DigitalOcean Holdings Inc (DOCN)

Interest coverage

		Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	77,942	17,154	-5,332	-34,307	-46,233	-14,730	-18,219	-30,502	-27,096	-14,457
Interest expense (ttm)	US$ in thousands	9,060	8,945	8,749	8,543	8,526	8,396	7,350	5,409	3,547	3,744
Interest coverage		8.60	1.92	-0.61	-4.02	-5.42	-1.75	-2.48	-5.64	-7.64	-3.86

March 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $77,942K ÷ $9,060K
= 8.60

The interest coverage ratio measures a company's ability to meet its interest payment obligations on outstanding debt. A higher ratio indicates a stronger ability to cover interest expenses. Looking at the trend of DigitalOcean Holdings Inc's interest coverage ratio over the past few quarters, we can see fluctuations.

The interest coverage ratio was positive and relatively healthy at 8.60x as of March 31, 2024. This suggests that the company's operating income was sufficient to cover its interest expenses over the period. However, the ratio had significantly declined in the previous quarter to 1.92x, indicating a potential strain on the company's ability to meet its interest obligations.

In the earlier quarters (September 30, 2023, and earlier), the interest coverage ratio was negative, indicating that the company's operating income was insufficient to cover its interest expenses. This negative trend could raise concerns about the company's financial health and ability to service its debt.

Overall, the fluctuating trend in DigitalOcean Holdings Inc's interest coverage ratio indicates variability in its ability to cover interest payments. It would be important to closely monitor future financial performance to ensure the company can adequately meet its debt obligations.