
If the stock price targets are achieved during the first three years following the grant date (First Performance Period), 50% of the eligible MRSUs will vest on the third anniversary of the grant date and the remaining 50% of the eligible MRSUs will vest on the fifth anniversary of the grant date.
If the stock price targets are achieved during the first three years following the grant date (“First Performance Period”), 50% of the eligible MRSUs will vest on the third anniversary of the grant date and the remaining 50% of the eligible MRSUs will vest on the fifth anniversary of the grant date.
The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned during the performance period is recognized as an adjustment to earnings in the period of the revision. Market-Based Restricted Stock Units The Company has granted market-based restricted stock units (MRSUs) to its chief executive officer.
The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned during the performance period is recognized as an adjustment to stock-based compensation expense in the period of the revision. Market-Based Restricted Stock Units The Company has granted market-based restricted stock units (“MRSUs”) to its chief executive officer.
Net Income (Loss) per Share Attributable to Common Stockholders Basic and diluted net income or loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. The Company has 10,000,000 shares of Preferred Stock that were authorized but never issued and outstanding.
Net Income per Share Attributable to Common Stockholders Basic and diluted net income or loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. The Company has 10,000,000 shares of Preferred Stock that were authorized but never issued and outstanding. Holders of common stock are entitled to one vote per share.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Tax Act”) was signed into law.
Interest and penalties related to income tax liabilities are included in income tax expense. During the years ended December 31, 2024, 2023 and 2022, the Company recognized $2,864, $1,816 and $1,540, respectively, in interest expense and penalties. The Company has not made any payments on interest and penalties as of December 31, 2024.
Interest and penalties related to income tax liabilities are included in income tax expense. During the years ended December 31, 2025, 2024 and 2023, the Company recognized $7,446, $2,864 and $1,816, respectively, in interest expense and penalties. The Company has not made any payments on interest and penalties as of December 31, 2025.
As discussed in Note 4. goodwill, was $348,674 as of December 31, 2024 and $348,322 as of December 31, 2023, and represents the excess purchase price over the fair value of identifiable net assets acquired in a business combination. As of December 31, 2024, the Company has a single reporting unit.
As discussed in Note 4., goodwill was $348,674 as of December 31, 2025 and 2024, and represents the excess purchase price over the fair value of identifiable net assets acquired in business combinations. As of December 31, 2025, the Company has a single reporting unit.
Holders of common stock are entitled to one vote per share. Under the two-class method, net income (loss) is attributed to common stockholders and participating securities based on their participation rights. Basic earnings per share is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.
Under the two-class method, net income (loss) is attributed to common stockholders and participating securities based on their participation rights. Basic earnings per share is computed by dividing net income or loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.
A cumulative percentage of the MRSU target is earned based on the achievement of stock price goals, measured based on the average of the Company’s closing stock price over a consecutive 60 trading day period during the performance period as set forth in the table below: Tranche Company Stock Price Target Total Payout 1 $65.00 25% of Target MRSUs 2 $100.00 50% of Target MRSUs 3 $135.00 100% of Target MRSUs 4 $170.00 150% of Target MRSUs The target number of achievable shares is 193,178 and the maximum number of achievable shares is 289,767.
A cumulative percentage of the MRSU target is earned based on the achievement of stock price goals, measured based on the average of the Company’s closing stock price over a consecutive 60 trading day period during the performance period as set forth in the table below: Tranche Company Stock Price Target Total Payout 1 $65.00 25% of Target MRSUs 2 $100.00 50% of Target MRSUs 3 $135.00 100% of Target MRSUs 4 $170.00 150% of Target MRSUs The target number of achievable shares is 193,178 and the maximum number of achievable shares is 289,767, with a weighted-average grant date fair value of $27.61 per share.
Non-direct response advertising expenses were $9,958, $7,857 and $19,914 for the years ended December 31, 2024, 2023 and 2022, respectively. Income Taxes The Company accounts for income taxes pursuant to the asset and liability method.
Non-direct response advertising expenses were $9,651, $9,958 and $7,857 for the years ended December 31, 2025, 2024 and 2023, respectively. Income Taxes The Company accounts for income taxes pursuant to the asset and liability method.
The Company includes the amortization of assets that are recorded under finance leases in depreciation expense included in cost of revenue in the Consolidated Statements of Operations. Interest expense is included in interest expense in the Consolidated Statements of Operations.
The Company includes the amortization of assets that are recorded under finance leases and equipment financing obligations in depreciation expense in cost of revenue in the consolidated statements of operations. Interest expense is included in interest expense in the consolidated statements of operations.
On July 5, 2023 (the Paperspace Acquisition Date), the Company consummated a business combination acquiring 100% of Paperspace for total cash consideration of $100,399. Included in the consideration paid was a contribution of 87 $11,100 to an escrow account held by a third party on the Paperspace Acquisition Date to support certain post-closing indemnification obligations.
On July 5, 2023, the Company acquired 100% of Paperspace for total cash consideration of $100,399, which was accounted for as a business combination. Included in the consideration paid was a contribution of $11,100 to an escrow account held by a third party on the Paperspace Acquisition Date to support certain post-closing indemnification obligations.
The following table presents the changes in our allowance for expected credit losses for the period presented: December 31, 2024 2023 Beginning balance $ 5,848 $ 6,099 Provision for expected credit losses 16,446 15,357 Write-offs and other (16,354) (15,608) Ending balance $ 5,940 $ 5,848 Fair Value of Financial Instruments Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The following table presents the changes in the allowance for expected credit losses for the period presented: December 31, 2025 2024 Beginning balance $ 5,940 $ 5,848 Provision for expected credit losses 17,985 16,446 Write-offs and other (17,551) (16,354) Ending balance $ 6,374 $ 5,940 78 Fair Value of Financial Instruments Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Under this plan, the Company matches 100% of participants’ contributions up to 3% of compensation and 50% of participants’ contributions between 3% and 5%. For the years ended December 31, 2024, 2023 and 2022, the Company incurred expense of $2,944, $2,987 and $3,846 related to the 401(k) Plan, respectively. 109 Note 18.
Under this plan, the Company matches 100% of participants’ contributions up to 3% of compensation and 50% of participants’ contributions between 3% and 5%. For the years ended December 31, 2025, 2024 and 2023, the Company incurred expense of $3,223, $2,944 and $2,987 related to the 401(k) Plan, respectively. Note 17.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2024 2023 2022 Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) Other comprehensive (loss) income: Foreign currency translation adjustments, net of taxes (1,057) 345 (411) Unrealized gain (loss) on marketable securities, net of taxes 12 1,251 (1,263) Other comprehensive (loss) income (1,045) 1,596 (1,674) Comprehensive income (loss) $ 83,447 $ 21,005 $ (29,478) See accompanying notes to consolidated financial statements 73 DIGITALOCEAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2025 2024 2023 Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 Other comprehensive income (loss): Foreign currency translation adjustments, net of taxes 537 (1,057) 345 Unrealized gain on marketable securities, net of taxes — 12 1,251 Other comprehensive income (loss) 537 (1,045) 1,596 Comprehensive income $ 259,799 $ 83,447 $ 21,005 See accompanying notes to consolidated financial statements 73 DIGITALOCEAN HOLDINGS, INC.
There were 21,442,582 shares available for grant under the 2021 Plan as of December 31, 2024. Stock Options Stock options granted have a maximum term of ten years from the grant date, are exercisable upon vesting and typically vest over a period of four years.
There were 25,197,755 shares available for grant under the 2021 Plan as of December 31, 2025. 100 Stock Options Stock options granted have a maximum term of ten years from the grant date, are exercisable upon vesting and typically vest over a period of four years.
The significant segment expenses reviewed by the CODM on a consolidated basis include cost of revenue, research and development, sales and marketing, and general and administrative as reported in the Consolidated Statements of Operations on a consolidated basis.
The significant segment expenses reviewed by the CODM on a consolidated basis include cost of revenue, research and development, sales and marketing, and general and administrative as reported in the consolidated statements of operations on a consolidated basis. Other segment expense categories include other income, net and income tax benefit (expense) as reported in the consolidated statements of operations.
The amount of net operating loss and tax credits carryforwards reflected in the financial statements differ from the amounts reported on the tax return due to uncertain tax positions related to tax laws and regulations that are subject to varied interpretation by the tax authorities.
The Company had $10,014 of foreign NOLs that do not expire. The amount of net operating loss and tax credits carryforwards reflected in the financial statements differ from the amounts reported on the tax return due to uncertain tax positions related to tax laws and regulations that are subject to varied interpretation by the tax authorities.
The aggregate intrinsic value of exercised options for the years ended December 31, 2024, 2023 and 2022 was $51,479, $156,819 and $81,912, respectively. No options were granted during the year ended December 31, 2024.
The aggregate intrinsic value of exercised options for the years ended December 31, 2025, 2024 and 2023 was $12,475, $51,479 and $156,819, respectively. No options were granted and vested during the year ended December 31, 2025.
As a result, the Consolidated Statements of Operations 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.
As a result, the consolidated statements of operations have been recast for the year ended December 31, 2023 to reflect the effects of the changes in cost of revenue, gross profit, sales and marketing, research and development and total operating expenses.
Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates are periodically reviewed to consider changes in circumstances, facts and experience.
Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Year Ended December 31, 2024 2023 2022 Balance of unrecognized tax benefits at beginning of year $ 20,337 $ 17,044 $ 721 Additions based on tax positions related to the current period 5,209 1,571 3,014 Additions for tax positions of prior periods 816 1,947 2,833 Additions recorded as part of business combination — — 11,106 Reductions for tax positions of prior periods (3,162) — (630) Release due to expiration of statute of limitations (808) (225) — Balance of unrecognized tax benefits at end of year $ 22,392 $ 20,337 $ 17,044 Amounts included in the balance of unrecognized tax benefits as of December 31, 2024, 2023 and 2022, if recognized, would affect the effective tax rate upon recognition.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Year Ended December 31, 2025 2024 2023 Balance of unrecognized tax benefits at beginning of year $ 22,392 $ 20,337 $ 17,044 Additions based on tax positions related to the current period 4,325 5,209 1,571 Additions for tax positions of prior periods 3,629 816 1,947 Reductions for tax positions of prior periods (2,277) (3,162) — Release due to expiration of statute of limitations (1,241) (808) (225) Balance of unrecognized tax benefits at end of year $ 26,828 $ 22,392 $ 20,337 Amounts included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023, if recognized, would affect the effective tax rate upon recognition.
The Company capitalized costs related to the development of computer software for internal use of $11,167, $6,958 and $10,636 for the years ended December 31, 2024, 2023 and 2022, respectively, which is included in internal-use software costs within Property and equipment, net.
Capitalized costs related to the development and purchase of computer software for internal use were $27,410, $11,167 and $6,958 for the years ended December 31, 2025, 2024 and 2023 respectively, which is included in internal-use software costs within property and equipment, net.
The Company does not include options for renewal periods or periods beyond the termination dates in the lease in the measurement of ROU assets and lease liabilities until it is reasonably certain that those options will be exercised based on management's assessment of various relevant factors including economic, entity specific, and market-based factors among others.
The Company does not include options for renewal periods or periods beyond the termination dates in the lease in the measurement of ROU assets and lease liabilities until it is reasonably certain that those options will be exercised based on management's assessment of various relevant factors including economic, entity specific, and market-based factors among others. 79 The Company has lease agreements with lease and non-lease components, which it has elected to combine for all asset classes.
The Convertible Notes are senior unsecured obligations of the Company and do not bear interest, and the principal amount of the Convertible Notes does not accrete. The Convertible Notes will mature on December 1, 2026 unless earlier converted, redeemed, or repurchased. The net proceeds from this offering were $1,461,795 after deducting underwriting fees, expenses and commissions.
The 2026 Convertible Notes are senior unsecured obligations of the Company and do not bear interest, and the principal amount of the 2026 Convertible Notes does not accrete. The net proceeds from this offering were $1,461,795 after deducting underwriting fees, expenses and commissions.
For the year ended December 31, 2022, the Company recognized $1,202 in sublease income from operating leases. Sublease income is recorded as a reduction to general and administrative expenses in the Consolidated Statements of Operations.
For the years ended December 31, 2024 and 2023, the Company recognized $1,677 in sublease income for operating leases. Sublease income is recorded as a reduction to general and administrative expenses in the consolidated statements of operations.
As of December 31, 2024, tax years 2018 and later remain open for examination. ASC 740 clarifies the accounting and reporting for uncertainties in income tax law and prescribes a comprehensive model for financial statement recognition measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
ASC 740 clarifies the accounting and reporting for uncertainties in income tax law and prescribes a comprehensive model for financial statement recognition measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
Amounts owed to the related party affiliate are recorded to Sales and marketing in the Consolidated Statements of Operations. During the year ended December 31, 2024, the Company recognized related party affiliate expenses of $2,158, which consist of the marketing and referral activity fee of $1,400, reimbursable compensation cost of $337, and referral fees of $421.
During the year ended December 31, 2024, the Company recognized related party affiliate expenses of $2,158, which consist of the marketing and referral activity fee of $1,400, reimbursable compensation cost of $337, and referral fees of $421.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03).
Recent Accounting Pronouncements – Pending Adoption In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”).
The actual number of shares that are received under the 2024 LTIP PRSU may be higher or lower than the target shares based on the actual financial metrics achieved relative to the target financial metrics for fiscal year 2024.
The actual number of shares that are received under the 2025 LTIP PRSUs may be higher or lower than the target shares based on the actual financial metrics achieved relative to the target financial metrics for fiscal year 2025, with the maximum number of achievable shares of 436,972.
Lease payments used to measure lease liabilities include fixed lease payments at the lease commencement date, including rental escalation provisions. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the lease terms and economic environment at commencement date in determining the present 79 value of future payments.
As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the lease terms and economic environment at commencement date in determining the present value of future payments.
The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $14,197 as of December 31, 2024. As of December 31, 2024, the Company recognized $6,475 of interest and penalties related to unrecognized tax benefits in the provision for taxes.
The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $17,599 as of December 31, 2025. As of December 31, 2025, the Company recognized $13,921 of interest and penalties related to unrecognized tax benefits in the provision for taxes.
Net Income (Loss) per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted net income (loss) per share: Year Ended December 31, (In thousands, except per share amounts) 2024 2023 2022 Basic net income (loss) per share: Numerator: Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) Denominator: Weighted average shares used to compute net income (loss) per share 91,634 90,141 100,806 Basic net income (loss) per share attributable to common stockholders $ 0.92 $ 0.22 $ (0.28) Diluted net income (loss) per share: Numerator: Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) Denominator: Number of shares used in basic calculation 91,634 90,141 100,806 Weighted-average effect of dilutive securities: Stock Options 1,414 5,698 — RSUs 1,370 495 — PRSUs 85 81 — Number of shares used in diluted calculation 94,503 96,415 100,806 Diluted net income (loss) per share attributable to common stockholders $ 0.89 $ 0.20 $ (0.28) Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows: Year Ended December 31, 2024 2023 2022 Stock Options 1 41 4 RSUs 1,200 1,574 434 PRSUs — 14 — Convertible Notes 8,403 8,403 8,403 Total 9,604 10,032 8,841 Note 14.
Net Income per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted net income per share: Year Ended December 31, (In thousands, except per share amounts) 2025 2024 2023 Basic net income per share: Numerator: Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 Denominator: Weighted-average shares used to compute net income (loss) per share 91,481 91,634 90,141 Basic net income per share attributable to common stockholders $ 2.83 $ 0.92 $ 0.22 Diluted net income per share: Numerator: Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 Interest expense on dilutive convertible notes, net of tax 5,693 — — Net income used in diluted calculation $ 264,955 $ 84,492 $ 19,409 Denominator: Number of shares used in basic calculation 91,481 91,634 90,141 Weighted-average effect of dilutive securities: Stock Options 750 1,414 5,698 RSUs 1,068 1,370 495 PRSUs 98 85 81 2026 Convertible Notes 5,869 — — 2030 Convertible Notes 6,077 — — Number of shares used in diluted calculation 105,343 94,503 96,415 Diluted net income per share attributable to common stockholders $ 2.52 $ 0.89 $ 0.20 104 Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows: Year Ended December 31, 2025 2024 2023 Stock Options — 1 41 RSUs 1,724 1,200 1,574 PRSUs — — 14 2026 Convertible Notes — 8,403 8,403 Total 1,724 9,604 10,032 Note 14.
Amortization expense for the next five years and 92 thereafter, based on valuations and determinations of useful lives, is expected to be as follows: 2025 $ 20,049 2026 19,657 2027 17,557 2028 9,198 2029 3,902 Thereafter 2,533 Total estimated future intangible amortization expense $ 72,896 Note 5.
Amortization expense for the next five years and thereafter, based on valuations and determinations of useful lives, is expected to be as follows: 90 2026 $ 19,657 2027 17,557 2028 9,198 2029 3,902 2030 950 Thereafter 1,583 Total estimated future intangible amortization expense $ 52,847 Note 5.
MRSU activity for the year ended December 31, 2024 was as follows: Shares Weighted-Average Grant Date Fair Value (Per share) Unvested balance at January 1, 2024 3,000,000 $ 25.12 Granted 289,767 27.61 Forfeited or cancelled (3,000,000) 25.12 Unvested balance at December 31, 2024 289,767 $ 27.61 The following assumptions were used in the Monte Carlo simulation model to estimate the grant date fair value and the derived service period of the MRSUs: 103 Year Ended December 31, 2024 Expected volatility 71.3% Expected term (in years) 5.0 Risk-free interest rate 4.1% Dividend yield —% Stock price at grant date (per share) $39.43 Weighted-average fair value of awards (per share) $27.61 As of December 31, 2024, there was $6,114 of unrecognized stock-based compensation related to the current CEO’s MRSU award that is expected to be recognized over a weighted-average period of 4.17 years.
The following assumptions were used in the Monte Carlo simulation model to estimate the grant date fair value and the derived service period of the MRSUs: Expected volatility 71.3% Expected term (in years) 5.0 Risk-free interest rate 4.1% Dividend yield —% Stock price at grant date (per share) $39.43 Weighted-average fair value of awards (per share) $27.61 As of December 31, 2025, there was $3,983 of unrecognized stock-based compensation related to the MRSU award that is expected to be recognized over a weighted-average period of 3.2 years.
The total minimum future commitments as of December 31, 2024 were as follows: 99 2025 $ 12,233 2026 4,654 2027 1,844 2028 — 2029 — Thereafter — Total purchase commitments $ 18,731 Letter of Credit In conjunction with the execution of an office space operating lease, a letter of credit in the aggregate amount of $1,747 was issued and outstanding as of December 31, 2024 and 2023.
The total minimum future commitments as of December 31, 2025 were as follows: 2026 $ 20,174 2027 20,227 2028 622 Total purchase commitments $ 41,023 99 Letter of Credit In conjunction with the execution of an office space operating lease, a letter of credit in the aggregate amount of $1,747 was issued and outstanding as of December 31, 2024.
If not utilized, the federal tax credit carryforwards will expire at various dates beginning in 2039. The federal NOL carryforward can be carried forward indefinitely. As of December 31, 2024, the Company had approximately $17,650 in state NOL carryforwards and $2,126 in California tax credits. If not utilized, the state NOL carryforwards will expire at various dates beginning in 2030.
The federal NOL carryforward can be carried forward indefinitely. As of December 31, 2025, the Company had approximately $13,212 in state NOL carryforwards and $1,569 in California tax credits. If not utilized, the state NOL carryforwards will expire at various dates beginning in 2031. The California state tax credits can be carried forward indefinitely.
The Company performs an assessment of indefinite-lived intangible assets utilizing either a qualitative or quantitative impairment test. The qualitative impairment test assesses several factors to determine whether it is more likely than not that the fair value of the assets are less than its respective carrying amounts.
The qualitative impairment test assesses several factors to determine whether it is more likely than not that the fair value of the assets are less than its respective carrying amounts.
As of December 31, 2024, the weighted-average remaining amortization period for amortizable intangible assets was five years for developed technology, six years for customer relationships, ten years for trade name, and three years for content. Brand is fully amortized as of December 31, 2024.
As of December 31, 2025, the weighted-average estimated useful life of intangible assets is five years for developed technology, six years for customer relationships, and ten years for trade name. Brand and content are fully amortized as of December 31, 2025 and 2024, respectively.
No shares of preferred stock were issued or outstanding as of December 31, 2024 and 2023. Share Buyback Program On February 14, 2023, the Company’s Board of Directors approved the repurchase of up to an aggregate of $500,000 of the Company’s common stock (2023 Share Buyback Program).
No shares of preferred stock were issued or outstanding as of December 31, 2025 and 2024. Share Buyback Program On February 20, 2024, the Company’s Board of Directors approved the repurchase of up to an aggregate of $140,000 of its common stock (“2024 Share Buyback Program”), which was completed in July 2025.
Goodwill and Indefinite-Lived Intangible Assets Goodwill is an asset representing the future economic benefit arising from other assets acquired in a business combination which are not individually identified and separately recognized. The Company does not amortize goodwill. Goodwill has resulted from prior acquisitions, including Cloudways Ltd. (Cloudways) on September 1, 2022 and Paperspace Co. (Paperspace) on July 5, 2023.
Goodwill and Indefinite-Lived Intangible Assets Goodwill is an asset representing the future economic benefit arising from other assets acquired in a business combination which are not individually identified and separately recognized. Goodwill has resulted from prior acquisitions.
Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel costs of the Company’s 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 professional services.
Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel costs of the Company’s sales and marketing and customer success employees, including salaries, bonuses, benefits, commissions and stock-based compensation.
As none of the above circumstances have occurred as of December 31, 2024, the Convertible Notes were not convertible for the fiscal year ended December 31, 2024. 97 On or after June 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at the option of the holder regardless of the foregoing circumstances.
On or after June 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2026 Convertible Notes at the option of the holder regardless of the foregoing circumstances.
Stock-Based Compensation Stock-based compensation is included in the Consolidated Statements of Operations as follows: Year Ended December 31, 2024 2023 2022 Cost of revenue (1) $ 5,889 $ 5,685 $ 1,820 Research and development (1) 38,285 42,040 39,354 Sales and marketing (1) 10,093 13,177 14,909 General and administrative (2) 36,278 23,508 49,746 Restructuring and other charges — 3,937 — Total $ 90,545 $ 88,347 $ 105,829 (1) Amounts for year ended December 31, 2023 have been recast to conform with current period presentation.
The Company recorded stock-based compensation associated with the ESPP of $2,312, $1,676 and $2,290 for the years ended December 31, 2025, 2024 and 2023, respectively. 103 Stock-Based Compensation Stock-based compensation is included in the consolidated statements of operations as follows: Year Ended December 31, 2025 2024 2023 Cost of revenue (1) $ 5,435 $ 5,889 $ 5,685 Research and development (1) 34,939 38,285 42,040 Sales and marketing (1) 11,646 10,093 13,177 General and administrative (2) 28,295 36,278 23,508 Restructuring and other charges — — 3,937 Total $ 80,315 $ 90,545 $ 88,347 ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.

… 265 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

135 edited+30 added−26 removed333 unchanged
Biggest changeData Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. 36 If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
Biggest changeIf we are unable to transfer personal data lawfully, or if the requirements for a compliant transfer become unduly burdensome, we could experience significant adverse consequences, including disruptions to or degradation of our operations, increased compliance costs, limitations on our ability to work with customers, partners, vendors, or other third parties, or the need to relocate some or all of our data processing or business operations to other jurisdictions at substantial expense.
Although our credit agreement 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 obligations, such as trade payables.
Although our Credit Agreement 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.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of voting stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; 43 • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of voting stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
Cyber-attacks, computer malware, viruses, supply chain attacks, social engineering (including through 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.
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 expect to continue to expend substantial financial and other resources on: • our technology infrastructure, including systems architecture, scalability, availability, performance, security, hardware, equipment and other capital expenditures, including expenses to increase or maintain data center capacity and to successfully optimize and operate data center facilities; • product development, including the development of new products and new functionality for our platform as well as investments in both further optimizing our existing products and infrastructure; • our sales and marketing organization to engage our existing and prospective customers, increase brand awareness and drive adoption of our products; • strategic investments and acquisitions; and 15 • general administration, including increased legal and accounting expenses.
In addition, we expect to continue to expend substantial financial and other resources on: • our technology infrastructure, including systems architecture, scalability, availability, performance, security, hardware, equipment and other capital expenditures, including expenses to increase or maintain data center capacity and to successfully optimize and operate data center facilities; • product development, including the development of new products and new functionality for our platform as well as investments in both further optimizing our existing products and infrastructure; • our sales and marketing organization to engage our existing and prospective customers, increase brand awareness and drive adoption of our products; • strategic investments and acquisitions; and • general administration, including increased legal and accounting expenses.
Any security breach or other security incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our products, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity 21 obligations, and adversely affect our business, financial condition and results of operations.
Any security breach or other security incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage to our brand, reduce the demand for our products, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, and adversely affect our business, financial condition and results of operations.
For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20.0 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
Furthermore, if these services become unavailable or are no longer available to us on commercially reasonable terms due to circumstances beyond our control, such as an acquisition of our third-party provider, our expenses could increase, our ability to access certain data could be interrupted, and our processes for providing certain services to our customers could be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could adversely affect our business.
Furthermore, if these services become unavailable or are no longer available to us on commercially reasonable terms due to circumstances beyond our control, such as an acquisition of our third-party provider, our expenses could increase, our ability to access certain data 24 could be interrupted, and our processes for providing certain services to our customers could be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could adversely affect our business.
These restrictions limit the ability of our subsidiaries, and effectively limit our ability to, among other things: • incur or guarantee additional debt or issue disqualified equity interests; 30 • pay dividends and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make certain intercompany dividends, distributions, payments or transfers; and • transfer or sell assets.
These restrictions limit the ability of our subsidiaries, and effectively limit our ability to, among other things: • incur or guarantee additional debt or issue disqualified equity interests; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make certain intercompany dividends, distributions, payments or transfers; and • transfer or sell assets.
We are not restricted under the terms of the indenture governing the Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt, repurchasing our stock, pledging our assets, making investments, paying dividends, guaranteeing debt or taking a number of other actions that are not limited by the terms of the indenture governing the Convertible Notes that could have the effect of diminishing our ability to make payments on the Convertible Notes when due.
We are not restricted under the terms of the indenture governing the 2030 Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt, repurchasing our stock, pledging our assets, making investments, paying dividends, guaranteeing debt or taking a number of other actions that are not limited by the terms of the indenture governing the 2030 Convertible Notes that could have the effect of diminishing our ability to make payments on the 2030 Convertible Notes when due.
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 17 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.
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.
Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. We rely on third parties to operate critical business systems to process sensitive information in a variety of contexts including, without limitation, data center facilities, encryption and authentication technology, employee email, 20 content delivery to customers, and other functions.
Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. We rely on third parties to operate critical business systems to process sensitive information in a variety of contexts including, without limitation, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provision of federal district courts of the 43 United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court.
For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provision of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court.
If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.
If one or more holders elect to convert their 2030 Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.
If we are unable to respond to these changes in a cost-effective manner, our platform may become less marketable and less competitive or obsolete, and our business, financial condition and results of operations could be adversely affected. We rely on third-party data center providers to ensure the functionality of our platform and products.
If we are unable to respond to these changes in a cost-effective manner, our platform may become less marketable and less competitive or obsolete, and our business, financial condition and results of operations could be adversely affected. We rely on third-party data center providers to help ensure the functionality of our platform and products.
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 24 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 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.
Monitoring, initiating and defending against legal actions are time-consuming for our management, may be expensive and may detract from our ability to fully 26 focus our internal resources on our business activities. We may not be successful in having any lawsuits dismissed or settled within the limits of our insurance coverage.
Monitoring, initiating and defending against legal actions are time-consuming for our management, may be expensive and may detract from our ability to fully focus our internal resources on our business activities. We may not be successful in having any lawsuits dismissed or settled within the limits of our insurance coverage.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax 29 laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
Our customers’ decision whether to increase their usage or subscribe to additional products is driven by a number of factors, including customer satisfaction with the security, performance, and reliability of our platform and existing products, the functionality of any new products we may offer, 16 general economic conditions, and customer reaction to our pricing model.
Our customers’ decision whether to increase their usage or subscribe to additional products is driven by a number of factors, including customer satisfaction with the security, performance, and reliability of our platform and existing products, the functionality of any new products we may offer, general economic conditions, and customer reaction to our pricing model.
If our capacity needs are reduced, or if we decide to close a data center, we may nonetheless be committed to perform our obligations under the applicable leases 22 including, among other things, paying the base rent for the balance of the lease term and continuing to pay for any servers or other equipment.
If our capacity needs are reduced, or if we decide to close a data center, we may nonetheless be committed to perform our obligations under the applicable leases including, among other things, paying the base rent for the balance of the lease term and continuing to pay for any servers or other equipment.
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 our being required to repay these borrowings before their due date.
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 us being required to repay these borrowings before their due date.
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.
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 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.
For these 30 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 particular, you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, our revenue growth rate may decline in the future as a result of a variety of factors, including the maturation of our business.
In particular, you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, our revenue growth rate may decline in the 14 future as a result of a variety of factors, including the maturation of our business.
If we fail 23 to integrate our platform with third-party applications that our customers use, we may not be able to offer the functionality that our customers need, which would harm our business. We rely heavily on the reliability, security and performance of our internally developed systems and operations.
If we fail to integrate our platform with third-party applications that our customers use, we may not be able to offer the functionality that our customers need, which would harm our business. We rely heavily on the reliability, security and performance of our internally developed systems and operations.
As a result of any of the existing restrictions described above or any other restrictions arising from our indebtedness, we could be limited as to how we conduct our business and we may be unable to raise additional debt or equity financings to compete effectively or to take advantage of new business opportunities.
As a result of any of the existing restrictions described above or any other restrictions arising from our indebtedness, we could be limited as to how we conduct our business and we may be unable to raise additional debt or 32 equity financings to compete effectively or to take advantage of new business opportunities.
As applicable, such rights may include the right to access, correct or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
As applicable, such rights may include the right to access, correct or delete certain personal 36 data, and to opt-out of certain data processing activities, such as targeted advertising, profiling and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
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 25 resources.
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.
We have in the past and may in the future undertake internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition. We have in the past and may in the future undertake internal restructuring activities in an effort to better align our resources with our business strategy.
We have in the past and may in the future undertake internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition. 26 We have in the past and may in the future undertake internal restructuring activities in an effort to better align our resources with our business strategy.
Our 31 inability to obtain adequate financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue to support our business growth, respond to business challenges, expand our operations or otherwise capitalize on our business opportunities due to lack of sufficient capital.
Our inability to obtain adequate financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue to support our business growth, respond to business challenges, expand our operations or otherwise capitalize on our business opportunities due to lack of sufficient capital.
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’ or users’ sensitive or proprietary data or to disrupt our ability to provide our services.
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’, employees’ or users’ sensitive or proprietary data or to disrupt our ability to provide our services.
We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and results of operations.
We cannot be sure that 22 the expansion of and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and results of operations.
In addition, while we have entered into various agreements for the lease of data center space, equipment, maintenance and other services, the third party could fail to live up to the contractual obligations under those agreements.
In addition, while 19 we have entered into various agreements for the lease of data center space, equipment, maintenance and other services, the third party could fail to live up to the contractual obligations under those agreements.
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, in addition to other members of senior management.
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 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.
In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.
In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the 2030 Convertible Notes could be used to satisfy short positions, or anticipated conversion of the 2030 Convertible Notes into shares of our common stock could depress the price of our common stock.
In addition, our inability to offer both suitable services to support their businesses at scale and suitable and appropriately priced services for the initial state of their business, could adversely affect our business, financial condition and results of operations.
In addition, our inability to offer both suitable services to support their businesses at scale and 17 suitable and appropriately priced services for the initial state of their business, could adversely affect our business, financial condition and results of operations.
Additionally, 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.
Additionally, 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 35 of AI/ML.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results. The conditional conversion feature of the Convertible Notes entitles holders of the Convertible Notes to convert the notes at any time during specified periods at their option.
The conditional conversion feature of the 2030 Convertible Notes, if triggered, may adversely affect our financial condition and operating results. The conditional conversion feature of the 2030 Convertible Notes entitles holders of the 2030 Convertible Notes to convert the notes at any time during specified periods at their option.
This may happen 34 if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI/ML with bad inputs or logic), or if the logic of the AI/ML is flawed (a so-called “hallucination”).
This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI/ML with bad inputs or logic), or if the logic of the AI/ML is flawed (a so-called “hallucination”).
Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses.
Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased 15 operating expenses.
The Convertible Notes are convertible only in certain circumstances as described in the indenture governing the Convertible Notes. Any sales in the public market of the common stock issuable upon any conversion of the Convertible Notes could adversely affect prevailing market prices of our common stock.
The 2030 Convertible Notes are convertible only in certain circumstances as described in the indenture governing the 2030 Convertible Notes. Any sales in the public market of the common stock issuable upon any conversion of the 2030 Convertible Notes could adversely affect prevailing market prices of our common stock.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. 35 These state laws allow for statutory fines for noncompliance.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance.
These customers generally have no obligation to maintain their usage of our platform. This ease of termination could cause our results of operations to fluctuate significantly from quarter to quarter.
These customers generally have no obligation to 16 maintain their usage of our platform. This ease of termination could cause our results of operations to fluctuate significantly from quarter to quarter.
The markets in which we 18 compete are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences.
The markets in which we compete are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences.
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 trustworthy 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.
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 responsible 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.
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.
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.
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.
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.
If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage. Furthermore, 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.
If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage. 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, Higher Spend 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.
For example, DNE 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.
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’ or users’ data, litigation, disruptions to our business operations, indemnity obligations, fines, penalties, disputes, regulatory investigations and actions, and other liabilities.
Security incidents (including breaches of security) or 20 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’, employees’ or users’ data, litigation, disruptions to our business operations, indemnity obligations, fines, penalties, disputes, regulatory investigations and actions, and other liabilities.
As we increase our international business, we may engage with business partners and third party intermediaries to market our products and to obtain 38 necessary permits, licenses, and other regulatory approvals, and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities.
As we increase our international business, we may engage with business partners and third party intermediaries to market our products and to obtain necessary permits, licenses, and other regulatory approvals, and may have direct or indirect interactions with officials and 39 employees of government agencies or state-owned or affiliated entities.
In addition, if we do not optimize and operate these data center facilities efficiently, or if we fail to expand our data centers 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.
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.
In addition, we may become subject to intellectual property disputes or otherwise subjected to 39 liability for customer content on our platform. From time to time, we are subject to legal claims arising from intellectual property disputes regarding our customer’s alleged infringement of third party intellectual property and may be subject to similar claims.
In addition, we may become subject to intellectual property disputes or otherwise subjected to liability for customer content on our platform. From time to time, we are subject to legal claims arising from intellectual 40 property disputes regarding our customer’s alleged infringement of third party intellectual property and may be subject to similar claims.
For example, the California Consumer Privacy Act of 2018 (CCPA) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
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.
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.
The Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting and we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
The Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”), requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting and we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
We do not directly control content that our customers or users store, use, or access in our products.
We do not directly control content that our customers or users store, use, or access in our 21 products.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for or pricing and usage of our platform and products; • our ability to attract new customers and retain existing customers; • customer expansion rates; 14 • integration of new products; • timing and amount of our investments and capital expenditures related to successfully optimizing, utilizing and expanding our data center facilities; • the investment in and integration of new products and features relative to investments in our existing infrastructure and products; • our ability to control costs, including our operating expenses, and the timing of payment for expenses; • the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges; • the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • the effects of acquisitions and their integration; • general economic conditions, both domestically and internationally, and economic conditions specifically affecting industries in which our customers participate; • changes in regulatory or legal environments that may cause us to, among other elements, be unable to continue operating in a particular market, remove certain customers from our platform, and/or incur expenses associated with compliance; • changes in the competitive dynamics of our market, including consolidation among competitors or customers or new entrants into our market; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products and platform capabilities; • our ability to control fraudulent registrations and usage of our platform, reduce bad debt and lessen capacity constraints on our data centers, servers and equipment; and • the impact of new accounting pronouncements.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for or pricing and usage of our platform and products; • our ability to attract new customers and retain existing customers, including increasing their usage of our products; • customer expansion rates; • integration of new products; • timing and amount of our investments and capital expenditures related to successfully optimizing, utilizing and expanding our data center facilities; • the investment in and integration of new products and features relative to investments in our existing infrastructure and products; • our ability to control costs, including our operating expenses, and the timing of payment for expenses; • the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges; • the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • the effects of acquisitions and their integration; • 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; • changes in regulatory or legal environments that may cause us to, among other elements, be unable to continue operating in a particular market, remove certain customers from our platform, and/or incur expenses associated with compliance; • changes in the competitive dynamics of our market, including consolidation among competitors or customers or new entrants into our market; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products and platform capabilities; • our ability to control fraudulent registrations and usage of our platform, reduce bad debt and lessen capacity constraints on our data centers, servers and equipment; and • the impact of new accounting pronouncements.
In addition, even if holders of Convertible Notes do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. ITEM 1B.
In addition, even if holders of 2030 Convertible Notes do not elect to convert their 2030 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2030 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
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 that the performance, features and reliability of our service offerings and our customer service remain competitive in a rapidly changing technological environment.
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 support the performance, features and reliability of our service offerings and our customer service to remain competitive in a rapidly changing technological environment.
Moreover, Higher Spend 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.
Moreover, DNE 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.
We intend to continue to devote substantial resources to the market for our Higher Spend 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.
We intend to continue to devote substantial resources to the market for our DNE 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.
Sales to Higher Spend 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.
Sales to DNE 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.
We are focused on expanding the number of Higher Spend Customers on our platform, both through expanding usage by existing customers and attracting new Higher Spend Customers. Net new sales to Higher Spend Customers involve risks that may not be present or that are present to a lesser extent with sales to smaller customers.
We are focused on expanding the number of DNE Customers on our platform, both through expanding usage by existing customers and attracting new DNE Customers. Net new sales to DNE Customers involve risks that may not be present or that are present to a lesser extent with sales to smaller customers.
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 harming our business and results of operations.
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 adversely affecting our business and results of operations.
Foreign Corrupt Practices Act (FCPA), U.S. domestic bribery laws, the UK Bribery Act, and other anti-corruption and anti-money laundering laws in the countries in which we conduct activities.
Foreign Corrupt Practices Act (“FCPA”), U.S. domestic bribery laws, the UK Bribery Act, and other anti-corruption and anti-money laundering laws in the countries in which we conduct activities.
The Digital Millennium Copyright Act (DMCA), provides 32 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.
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.
Other factors, many of which are beyond our control, that can affect the delivery, performance, and availability of our platform and products include: • the development, maintenance, and functioning of the infrastructure of the internet as a whole; • the performance and availability of third-party telecommunications services with the necessary speed, data capacity, and security for providing reliable internet access and services; • the failure of our redundancy systems, in the event of a service disruption at one of the facilities hosting our network infrastructure, to redistribute load to other components of our network; • the failure of our disaster recovery and business continuity plans; and • decisions by the owners and operators of the co-location and ISP-partner facilities where our network infrastructure is deployed or by global telecommunications service provider partners who provide us with network bandwidth to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy, breach their contracts with us, or prioritize the traffic of other parties.
Other factors, many of which are beyond our control, that can affect the delivery, performance, and availability of our platform and products include: • the development, maintenance, and functioning of the infrastructure of the internet as a whole; • the performance and availability of third-party telecommunications services with the necessary speed, data capacity, and security for providing reliable internet access and services; • the failure of our redundancy systems, in the event of a service disruption at one of the facilities hosting our network infrastructure, to redistribute load to other components of our network; • the failure of our disaster recovery and business continuity plans; • the failure of utility providers to deliver power at sufficient levels on commercially acceptable terms to support our data centers; and • decisions by the owners and operators of the co-location and ISP-partner facilities where our network infrastructure is deployed or by global telecommunications service provider partners who provide us with network bandwidth to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy, breach their contracts with us, or prioritize the traffic of other parties.
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.
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, and our products may otherwise be subject to fraudulent usage.
Our current and future international business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of cloud-based infrastructures and platforms by international businesses; • the need to adapt and localize our products for specific countries; • potential changes in laws, regulations, sanctions or trade relations; • more stringent regulations relating to data privacy and security and the unauthorized use of, or access to, commercial and personal data, particularly in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • greater difficulty collecting accounts receivable and longer payment cycles; • payment issues and other foreign currency risks, including fluctuations in exchange rates; • inflation in certain regions where we operate; • laws and business practices favoring local competitors or general market preferences for local vendors; • political instability or terrorist activities; • an outbreak of a contagious disease or a natural disaster that may cause us or our third-party providers and/or customers to temporarily suspend our or their respective operations in the affected city or country; and • adverse tax burdens and foreign exchange restrictions that could make it difficult to repatriate earnings and cash. 28 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 current and future international business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of cloud-based infrastructures and platforms by international businesses; • the need to adapt and localize our products for specific countries; • potential changes in laws, regulations, sanctions or trade relations; • more stringent regulations relating to data privacy and security and the unauthorized use of, or access to, commercial and personal data, particularly in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • greater difficulty collecting accounts receivable and longer payment cycles; • payment issues and other foreign currency risks, including fluctuations in exchange rates; • inflation in certain regions where we operate; • laws and business practices favoring local competitors or general market preferences for local vendors; • political instability or terrorist activities; • an outbreak of a contagious disease or a natural disaster that may cause us or our third-party providers and/or customers to temporarily suspend our or their respective operations in the affected city or country; and • adverse tax burdens and foreign exchange restrictions that could make it difficult to repatriate earnings and cash.
As another example, the General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018) may apply to our operations. The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.
As another example, the General Data Protection Law (“Lei Geral de Proteção de Dados Pessoais”, or “LGPD”) (Law No. 13,709/2018) may apply to our operations. The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.
For example, if we elect to settle our conversion obligation under our 0% convertible senior notes due 2026, or the Convertible Notes, in shares of our common stock or a combination of cash and shares of our common stock, the issuance of such common stock may dilute the ownership interests of our stockholders and sales in the public market could adversely affect prevailing market prices.
For example, if we elect to settle our conversion obligation under our 2030 Convertible Notes in shares of our common stock or a combination of cash and shares of our common stock, the issuance of such common stock may dilute the ownership interests of our stockholders and sales in the public market could adversely affect prevailing market prices.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, the European Union’s General Data Protection Regulation (EU GDPR), the United Kingdom’s GDPR (UK GDPR), and China’s Personal Information Protection Law (PIPL) impose strict requirements for processing personal data.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (UK GDPR), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal data.
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.
Our business could be disrupted by catastrophic occurrences and similar events. 33 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.
In Canada, the Personal Information Protection and Electronic Documents Act (PIPEDA) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (CASL), apply to our operations. In Australia, the Privacy Act also applies to our operations.
In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), apply to our operations. In Australia, the Privacy Act also applies to our operations.
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.
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, and Contabo.
Our reliance on these suppliers exposes us to risks, including: • reduced control over production costs and constraints based on the then current availability, terms, and pricing of these components; • competition with larger cloud computing companies and other consumers with respect to high demand equipment, such as GPUs; • limited ability to control the quality, quantity and cost of our products or of their components; • the potential for binding price or purchase commitments with our suppliers at higher than market rates; • limited ability to adjust production volumes in response to our customers’ demand fluctuations; • labor and political unrest at facilities we do not operate or own; • geopolitical disputes, regulatory restrictions and sanctions disrupting our supply chain; • business, legal compliance, litigation and financial concerns affecting our suppliers or their ability to manufacture and ship our products in the quantities, quality and manner we require; • impacts on our supply chain from adverse public health developments, including outbreaks of contagious diseases; and • disruptions due to floods, earthquakes, storms and other natural disasters, particularly in countries with limited infrastructure and disaster recovery resources.
Our reliance on these suppliers exposes us to risks, including: • reduced control over production costs and constraints based on the then current availability, terms, and pricing of these components; • competition with larger cloud computing companies and other consumers with respect to high demand equipment, such as GPUs; • limited ability to control the quality, quantity and cost of our products or of their components; • the potential for binding price or purchase commitments with our suppliers at higher than market rates; • limited ability to adjust production volumes in response to our customers’ demand fluctuations; • labor and political unrest at facilities we do not operate or own; • geopolitical disputes and tensions, regulatory restrictions and sanctions disrupting our supply chain; • changes in trade policies and related uncertainties, including the imposition and enforceability of tariffs, trade controls and other trade barriers or retaliation for those measures by other governments, which may impact the pricing and availability of these components and future pricing expectations; • business, legal compliance, litigation and financial concerns affecting our suppliers or their ability to manufacture and ship our products in the quantities, quality and manner we require; 23 • impacts on our supply chain from adverse public health developments, including outbreaks of contagious diseases; and • disruptions due to floods, earthquakes, storms and other natural disasters, particularly in countries with limited infrastructure and disaster recovery resources.
Finally, the use of AI/ML technology also presents emerging ethical issues and if our use of third-party AI/ML technology becomes controversial, we may experience brand or reputational harm, competitive harm or legal liability.
Finally, the use of AI/ML technology also presents emerging ethical issues and if our use of third-party AI/ML technology becomes 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.
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.
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.
India’s new privacy legislation, the Digital Personal Data Protection Act (DPDP), also applies to our operations. In addition to the EU GDPR, the European Commission has another draft regulation, known as the Regulation on Privacy and Electronic Communications (ePrivacy Regulation), that would replace the current ePrivacy Directive.
India’s new privacy legislation, the Digital Personal Data Protection Act (DPDP), also applies to our operations. In addition to the EU GDPR, the European Commission has proposed a draft regulation, known as the Regulation on Privacy and Electronic Communications (“ePrivacy Regulation”), which is intended to replace the current ePrivacy Directive.

… 111 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+5 added−2 removed5 unchanged
Biggest changeWe have an established 44 process and playbook led by our chief information security officer (CISO) governing our assessment, response and notifications internally and externally upon the occurrence of a cybersecurity incident. We undertake periodic reassessments of the Company’s risk profile and may make certain adjustments to our security controls based on such assessments to further enhance our security posture.
Biggest changeWe have an established process and playbook led by our chief information security officer (“CISO”) governing our assessment, response and notifications internally and externally upon the occurrence of a cybersecurity incident.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas, including the involvement of cross-functional teams and, depending on the nature and severity of an incident, an escalation path to notify our executive and senior management teams and our board of directors (Board).
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas, including the involvement of cross-functional teams and, depending on the nature and severity of an incident, an escalation path to notify our executive and senior management teams and our Board of Directors.
Our cybersecurity risk management program includes: • a risk assessment methodology designed to escalate cybersecurity risks to the appropriate channels within our organization in order to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security department, including our CISO and experienced information systems security professionals and information security managers, divided into three teams: (1) security operations, which is responsible for responding to abuse on our platform, digital forensics and incident response, and threat intelligence; (2) security engineering, which is responsible for security data analysis and observability on our infrastructure and product offerings; and (3) trust and governance, which is responsible for privacy and security regulatory compliance and risk management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents and escalating cybersecurity incidents to cross-functional teams, management and our Board of Directors (Board); • deployment of technical safeguards that are designed to protect our platform, customers, employees and systems from cybersecurity threats.
Our cybersecurity risk management program includes: • a risk assessment methodology designed to escalate cybersecurity risks to the appropriate channels within our organization in order to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security department, including our CISO and experienced information systems security professionals and information security managers, divided into three teams: (1) security operations, which is responsible for 45 responding to abuse on our platform, digital forensics and incident response, and threat intelligence; (2) security engineering, which is responsible for security data analysis and observability on our infrastructure and product offerings; and (3) trust and governance, which is responsible for privacy and security regulatory compliance and risk management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents and escalating cybersecurity incidents to cross-functional teams, management and our Board of Directors; • deployment of technical safeguards that are designed to protect our platform, customers, employees and systems from cybersecurity threats.
We actively monitor, manage and configure our systems to protect our data against any vulnerabilities we find; • continuous monitoring of our infrastructure network for vulnerabilities and threats through our security observability platform; • a system to proactively identify risks that may threaten customer information and utilize both internal and external resources to perform a variety of vulnerability and penetration testing on the platforms, systems and applications used to provide our products and services; • engagement of third party experts to assist in assessing, managing and reviewing various risks from cybersecurity threats and incidents, including to perform independent audits our data centers, to conduct adversary simulations and to perform network penetration tests periodically; • mandatory periodic cybersecurity awareness training for all of our employees and consultants, covering key threats and measures to take to protect their own data and the data of the company in addition to role-specific training for security personnel; and • a robust privacy practice governing information we collect from customers and how we use, share and store such customer data and implementation of measures to collect personal data only to the extent necessary to service our customers and to protect customer content data through limited access.
We actively monitor, manage and configure our systems to protect our data against any vulnerabilities we find; • continuous monitoring of our infrastructure network for vulnerabilities and threats through our security observability platform; • a system to proactively identify risks that may threaten customer information and utilize both internal and external resources to perform a variety of vulnerability and penetration testing on the platforms, systems and applications used to provide our products and services; • engagement of third party experts to assist in assessing, managing and reviewing various risks from cybersecurity threats and incidents, including to perform independent audits our data centers, to conduct adversary simulations and to perform network penetration tests periodically; • mandatory periodic cybersecurity awareness training for all of our employees and consultants, covering key threats and measures to take to protect their own data and the data of the company in addition to role-specific training for security personnel; and • a privacy compliance program governing personal data we collect from and how we use, share and store such data, including implementation of measures to collect personal data only to the extent necessary for legitimate business purposes.
Our cybersecurity risk management program is designed to be adaptable in order to respond to an evolving landscape of emerging threats and available technology. Our security controls and cybersecurity risk management program are evaluated through data gathering and analysis of emerging threats from internal and external incidents and technology investments. See Part I, Item 1A.
Our cybersecurity risk management program is designed to be adaptable in order to respond to an evolving landscape of emerging threats and available technology. Our security controls and cybersecurity risk management program are evaluated through data gathering and analysis of emerging threats from internal and external incidents and technology investments.
Our executive and senior management teams, including our chief executive officer, chief financial officer and CISO, supervise these efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents and the risk assessments and disclosure required if cybersecurity incidents do arise, through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our executive and senior management teams, including our chief executive officer, chief financial officer and CISO, supervise these efforts to prevent, detect, mitigate, remediate, and comply with required disclosures regarding cybersecurity risks and incidents, through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
“Risk Factors” for a more comprehensive description of risks related to cybersecurity. Cybersecurity Governance Our Board has overall oversight responsibility for our risk management and delegated cybersecurity risk management oversight to the Audit Committee of the Board. The Audit Committee oversees management’s 45 implementation of our cybersecurity risk management program.
Cybersecurity Governance Our Board has overall oversight responsibility for our risk management and delegated cybersecurity risk management oversight to the Audit Committee of the Board. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.
Our security teams have a wealth of cross-industry, government, and national defense experience. We employ qualified and certified security practitioners with specialized skill sets in security engineering, incident response, forensics, and threat management. Our CISO has more than a decade leading highly technical security teams that evolve with the technology and threat landscape.
Our security teams have a wealth of cross-industry, government, and national defense experience. We employ qualified and certified security practitioners with specialized skill sets in security engineering, incident response, forensics, and threat management.
Our security and legal teams oversee our information security and privacy practices and are responsible for identifying and proactively addressing security and privacy risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and incident response plans and maintaining cybersecurity programs.
Our CISO has more than a decade of experience leading highly technical security teams that evolve with the technology and threat landscape. 46 Our security and legal teams oversee our information security and privacy practices and are responsible for identifying and proactively addressing security and privacy risks on an ongoing basis, establishing processes to help ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and incident response plans and maintaining cybersecurity programs.
To ensure our preparedness to appropriately respond to cybersecurity incidents, the cross-functional team meets regularly and conducts simulations of cybersecurity incidents to test its procedures.
To support our preparedness to appropriately respond to cybersecurity incidents, the respective cross-functional teams meet periodically or as needed and conduct simulations of cybersecurity incidents to test its procedures.
Removed
In addition, we have created a cybersecurity materiality assessment team, which includes representatives from our security, legal, finance, internal audit, communications and investor relations departments that reviews and assesses the impact of cybersecurity incidents on the company, our customers and other stakeholders.
Added
We undertake reassessments of the Company’s risk profile periodically or as needed and may make certain adjustments to our security controls based on such assessments to further enhance our security posture.
Removed
Our material assessment framework provides for an escalation path for any potentially material cybersecurity incidents from the security team to our CISO who may further escalate to the materiality assessment team, senior management and the Audit Committee.
Added
To date, we believe that the risks from identified cybersecurity threats, including as a result of previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. See Part I, Item 1A. “Risk Factors” for a more comprehensive description of risks related to cybersecurity.
Added
In addition to our cybersecurity incident response plan and program, we maintain a cybersecurity incident disclosure framework designed to support timely disclosure of cybersecurity incidents, including those that may reasonably be expected to have a material impact on the Company, in compliance with applicable security laws.
Added
Under this framework, potential cybersecurity incidents are evaluated by our information security and legal teams, and incidents that may be material are referred to a cross-functional materiality assessment team for further evaluation. Our General Counsel reviews and confirms the determination by our materiality assessment team.
Added
If an incident is determined to be material, executive management and the Board of Directors are informed accordingly by our General Counsel, and the Company makes any required disclosures pursuant to applicable security laws.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−1 removed1 unchanged
Biggest changeThe lease and the related subleases terminate in June 2025. We also have entered into leases for small office spaces in a number of locations. Additionally, we lease space to operate 16 data centers worldwide, including in the United States, Australia, Canada, Germany, India, the Netherlands, Singapore and the United Kingdom. We do not own any real property.
Biggest changeAdditionally, we have entered into leases with data center operators to operate 20 current and upcoming data centers worldwide, including in the United States, Australia, Canada, Germany, India, the Netherlands, Singapore and the United Kingdom. We do not own any real property.
Removed
ITEM 2. PROPERTIES Our headquarters is located in New York City, where we lease approximately 44,000 square feet. In 2022, we entered into two sublease agreements whereby we sublease approximately two-thirds of this office space to third party subtenants. The rental amounts payable to us pursuant to the sublease agreements increase approximately 2% each year.
Added
ITEM 2. PROPERTIES Our headquarters is located in Broomfield, Colorado, where we lease approximately 4,400 square feet. The lease terminates in February 2028. We also have entered into leases for small office spaces in a number of locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 46 PART II
Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 47 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−1 removed4 unchanged
Biggest changeIssuer Purchases of Equity Securities The following table provides information with respect to repurchases of shares of common stock by the Company during the three months ended December 31, 2024: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Program (1) October 1-31, 2024 186,327 $ 41.86 186,327 $ 102,648 November 1-30, 2024 347,744 37.91 347,744 $ 89,463 December 1-31, 2024 182,647 37.45 182,647 $ 82,298 Total 716,718 $ 38.82 716,718 (1) On February 20, 2024, our Board of Directors approved the repurchase of up to an aggregate of $140 million of our common stock (2024 Share Buyback Program).
Biggest changeIssuer Purchases of Equity Securities The following table provides information with respect to repurchases of shares of common stock by the Company during the three months ended December 31, 2025: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Program (1) October 1-31, 2025 — $ — — $ 100,000 November 1-30, 2025 — — — $ 100,000 December 1-31, 2025 — — — $ 100,000 Total — $ — — ___________________________ (1) On August 11, 2025, the Company adopted the 2025 Share Buyback Program authorizing the repurchase of up to $100 million of the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock trades on The New York Stock Exchange (NYSE) under the symbol “DOCN”. Holders of Record As of February 18, 2025, there were 26 stockholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock trades on The New York Stock Exchange (“NYSE”) under the symbol “DOCN”. Holders of Record As of February 17, 2026, there were 19 stockholders of record of our common stock.
Stock Performance Graph The graph below shows a comparison, from March 24, 2021 (the date our common stock commenced trading on the NYSE) through December 31, 2024, of the cumulative total return to stockholders of our common stock relative to the Standard & Poor’s 500 Index (S&P 500) and the S&P Information Technology Index (S&P Information Technology).
The 2025 Share Buyback Program will expire on July 31, 2027. 48 Stock Performance Graph The graph below shows a comparison, from March 24, 2021 (the date our common stock commenced trading on the NYSE) through December 31, 2025, of the cumulative total return to stockholders of our common stock relative to the Standard & Poor’s 500 Index (“S&P 500”) and the S&P Information Technology Index (“S&P Information Technology”).
The graph assumes $100 was invested in each of our common stock, S&P 500 and the S&P Information Technology at their respective closing prices on March 24, 2021 and assumes reinvestment of gross dividends.
The graph assumes $100 was invested in each of our common stock, S&P 500 and the S&P Information Technology at their respective closing prices on March 24, 2021 and assumes reinvestment of gross dividends. The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance.
The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance. 47 Information used in the graph was obtained from a source we believe to be reliable, but we do not assume responsibility for any errors or omissions in such information.
Information used in the graph was obtained from a source we believe to be reliable, but we do not assume responsibility for any errors or omissions in such information.
Pursuant to the 2024 Share Buyback Program, repurchases of our common stock were made at prevailing market prices through open market purchases or in negotiated transactions off the market.
Pursuant to the 2025 Share Buyback Program, repurchases of the Company’s common stock will be made at prevailing market prices through open market purchases, in negotiated transactions off the market or otherwise, including through Rule 10b5-1 plans.
Removed
The repurchase program is authorized through fiscal year 2025; however, we are not obligated to acquire any particular amount of common stock and the program may be extended, modified, suspended or discontinued at any time at our discretion.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

89 edited+36 added−54 removed42 unchanged
Biggest changeOur modified definition is less susceptible to variability each month, and therefore is more reliable when comparing period-to-period results. 52 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: • Builders: users that spend more than $50 and less than or equal to $500 in a month. • Scalers: users that spend more than $500 and less than or equal to $8,333 in a month. • Scalers+: users that spend more than $8,333 in a month.
Biggest changeCustomers 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): Current Prior Customer Grouping Customer Category Description Customer Category Customer Grouping Digital Native Enterprise Customers Above $6K and under $100K Customers Users that spend more than $500 and less than or equal to $8,333 in a month Scalers Higher Spend Customers Above $100K and under $500K Customers Users that spend more than $8,333 and less than or equal to $41,667 in a month Scalers+ Above $500K and under $1M Customers Users that spend more than $41,667 and less than or equal to $83,333 in a month Above $1M Customers Users that spend more than $83,333 in a month Developers Users that spend more than $50 and less than or equal to $500 in a month Builders Users that spend less than or equal to $50 in a month and have been on our platform for more than three months Learners Refer to the table above for customer count by category under our new customer classification and definitions.
For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEO’s forfeited MRSU award that is reported in Restructuring related charges, as well as $3.9 million that is reported in Restructuring and other charges, in the table above.
For the year ended December 31, 2023, non-GAAP stock-based compensation excludes the $31.3 million reversal related to the former CEO’s forfeited MRSU award that is reported in restructuring related charges, as well as $3.9 million that is reported in restructuring and other charges, in the table above.
(2) For the year ended December 31, 2024, primarily consists of executive reorganization charges.
(2) For the year ended December 31, 2024, primarily consists of executive reorganization charges.
Prior Period Reclassification 55 As indicated in Note 2 in our consolidated financial statements, beginning in the fourth quarter of 2024, we reclassified personnel costs including salaries, bonuses, benefits, and stock-based compensation related to our customer support employees, and certain other costs from sales and marketing and research and development to cost of revenue in order to better reflect the cost of supporting our growing customer base, and to improve comparability with peers.
Prior Period Reclassification As indicated in Note 2 in our consolidated financial statements, beginning in the fourth quarter of 2024, we reclassified personnel costs including salaries, bonuses, benefits, and stock-based compensation related to our customer support employees, and certain other costs from sales and marketing and research and development to cost of revenue in order to better reflect the cost of supporting our growing customer base, and to improve comparability with peers.
Our customers include growing technology companies across numerous industry verticals ranging from 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.
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.
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. 54 We intend to continue to invest additional resources in our infrastructure to support our product portfolio and the scalability of our customer base.
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.
These types of promotional and referral credits typically expire in two months or less if not 61 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.
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.
Key Factors Affecting Our Performance Increasing Usage by Our Existing Customers 50 Our existing customer base represents a significant opportunity for further sales expansion through increased usage of our platform and adoption of additional product offerings.
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.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification , in Item 8. in the consolidated financial statements for further details. (2) May not foot due to rounding. A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification , in Item 8. in the consolidated financial statements for further details. (2) May not foot due to rounding. A discussion regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below.
Research and development expenses also include amortization of capitalized internal-use software development costs for research and development activities, 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.
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.
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 year ended December 31, 2024, 38% of our revenue was generated from North America, 28% from Europe, 23% from Asia and 11% from the rest of the world.
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 year ended December 31, 2025, 38% of our revenue was generated from North America, 28% from Europe, 23% from Asia and 11% from the rest of the world.
Augmenting our Platform though 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.
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.
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 business customers.
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.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found under Part II, Item 7.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under Part II, Item 7.
This deeper relationship with our customers will help us 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.
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 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 cloud computing platform by our customers. We recognize revenue largely based on the customer utilization of our offerings.
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.
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 Higher Spend Customers.
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.
Sales and marketing expenses also include costs for marketing programs, advertising, amortization of acquired customer relationships and professional services. We expect sales and marketing expenses to increase in absolute dollars as we enhance our product offerings and implement new marketing and sales strategies.
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.
We are investing in strategies that we believe will drive adoption by new Higher Spend Customers, including new marketing initiatives that further optimize our self-service revenue funnel to identify potential Higher Spend Customers, enhanced research and development to build our product roadmap around the needs of Higher Spend Customers, the creation of a new migration services team to support migration to our platform from other cloud providers, and a dedicated AI sales team with deep AI expertise to help prospective customers understand our offerings and the process to onboard onto our platform.
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.
As a result, the Consolidated Statements of Operations 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.
As a result, the consolidated statements of operations 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.
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.
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.
Recently Adopted Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information about recent accounting pronouncements.
Summary of Significant Accounting Policies, to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for information about recent accounting pronouncements.
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 Spend Customers, and introducing an account management function to provide more direct coverage of our top spending accounts.
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.
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized prior to invoicing. Any payments received in advance of billing are a contract liability, which is recorded as Deferred revenue within Total current liabilities on the Consolidated Balance Sheets.
Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized prior to invoicing. Any payments received in advance of billing are a contract liability, which is recorded as deferred revenue within total current liabilities on the consolidated balance sheets. Recently Adopted Accounting Pronouncements See Note 2.
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information regarding these commitments. 60 Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Commitments and Contingencies to our consolidated financial statements included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information regarding these commitments. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
We have historically repurchased our common stock pursuant to repurchase programs approved by our Board of Directors. In February 2024, our Board of Directors approved an additional repurchase program of up to an aggregate of $140 million of our common stock through fiscal year 2025.
We have historically repurchased our common stock pursuant to repurchase programs approved by our Board of Directors. In February 2024, our Board of Directors approved additional repurchase program of up to an aggregate of $140 million of our common stock, which we completed in July 2025.
Adjusted EBITDA and Adjusted EBITDA Margin 62 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, loss on extinguishment of debt, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, and interest income and other income, net.
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, revaluation of warrants, (gain) loss on extinguishment of debt, net, release of a VAT reserve, and other charges.
Macroeconomic Conditions Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from trade tension and/or the imposition of trade tariffs (including recent U.S. tariffs imposed or threatened to be imposed and any retaliatory actions taken by other countries), changes in gross domestic product growth, supply chain disruptions, inflationary pressures, interest rates, financial and credit market fluctuations, volatility in the capital markets, liquidity 51 concerns at, and failures of, banks and other financial institutions, international trade relations, 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.
Macroeconomic Conditions 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 restrictions or other changes in trade policies and related uncertainties (including recent U.S. tariffs imposed and/or threatened to be imposed, any retaliatory actions taken by other countries, 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, geopolitical 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.
As of December 31, 2024, we had $88.8 million of estimated undiscounted fixed payment obligations for leases of co-location space at data center facilities that have not yet commenced and were not included on the Consolidated Balance Sheets. These leases are expected to commence between January 2025 and August 2025, and have a weighted average lease term of 6.2 years.
As of December 31, 2025, we had $599.4 million of estimated undiscounted fixed payment obligations for leases of co-location space at data center facilities that have not yet commenced and were not included on the consolidated balance sheets. These leases are scheduled to commence between January 2026 and April 2026, and have a weighted-average lease term of 9.6 years.
Determine the transaction price The transaction price is calculated based on the customer’s usage for the month at an hourly rate that is published on the Company’s website. None of our contracts contain a significant financing component. 4.
Determine the transaction price The transaction price is calculated based on the customer’s usage for the month at the applicable unit of measure (e.g. hourly) that is published on the Company’s website. None of our contracts contain a significant financing component. 4.
For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEO’s forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs. 63 (3) For the years ended December 31, 2024 and 2023, primarily consists of interest and accretion income from our cash and cash equivalents and marketable securities.
For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEO’s forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs.
Our primary uses of cash from operating activities are for personnel costs, co-location costs, payment processing fees, bandwidth and connectivity, server maintenance, software licensing fees, and taxes. Net cash provided by operating activities was $282.7 million, $234.9 million and $195.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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, and taxes. Net cash provided by operating activities was $309.6 million and $282.7 million for the years ended December 31, 2025 and 2024, respectively.
We recognize revenue largely based on the customer utilization of these resources. Fees are billed monthly, and payment is typically due upon invoicing. Revenue is recognized net of allowances for credits and any taxes collected from customers, which are subsequently remitted to governmental authorities. Our global cloud platform is supported by various third parties.
Fees are billed monthly, and payment is typically due upon invoicing. Revenue is recognized net of allowances for credits and any taxes collected from customers, which are subsequently remitted to governmental authorities. 62 Our global cloud platform is supported by various third parties.
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.
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.
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Both our critical and significant accounting policies are important to an understanding of the consolidated financial statements. Revenue Recognition We recognize revenue in accordance with FASB Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). We account for revenue using the following steps: 1.
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Both our critical and significant accounting policies are important to an understanding of the consolidated financial statements. Revenue Recognition We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).
Identify the contract with a customer We consider the terms and conditions of the contract and our customary business practices in identifying our contracts under ASC 606.
We account for revenue using the following steps: 1. Identify the contract with a customer We consider the terms and conditions of the contract and our customary business practices in identifying our contracts under ASC 606.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, (In thousands) 2024 2023 2022 Net cash provided by operating activities $ 282,725 $ 234,942 $ 195,152 Net cash (used in) provided by investing activities (94,805) 401,152 (1,148,158) Net cash used in financing activities (76,446) (468,903) (610,363) Increase (decrease) in cash, cash equivalents and restricted cash 111,210 167,176 (1,563,618) Operating Activities Our largest source of operating cash is cash collections from sales to our customers.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, (In thousands) 2025 2024 2023 Net cash provided by operating activities $ 309,604 $ 282,725 $ 234,942 Net cash (used in) provided by investing activities (268,285) (94,805) 401,152 Net cash used in financing activities (216,909) (76,446) (468,903) (Decrease) increase in cash, cash equivalents and restricted cash (175,560) 111,210 167,176 Operating Activities Our largest source of operating cash is cash collections from sales to our customers.
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: Year Ended December 31, (In thousands) 2024 2023 2022 GAAP Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) Adjustments: Depreciation and amortization 130,052 117,866 102,232 Stock-based compensation (1) 90,398 115,019 105,829 Interest expense 9,113 8,945 8,396 Acquisition related compensation 12,661 27,763 9,443 Acquisition and integration related costs — 6,145 5,439 Income tax expense 13,207 7,367 3,919 Loss on extinguishment of debt — — 407 Restructuring and other charges (1) — 20,887 — Restructuring related charges (1)(2) 4,025 (23,535) — Impairment of certain long-lived assets 356 1,140 1,635 Interest income and other income, net (3) (15,805) (23,825) (10,615) Adjusted EBITDA $ 328,499 $ 277,181 $ 198,881 As a percentage of revenue: Net income margin 11 % 3 % (5) % Adjusted EBITDA margin 42 % 40 % 35 % ___________________ (1) For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges.
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: 63 Year Ended December 31, (In thousands) 2025 2024 2023 GAAP Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 Adjustments: Depreciation and amortization 137,449 130,052 117,866 Stock-based compensation (1) 80,315 90,398 115,019 Interest expense 17,940 9,113 8,945 Acquisition related compensation — 12,661 27,763 Acquisition and integration related costs — — 6,145 Income tax (benefit) expense (52,600) 13,207 7,367 Gain on extinguishment of debt, net (48,104) — — Restructuring and other charges (1) — — 20,887 Restructuring related charges (1)(2) — 4,025 (23,535) Impairment of certain long-lived assets 52 356 1,140 Interest income and other income, net (3) (19,509) (15,805) (23,825) Adjusted EBITDA $ 374,805 $ 328,499 $ 277,181 As a percentage of revenue: Net income margin 29 % 11 % 3 % Adjusted EBITDA margin 42 % 42 % 40 % ___________________ (1) For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in restructuring related charges.
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, loss on extinguishment of debt, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, and other unusual or non-recurring transactions as they occur.
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, revaluation of warrants, release of a VAT reserve, and other charges.
Liquidity and Capital Resources We have funded our operations since inception primarily with cash flow generated by operations, private offerings of our equity and debt securities, borrowings under our existing credit facility and capital expenditure financings.
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, borrowings under our credit facilities, and equipment financing arrangements.
Our product strategy is anchored in addressing the needs of our Higher Spend Customers and other growing technology companies and on continuously innovating to meet those needs in a simple, scalable and approachable way.
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.
Growing our Higher Spend 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 Spend Customers as a percentage of total revenue was 87% in 2024, 86% in 2023 and 85% in 2022.
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 60% in 2025, 55% in 2024, and 53% in 2023.
General and administrative expenses also include payment processing fees, provision for expected credit losses, professional services, software, business insurance, depreciation and amortization expenses, 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.
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.
The following table sets forth our results of operations as a percentage of revenue for the periods presented: Year Ended December 31, 2024 2023 2022 Revenue 100 % 100 % 100 % Cost of revenue (1) 40 43 37 Gross profit 60 57 63 Operating expenses: Research and development (1) 18 20 25 Sales and marketing (1) 9 9 14 General and administrative 21 23 29 Restructuring and other charges — 3 — Total operating expenses (2) 48 56 68 Income (loss) from operations (2) 12 2 (4) Other income, net 1 2 — Income (loss) before income taxes (2) 13 4 (4) Income tax expense (2) (1) (1) Net income (loss) attributable to common stockholders (2) 11 % 3 % (5) % ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
(2) Amount includes $31.3 million of recognized stock-based compensation related to our former CEO’s MRSUs that was estimated to be forfeited and therefore reversed for the year ended December 31, 2023. 57 The following table sets forth our results of operations as a percentage of revenue for the periods presented: Year Ended December 31, 2025 2024 2023 Revenue 100 % 100 % 100 % Cost of revenue (1) 40 40 43 Gross profit 60 60 57 Operating expenses: Research and development (1) 18 18 20 Sales and marketing (1) 9 9 9 General and administrative 15 21 23 Restructuring and other charges — — 3 Total operating expenses (2) 42 48 56 Income from operations (2) 17 12 2 Other income, net 6 1 2 Income before income taxes (2) 23 13 4 Income tax benefit (expense) 6 (2) (1) Net income attributable to common stockholders (2) 29 % 11 % 3 % ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
See “Higher Spend Customers” below for a description of how we previously calculated customer count, definitions of our customer categories, our reasons for such changes, and our customer count calculated using our prior definition for each period presented.
See “Digital Native Enterprise Customers” below for a description of how we previously defined our customer count and categories, our reasons for such changes, and our customer count under our prior definitions for each period presented.
As of December 31, 2024, we had approximately 165,000 Higher Spend Customers using our platform to build, deploy and scale applications. The number of Higher Spend Customers increased from approximately 156,000 as of December 31, 2023 and 142,000 as of December 31, 2022.
As of December 31, 2025, we had approximately 21,000 DNE Customers using our platform to build, deploy and scale applications. The number of DNE Customers increased from approximately 18,000 as of December 31, 2024 and 17,000 as of December 31, 2023.
We believe our existing cash and cash equivalents, cash flow from operations and availability under our Credit Facility (as defined in Note. 8. Debt in Item 8. in the consolidated financial statements) will be sufficient to support working capital and capital expenditure requirements and our outstanding contractual commitments for at least the next 12 months and in the long term.
We believe our existing cash and cash equivalents, cash flow from operations and availability under our 2025 Credit 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 for at least the next 12 months and in the long term.
Contractual Obligations and Commitments We have various contractual obligations and commitments, such as long-term leases, purchase commitments and long-term debt, that are disclosed in the footnotes to the consolidated financial statements. See Note 8. Debt; Note 9. Leases; and Note 10. Commitments and Contingencies to our consolidated financial statements included in Part II, Item 8.
Contractual Obligations and Commitments We have various contractual obligations and commitments, such as long-term leases, purchase commitments, financing arrangements, long-term debt, and short-term debt that are disclosed in the footnotes to the consolidated financial 61 statements. See Note 7. Debt; Note 8. Operating Leases; Note 9. Finance Leases and Equipment Financing Obligations; and Note 10.
The following table presents a reconciliation of Net income (loss) 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: 64 Year Ended December 31, (In thousands, except per share amounts) 2024 2023 2022 GAAP Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) Stock-based compensation (1) 90,398 115,019 105,829 Acquisition related compensation 12,661 27,763 9,443 Amortization of acquired intangible assets 22,426 18,967 6,301 Acquisition and integration related costs — 6,145 5,439 Loss on extinguishment of debt — — 407 Restructuring and other charges (1) — 20,887 — Restructuring related charges (1)(2) 4,025 (23,535) — Impairment of certain long-lived assets 356 1,140 1,635 Non-GAAP income tax adjustment (3) (23,202) (25,469) (34) Non-GAAP Net income $ 191,156 $ 160,326 $ 101,216 Non-cash charges related to convertible notes (4) $ 6,357 $ 6,249 $ 5,910 Non-GAAP Net income used to compute net income per share, diluted $ 197,513 $ 166,575 $ 107,126 GAAP Net income (loss) per share attributable to common stockholders, diluted $ 0.89 $ 0.20 $ (0.28) Stock-based compensation (1) 0.88 1.10 0.91 Acquisition related compensation 0.12 0.26 0.09 Amortization of acquired intangible assets 0.22 0.18 0.06 Acquisition and integration related costs — 0.06 0.06 Restructuring and other charges (1) — 0.20 — Restructuring related charges (1)(2) 0.04 (0.23) — Impairment of certain long-lived assets — 0.01 0.01 Non-cash charges related to convertible notes (4) 0.06 0.06 0.06 Non-GAAP income tax adjustment (3) (0.30) (0.25) — Non-GAAP Net income per share, diluted * $ 1.92 $ 1.59 $ 0.91 GAAP Weighted-average shares used to compute net income per share, diluted 94,503 96,415 100,806 Weighted-average dilutive effect of potentially dilutive securities 8,403 8,403 17,372 Non-GAAP Weighted-average shares used to compute net income per share, diluted 102,906 104,818 118,178 *may not foot due to rounding ______________ (1) For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges.
We believe 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. 64 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: Year Ended December 31, (In thousands, except per share amounts) 2025 2024 2023 GAAP Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 Stock-based compensation (1) 80,315 90,398 115,019 Acquisition related compensation — 12,661 27,763 Amortization of acquired intangible assets 20,057 22,426 18,967 Acquisition and integration related costs — — 6,145 Gain on extinguishment of debt, net (48,104) — — Restructuring and other charges (1) — — 20,887 Restructuring related charges (1)(2) — 4,025 (23,535) Impairment of certain long-lived assets 52 356 1,140 Non-GAAP income tax adjustment (3) (94,038) (23,202) (25,469) Non-GAAP Net income $ 217,544 $ 191,156 $ 160,326 Non-cash charges related to convertible notes (4) $ 5,697 $ 6,357 $ 6,249 Non-GAAP Net income used to compute net income per share, diluted $ 223,241 $ 197,513 $ 166,575 GAAP Net income per share attributable to common stockholders, diluted $ 2.52 $ 0.89 $ 0.20 Stock-based compensation (1) 0.76 0.88 1.10 Acquisition related compensation — 0.12 0.26 Amortization of acquired intangible assets 0.19 0.22 0.18 Acquisition and integration related costs — — 0.06 Gain on extinguishment of debt, net (5) (0.46) — — Restructuring and other charges (1) — — 0.20 Restructuring related charges (1)(2) — 0.04 (0.23) Impairment of certain long-lived assets — — 0.01 Non-cash charges related to convertible notes (4) 0.05 0.06 0.06 Non-GAAP income tax adjustment (3) (0.94) (0.30) (0.25) Non-GAAP Net income per share, diluted (6) $ 2.12 $ 1.92 $ 1.59 GAAP Weighted-average shares used to compute net income per share, diluted 105,343 94,503 96,415 Weighted-average dilutive effect of potentially dilutive securities — 8,403 8,403 Non-GAAP Weighted-average shares used to compute net income per share, diluted 105,343 102,906 104,818 ______________ (1) For the year ended December 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in restructuring related charges.
Summary of Significant Accounting Policies, Prior Period Reclassification , in Item 8. in the consolidated financial statements for further details. 56 (2) Includes stock-based compensation as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of revenue (1) $ 5,889 $ 5,685 $ 1,820 Research and development (1) 38,285 42,040 39,354 Sales and marketing (1) 10,093 13,177 14,909 General and administrative (2) 36,278 23,508 49,746 Restructuring and other charges — 3,937 — Total $ 90,545 $ 88,347 $ 105,829 ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
(2) Includes stock-based compensation as follows: Year Ended December 31, 2025 2024 2023 (in thousands) Cost of revenue (1) $ 5,435 $ 5,889 $ 5,685 Research and development (1) 34,939 38,285 42,040 Sales and marketing (1) 11,646 10,093 13,177 General and administrative (2) 28,295 36,278 23,508 Restructuring and other charges — — 3,937 Total $ 80,315 $ 90,545 $ 88,347 ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEO’s forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs. 65 (3) For the years ended December 31, 2024 and 2023, we used a tax rate of 16% and 17%, respectively, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2024 and 2023, respectively.
For the year ended December 31, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the 65 former CEO’s forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs.
The efficiency of our go-to-market model and our focus on the needs of growing technology companies have enabled us to drive organic growth and establish a truly global customer base across a broad range of industries.
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 years ended December 31, 2025, 2024 and 2023, our sales and marketing expense was approximately 9% of our revenue.
Results of Operations The following table sets forth our results of operations for the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Revenue $ 780,615 $ 692,884 $ 576,322 Cost of revenue (1)(2) 314,672 295,387 211,927 Gross profit 465,943 397,497 364,395 Operating expenses: Research and development (1)(2) 142,499 136,917 143,885 Sales and marketing (1)(2) 71,570 65,055 81,022 General and administrative (2) 160,867 162,742 165,185 Restructuring and other charges (2) — 20,887 — Total operating expenses 374,936 385,601 390,092 Income (loss) from operations 91,007 11,896 (25,697) Other income, net 6,692 14,880 1,812 Income (loss) before income taxes 97,699 26,776 (23,885) Income tax expense (13,207) (7,367) (3,919) Net income (loss) attributable to common stockholders $ 84,492 $ 19,409 $ (27,804) ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
The consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity, and the consolidated statements of cash flows were not affected by changes in the presentation of these costs. 56 Results of Operations The following table sets forth our results of operations for the periods presented: Year Ended December 31, 2025 2024 2023 (in thousands) Revenue $ 901,427 $ 780,615 $ 692,884 Cost of revenue (1)(2) 361,835 314,672 295,387 Gross profit 539,592 465,943 397,497 Operating expenses: Research and development (1)(2) 161,621 142,499 136,917 Sales and marketing (1)(2) 82,433 71,570 65,055 General and administrative (2) 138,549 160,867 162,742 Restructuring and other charges (2) — — 20,887 Total operating expenses 382,603 374,936 385,601 Income from operations 156,989 91,007 11,896 Other income, net 49,673 6,692 14,880 Income before taxes 206,662 97,699 26,776 Income tax benefit (expense) 52,600 (13,207) (7,367) Net income attributable to common stockholders $ 259,262 $ 84,492 $ 19,409 ___________________ (1) Amounts for the year ended December 31, 2023 have been recast to conform with current period presentation.
See “ARR” below for a description of how we previously calculated ARR and our ARR calculated using our prior definition for each period presented. 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.
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.
Restructuring and other charges 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.
General and administrative expenses may increase in absolute dollars as we continue to grow our business. 55 Restructuring and other charges 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.
We calculate net dollar retention rate monthly by starting with the revenue from all customers, including Testers, Learners, Builders, Scalers and Scalers+ for our IaaS and PaaS/SaaS offerings during the corresponding month 12 months prior, or the Prior Period Revenue.
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 total revenue for our IaaS and PaaS/SaaS offerings during the corresponding month 12 months prior, or the Prior Period Revenue.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 21, 2024, which is available on the SEC’s website at www.sec.gov. 57 Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands) Revenue $ 780,615 $ 692,884 $ 87,731 13 % Revenue increased $87.7 million, or 13%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 25, 2025, which is available on the SEC’s website at www.sec.gov.
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%, 7% and 10% of our revenue in the years ended December 31, 2024, 2023 and 2022, respectively.
We had no material customer concentration as our top 25 customers made up approximately 10%, 8% and 7% of our revenue in the years ended December 31, 2025, 2024 and 2023, respectively. 50 Our ARR, as further described in “ARR” below, as of December 31, 2025 was $970 million, up from $820 million as of December 31, 2024, and $723 million as of December 31, 2023.
We believe the total number of our Higher Spend Customers is an important indicator of the growth of our business and future revenue opportunity, and the trends relating to our Builders, Scalers and Scalers+ is of particular importance to us as these customers represent a significant majority of our revenue and revenue growth, and they are representative of growing technology companies that scale on our platform and use multiple products.
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.
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.
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.
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.
Net Dollar Retention Rate 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.
While our business model provides some resilience against these factors, we will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and our results of operations, and will take appropriate measures, as necessary, to minimize potential risk exposure.
We will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and our results of operations.
For the year ended December 31, 2024, we repurchased and retired 1,511,909 shares of common stock for an aggregate purchase price of $57.4 million. The program will expire on December 31, 2025.
In August 2025, we adopted the 2025 Share Buyback Program which authorizes the repurchase of up to $100 million of our common stock. The 2025 Share Buyback Program 60 will expire on July 31, 2027. For the year ended December 31, 2025, we repurchased and retired 2.4 million shares of common stock for an aggregate purchase price of $82.1 million.
Recognize revenue when or as we satisfy a performance obligation We offer mission-critical solutions 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; and artificial intelligence and machine learning (AI/ML), including our GPU Droplets, Notebooks and GenAI Platform offerings.
Recognize revenue when or as we satisfy a performance obligation 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 closely monitor our net dollar retention (NDR), which reflects our ability to retain and grow revenue from our existing customers.
We closely monitor our net dollar retention (“NDR”), which reflects our ability to retain and grow revenue from our existing customers. NDR increased from 98% during the year ended December 31, 2024 to 100% during the year ended December 31, 2025 driven by improved net expansion.
Financing Activities Net cash used in financing activities of $76.4 million and $468.9 million for the years ended December 31, 2024 and 2023, respectively, was primarily due to the repurchase and retirement of our common stock for $59.8 million and $488.5 million, respectively.
Financing Activities Net cash used in financing activities was $216.9 million and $76.4 million for the years ended December 31, 2025 and 2024, respectively.
Investing Activities Net cash used in investing activities was $94.8 million for the year ended December 31, 2024 compared to $401.2 million provided by investing activities for the year ended December 31, 2023.
Investing Activities Net cash used in investing activities was $268.3 million and $94.8 million for the years ended December 31, 2025 and 2024, respectively.
While NDR decreased from 101% in 2023 to 98% in 2024 as we lapped the effects of the 2022 price increases, we expect to increase our revenue in the future from existing customers through the introduction of new products and features tailored to our Higher Spend Customers through expanded customer outreach, and targeted services to support our customers in migrating additional workloads from other cloud providers to DigitalOcean.
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. 51 Growing Our Base of AI Native and Cloud Native DNE Customers We believe there is a substantial opportunity to further expand our customer base.
The change is primarily due to increases of $2.9 million in professional services costs and $1.5 million in personnel costs, mainly driven by increased headcount, and $1.3 million in other operating costs. Sales and marketing expenses increased $6.5 million, or 10%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Sales and marketing expenses increased for the year ended December 31, 2025 compared to 2024 due to increases of $7.8 million in personnel costs driven by higher headcount , $2.2 million in expenses associated with events and advertising, and $0.9 million in other costs, net.
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 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. 53 The following table provides a mapping of our current definitions and categories of customers to our prior definitions and categories of customers.
Debt in Item 8. in the consolidated financial statements), 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.
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.
We believe that being simple, scalable and approachable 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. 48 We offer mission-critical solutions 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; and artificial intelligence and machine learning (AI/ML), including our GPU Droplets, Notebooks and GenAI Platform offerings.
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.
As of December 31, 2024, we had $428.4 million in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash and money market funds. 59 We may from time to time seek to retire or purchase our outstanding equity or debt, including the repurchase of our common stock or the Convertible Notes (as defined in Note. 8.
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.
The increase in cash used in investing activities was primarily driven by a $535.6 million reallocation of our marketable securities portfolio to cash equivalents and an increase of $61.7 million in cash payments for capital expenditures, partially offset by $99.0 million decline in cash paid for acquisition of businesses, net of cash acquired, and a $2.5 million decrease in cash activity for asset acquisitions.
The change in cash used in investing activities was primarily driven by $126.8 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 $91.7 million reallocation of our marketable securities portfolio to cash equivalents, partially offset by a decrease of $46.7 million in cash payments for capital expenditures.
For a quarterly or annual period, ARPU is determined as the weighted average monthly ARPU over such three or 12-month period. 53 ARR Given the recurring nature of our business, we view annual run-rate revenue as an important indicator of our current progress towards meeting our revenue targets and projected growth rate going forward.
Prior periods have been recast to reflect the effects of the changes. ARR Given the recurring nature of our business, we view annual run-rate revenue 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.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification , in Item 8. in the consolidated financial statements for further details. (2) Amount includes $31.3 million of recognized stock-based compensation related to our former CEO’s MRSUs that was estimated to be forfeited and therefore reversed for the year ended December 31, 2023.
Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification , in Item 8. in the consolidated financial statements for further details.
Other Income, net Other income, net consists primarily of interest income on our money market funds, amortization of deferred financing fees on our convertible notes, and gains or losses on foreign currency exchange. Income Tax Expense Income tax expense is attributable to the mix of income in the jurisdictions in which we conduct business.
Other Income, net Other income, net consists primarily of gain on partial extinguishment of our 2026 Convertible Notes, interest income on our money market funds, amortization of debt issuance costs, cash interest expense on our Term Loan A, credit facilities and equipment financing obligations, and gains or losses on foreign currency exchange.
Our research and development, sales and marketing and customer support investments are primarily focused on these Higher Spend Customers, and we believe their performance is the best indicator of our future growth and performance.
We believe these annual run-rate revenue (“ARR”) based tiers provide a better representation of the growth of customers on our platform during each reporting period as our research and development, sales and marketing and customer support investments are primarily focused on these DNE Customers.
Components of Results of Operations Revenue We offer mission-critical solutions 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; and artificial intelligence and machine learning (AI/ML), including our GPU Droplets, Notebooks and GenAI Platform offerings.
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.
The change is primarily due to decreases of $32.7 million in personnel costs, primarily from reduced acquisition-related deferred compensation as well as reversal of stock-based compensation 58 from forfeited RSUs, and $2.6 million in professional services costs, partially offset by increases of $31.3 million reversal of stock-based compensation attributed to our former CEO’s forfeited MRSUs and $1.5 million in payment processing costs due to revenue growth.
General and administrative expenses decreased for the year ended December 31, 2025 compared to 2024 due to decreases of $28.8 million in personnel costs, primarily due to costs incurred in the first half of 2024 related to acquisition-related deferred compensation and executive reorganization, including the reversal of stock-based compensation from forfeited RSUs and other related costs, and $0.3 million in other costs, net, partially offset by increases of $3.7 million in payment processing costs and provision for expected credit losses due to higher revenue and $3.0 million in professional services costs.

… 99 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+5 added−1 removed4 unchanged
Biggest changeConvertible Notes In November 2021, we issued our Convertible Notes with an aggregate principal amount of $1.5 billion. The Convertible Notes have a fixed annual interest rate of 0.0%, and accordingly, we do not have economic interest rate exposure on the Convertible Notes. However, the fair value of the Convertible Notes is exposed to interest rate risk.
Biggest changeThe 2026 and 2030 Convertible Notes have a fixed annual interest rate of 0.00%, and accordingly, we do not have economic interest rate exposure. However, the fair value of the 2026 and 2030 Convertible Notes is exposed to interest rate risk.
To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have a material effect on our operating results. 66
To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have a material effect on our operating results. 67
Generally, the fair value of the Convertible Notes will increase as interest rates fall and decrease as interest rates rise. We carry the Convertible Notes at face value less unamortized discount and issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only.
Generally, the fair value of the 2026 and 2030 Convertible Notes will increase as interest rates fall and decrease as interest rates rise. We carry the 2026 and 2030 Convertible Notes at face value less unamortized discount and issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only.
In addition, the fair value of the Convertible Notes also fluctuates when the market price of our common stock fluctuates. The fair value was determined based on the quoted bid price of the Convertible Notes in an over-the-counter market on the last trading day of the reporting period. For further information refer to Note 6.
In addition, the fair value of the 2026 and 2030 Convertible Notes also fluctuates when the market price of our common stock fluctuates. The fair value was determined based on the quoted bid price in an over-the-counter market on the last trading day of the reporting period. For further information refer to Note 5.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk At December 31, 2024, we had cash, cash equivalents and marketable securities of $428 million, which were held for working capital purposes. Our cash equivalents consist of highly liquid investments in money market funds.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk At December 31, 2025, we had cash and cash equivalents of $254.5 million, which were held for working capital purposes. Our cash equivalents consist of highly liquid investments in money market funds.
As of December 31, 2024, the effect of a hypothetical 10% change in interest rates would have changed the fair value of our investments in cash equivalents and marketable securities by an immaterial amount.
As of December 31, 2025, the effect of a hypothetical change of 100 basis points in interest rates would have changed the fair value of our investments in cash equivalents by an immaterial amount.
Fair Value Measurements, Financial Instruments Not Recorded at Fair Value on a Recurring Basis and Note 8. Debt, to the consolidated financial statements included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Fair Value Measurements, Financial Instruments Not Recorded at Fair Value on a Recurring Basis and Note 7. Debt, to the consolidated financial statements included in Part II, Item 8.
Foreign Currency Exchange Risk Our sales are primarily denominated in U.S. dollars, and therefore our revenue is generally not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in Australia, Canada, Germany, India, the Netherlands, Pakistan, United Kingdom and the United States.
Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in Australia, Canada, Germany, India, the Netherlands, Pakistan, United Kingdom and the United States.
Removed
Fluctuations in the fair value of our investments in marketable securities caused by a change in interest rates (gains or losses on the carrying amount) are recorded in other comprehensive income (loss), and are realized only if we sell the underlying securities prior to maturity.
Added
Borrowings under our 2025 Credit Facility bear interest at a variable rate tied to the adjusted term SOFR, the prime rate, or the federal funds effective rate. As of December 31, 2025, we had $380.0 million outstanding under the 2025 Credit Facility as Term Loan A.
Added
We do not have any other long-term debt or financial liabilities with floating interest rates that would subject us to interest rate fluctuations. As of December 31, 2025, a hypothetical increase of 100 basis points in interest rates for our Term Loan A would not have a material impact on our consolidated financial statements.
Added
Convertible Notes In August 2025, we issued our 2030 Convertible Notes with an aggregate principal amount of $625.0 million. In connection with the issuance of the 2030 Notes, we entered into privately negotiated capped call transactions with certain counterparties.
Added
The capped calls transactions are expected generally to offset the potential dilution to our common stock as a result of any conversion of the 2030 Notes. In August 2025, we partially repaid our 2026 Convertible Notes with an aggregate outstanding principal amount of $312.3 million as of December 31, 2025.
Added
“Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 66 Foreign Currency Exchange Risk Our sales are primarily denominated in U.S. dollars, and therefore our revenue is generally not currently subject to significant foreign currency risk.

Other DOCN 10-K year-over-year comparisons