Of the $350 million DigitalOcean paid for Cloudways, $38.8 million was contingent pay to a seller

Of the $350 million DigitalOcean agreed to pay for Cloudways, $38.8 million was never a payment for shares. DigitalOcean's 2025 annual report records $311.2 million of cash consideration for all of the equity of Cloudways, which it bought on 1 September 2022, and separately $38.8 million of contingent compensation due to a Cloudways seller. The two add up to $350.07 million, so about 11 percent of the headline price was pay tied to a person rather than to the business.

The filing says $14.7 million of that compensation was earned and paid during 2024. The seller resigned on 30 October 2024, and DigitalOcean paid the remaining $7.3 million in the same quarter, in recognition of the seller's service. The filing does not name the seller.

The dates frame the payout. The Share Purchase Agreement is dated 19 August 2022, and DigitalOcean announced the deal four days later. The sale closed on 1 September. The last compensation payment fell in the quarter ended 31 December 2024, about 27 months after closing and inside the 30 month window DigitalOcean described in 2022, when it said a significant portion of the price would be paid over that period. The agreement's other terms are not in the annual report.

A management layer on rented servers

Cloudways sells management on top of cloud servers it does not own. A customer picks a server from a provider, and Cloudways handles setup, security patches, backups and speed tuning. DigitalOcean's annual report lists it as the company's Managed Hosting offering, aimed at growing technology companies that want to hand off the work of running infrastructure, and names Kinsta and WP Engine as competitors.

This model carries a squeeze. A reseller of cloud capacity pays its supplier by the hour and charges customers by the month, so its margin is the gap between the two. DigitalOcean said in its 2022 announcement that Cloudways already ran about 50 percent of its customers on DigitalOcean infrastructure. In our reading, that explains the buyer's interest: each customer moved from another cloud onto DigitalOcean turns what had been a supplier's cut into the buyer's own revenue. WordPress powered 43 percent of websites at the time of the deal, according to W3Techs figures DigitalOcean cited, which is the market that kind of service sells into.

The mismatch in billing periods is why the product needs scale. Cloud providers meter servers by the hour, while a hosting customer expects one predictable monthly bill, so a reseller carries the risk of customers whose servers sit idle or run hot. Spread over tens of thousands of accounts, that risk averages out. For a single agency with a handful of client sites, it does not, which is the sales case for paying Cloudways rather than renting servers directly.

What the published figures imply

DigitalOcean said Cloudways was expected to earn more than $52 million in 2022 and had grown revenue at a compound rate above 50 percent a year over three years. The price was 6.7 times that expected revenue ($350 million divided by $52 million). Growth of 50 percent a year for three years multiplies revenue by 3.4, so three years before the sale Cloudways earned roughly $15 million or less. It more than tripled in that time.

TRT World reported that Cloudways had more than 75,000 customers at the time of the deal. Dividing $52 million by 75,000 gives about $690 a year, or $58 a month, per customer. Because the customer count was above 75,000, that is a ceiling on the average account. It describes a business of many modest, steady accounts rather than a few large ones.

One figure does not reconcile easily. DigitalOcean expected Cloudways to add $13 million to $15 million to its 2022 revenue. The deal closed on 1 September, so four months of consolidation applied, and a straight line share of $52 million over four months is $17.3 million. The straight line is our assumption, and the filings give no reason for the lower guidance. The $52 million remains a forecast, not an audited result.

“SMBs love simplicity, performance, predictability, affordability, and great support.”

DigitalOcean added that Cloudways had a net promoter score of 71 and that the deal would raise its global headcount by 30 percent.

Built in Pakistan, registered in Malta

TRT World reported that Cloudways is registered in Malta but carries out its backend development in Pakistan, and that some of its founders belong to the Karachi based Gaditek Group. In a LinkedIn post the outlet quoted, Gadit called the sale "a great validation that we can build and scale global tech platforms from Pakistan". The company that changed hands was a Maltese one, so the sale tells us about Pakistani engineering talent more directly than it tells us about Pakistani corporate ownership. DigitalOcean's filings do not say how many Cloudways staff work in Pakistan or where the selling shareholders live.

What DigitalOcean has not said

DigitalOcean does not report Cloudways revenue separately. Its 2025 annual report treats managed hosting as part of a wider platform and software category. The net dollar retention rate it gives, 98 percent in 2024 and 100 percent in 2025, measures how much customers spent compared with a year earlier, so a figure near 100 means growth in existing accounts roughly offset those that left. It covers the whole company, however, so it says nothing precise about Cloudways.

The technical risk, in our reading, is dependence. A management layer can be copied, and the clouds underneath can raise their prices or build managed WordPress products of their own. The 30 month payout DigitalOcean described in 2022, and the 2024 payment tied to the seller's departure, show the buyer paid for continuity as well as for customers. Whether $350 million proves cheap or dear rests on Cloudways revenue and retention figures that DigitalOcean has so far kept to itself. Three numbers would settle it: Cloudways revenue since the purchase, its customer count today, and the share of its customers still running on clouds other than DigitalOcean. None has been published.