Software has started to bounce back from the AI fear-driven SaaS-pocalypse after Salesforce (CRM) and Snowflake (SNOW) earnings. DigitalOcean (DOCN) is an example of a software company that is integrating AI into its offerings – and seeing demand from AI-native players – showing that the two can coexist. DOCN’s CEO, Paddy Srinivasan, joined Market ON Close to break down their latest quarter and future strategy.

DigitalOcean is a cloud computing infrastructure company, meaning it helps other companies build the specialized applications they’re looking for. It tends to work with startups and digital businesses. DigitalOcean offers virtual machines called ‘Droplets’, with or without AI. It’s added OpenClaw’s AI assistant as an option as well.

Srinivasan discussed how DigitalOcean is appealing to AI-native companies, cementing demand and utility even with market worries around the software sector. Being the backbone of application building may put DigitalOcean in a good spot within this sector: Srinivasan says you could call it one of the “picks and shovels” of software. It claims some buzzy new startups as clients, including ScraperAPI, Servd, Character.AI, Scribe, and other budding AI companies.

They compete with names like Amazon’s AWS and make their pitch to customers through lower pricing, with one testimonial from ScraperAI saying AWS would cost 250% more.

Turning to the financials, in its latest quarterly report, 4Q25, it posted 18% revenue growth and $970 million in annual recurring revenue (ARR), an important metric to the sector. Annualized monthly revenue hit $1B; DOCN proclaims it was “built for this shift” as AI reshapes industries. They’re keeping up profit margins as well, with a 60% gross margin, $168M in free cash flow, and adjusted EBITDA margin hitting 42%.

Top customers are the force behind their growth, with 21K Digital Native Enterprises making up a full 62% of their total ARR. For context, they have 651K customers overall, meaning those core customers make up around 3% of their total clients. DigitalOcean says that their top customers are also their fastest growing, meaning they like what the platform offers the deeper they go.

At the end of the day, AI needs computing power. Companies just getting started need a framework and tools. These small AI startups can’t afford to pour money into building data centers; they need to rent their piece. They can’t just order AI to build them something, they need access to a complex-enough model and a way to securely build their applications.

That makes DigitalOcean and companies like it part of the fulcrum of the AI wrecking ball, rather than something in its way. On the other hand, with a small number of companies making up the majority of their revenue, if there is an AI bubble and it pops, it could be caught up in the fallout.

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