What impact will this financing have on DigitalOcean’s leverage ratios and credit rating?

The $550 million upsized convertible‑note issuance will add a sizable amount of senior debt to DigitalOcean’s balance sheet, so its leverage ratios (e.g., debt‑to‑EBITDA and net‑debt‑to‑equity) are expected to rise in the near term. Because the notes carry a 0 % coupon and are structured as convertibles, the company is deferring cash‑interest expense, but the principal will still be recorded as debt and will increase the company’s overall leverage until the notes are either refinanced or converted into equity. If the proceeds are used to fund growth initiatives or to refinance higher‑‑cost debt, the impact on leverage may be partially offset; however, the raw increase in debt will push the ratios upward and could place DigitalOcean closer to the upper‑end of the “moderate‑leverage” range that most rating agencies view as a warning sign.

Rating agencies typically view a sudden boost in senior debt as a negative factor, especially when the company’s leverage is already on the higher side of its historical range. Consequently, the new financing could trigger a modest downward pressure on DigitalOcean’s credit rating unless management can demonstrate that the capital will materially improve cash‑flow generation or profitability (e.g., by accelerating customer acquisition, expanding higher‑margin services, or reducing existing higher‑cost borrowings). Traders should therefore keep an eye on any rating‑agency commentary in the coming weeks and monitor the company’s quarterly leverage metrics; a downgrade risk could create short‑term downside pressure on the stock, while a successful deployment of the proceeds that improves earnings could mitigate rating concerns and support the price.