What is the expected impact on earnings per share (EPS) and cash flow once the notes are issued?

Impact on EPS

Because the notes carry a 0 % coupon, DigitalOcean will not incur any cash‑interest expense on the $550 million of debt. In the near‑term this means the “interest‑expense‑after‑tax” line in the income statement will stay essentially unchanged, so net income—and therefore earnings‑per‑share—should not be dragged down by the financing cost. However, the notes are convertible, so when (or if) holders elect to convert them into common stock the outstanding share count will rise. That future dilution will depress the EPS that investors actually receive. In other words, EPS is likely to hold steady or even tick up slightly now, but the upside is capped by the conversion‑risk‑driven dilution that will pull the EPS down once the conversion window is triggered.

Impact on cash flow

The pricing of the $550 million notes injects a sizable cash inflow into DigitalOcean’s balance sheet immediately. With no periodic cash‑interest outlays, the net cash‑flow impact is a pure boost to operating‑and‑investment liquidity. Management can use the proceeds to fund growth initiatives, shore up working capital, or refinance higher‑cost debt, all of which should improve free‑cash‑flow generation in the coming quarters. The cash‑flow statement will show a large financing‑cash‑inflow, and, absent a cash‑interest drag, the operating cash flow line will not be eroded by this financing.

Trading implications

• Short‑term: The liquidity uplift is a positive catalyst—expect the stock to price‑in the stronger cash‑position and the removal of interest expense. A modest upside in the next 4‑6 weeks is plausible, especially if the market perceives the capital raise as a runway‑extender for growth.
  
• Medium‑term: Keep a close eye on the conversion terms (conversion price, trigger events, and any anti‑dilution provisions). If the notes are likely to convert before 2030, the dilution risk will become a head‑line factor for EPS and could cap upside or even trigger a pull‑back.
  
• Actionable: Consider a long‑position now to capture the cash‑flow‑boost rally, but size the position with a stop that reflects the potential upside‑downside from future dilution. Monitor the company’s capital‑allocation updates and any hints about accelerating conversion—those will be the key drivers of EPS trajectory and, ultimately, the stock’s valuation.