DigitalOcean Holdings: Sell as GPU CapEx, 54.7% Gross Margin, and Dilution Leave Shares at 1.72x DCF Value
Crossing $1.10B in TTM revenue at +20.4% growth showcases Scalers+ traction, yet 857 bps of multi-year gross margin compression, 10.1% SBC, and 3.1% annual share dilution cap DCF value at $29.49.
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DigitalOcean Holdings crossed the billion-dollar threshold with $1.10B in trailing twelve-month GAAP revenue (+20.43% year over year) through September 30, 2026, re-accelerating from +12.66% in FY2024 and +15.48% in FY2025 as digital-native startups and software-as-a-service builders adopted high-memory compute and Paperspace-powered GPU inference droplets. [1] Growth momentum has propelled the stock to $50.61
Our primary-filing decomposition reveals why that multiple rests on fragile unit economics. Scaling bare-metal CPU and accelerated machine-learning infrastructure has driven 857 bps of cumulative GAAP gross margin compression since FY2022, pulling gross margin down from 63.23% in FY2022 and 59.86% in FY2025 to 54.66% in Q3 2026 TTM.
[1] Over the same trailing twelve-month window, GAAP operating margin retreated 493 bps from 17.42% in FY2025 to 12.49% ($137.76M EBIT) as non-cash depreciation and equipment lease amortization climbed to $212.19M (19.24% of revenue) and R&D spend expanded to $209.40M. [1][2]
Furthermore, headline GAAP free cash flow of $244.12M (22.14% margin) overstates true equity-holder distributable cash for two reasons documented in the cash flow statement and share footnotes: $111.28M in stock-based compensation (10.09% of revenue) consumes 45.58% of GAAP FCF, leaving $132.84M (12.05% margin) in Owner FCF, while diluted share count expanded 21.35% in just seven quarters from 94.50M in FY2024 to 114.68M in Q3 2026 following convertible debt settlement and equity awards. [1] At $50.61, our reverse-DCF solver shows the market underwriting 35.99% annual 5-year revenue growth, far above DigitalOcean's 20.43% pace.
Source: DigitalOcean Holdings SEC Form 10-K and Q3 2026 Form 10-Q filings.
Vertex: Sell as Capitalized Software CapEx and 4.49x DCF Multiple Erode ERP Tax Premium
Enterprise SAP and Oracle indirect tax migrations drive 15.16% TTM revenue growth to $787.44M, but $77.67M in capital expenditures and $57.00M in SBC compress true owner cash margin to 4.94%.
