> What a sad indictment of modern accounting practices that its accepted practice to create 'noise' to prop up a P&L

Income statements include things like depreciation. That's real, in a sense. It's future CAPEX. But for the present health of a business, particularly a levered one, cash is king.

One way to think of it is in time frames. Cash flows are immediately relevant. If they're out of whack, it's an urgent problem. (They're also the most difficult to mess with.) Income statements are longer term. An unprofitable, cash-generating business may have structural issues with its PP&E, or it may be overleverd, or a bunch of options might have been issued or exercised. Balance sheets are the longest-term statement. (They're also the easiest to mess with.)

Keep in mind, too, that income statements for investors are different from those prepared for the IRS.

"Income statements include things like depreciation. That's real, in a sense. It's future CAPEX."

Depreciation is past capex, not future capex. You could argue that the two are equivalent, because the assets being depreciated will need replacement in the future. But:

1. The assets' useful life may be longer (or shorter) than the depreciation schedule.

2. The future replacements may cost less (or more) or just not be needed at all.

> Depreciation is past capex, not future capex

Technically (from an accounting perspective), yes. Practically (from a financial/economic perspective), not quite.

Past capex is a sunk cost. Investors care about future cash flows. If you strip out depreciation, you’ll be surprised by the bill when your machine breaks down. (You may still be surprised. Life is unpredictable and depreciation schedules are an estimate. But that’s one of the problems the concept tries to solve.)

It's not really a "sad indictment", there's nothing shady about re-investing your money into the business. It just so happens that if you are a fast growth company doing that, it is no longer beneficial to use the same tools to compare to traditional large established slow growth companies. Amazon fairly and legally and morally (mostly) re-invested their positive cash flow back into their business, but looking at their P&L you can't tell if they are a year 0 startup or an amazing giant company - the cashflow, however, reveals a different story.

It's perhaps not nefarious. A lot of GAAP and the standards came about when manufacturing was a lot more prevalent. Concepts like depreciation make a lot more sense when you mentally place yourself in the 1920s.

Depreciation still makes plenty of sense today. A company with very little capital equipment will simply not have a lot of depreciation. Digital ocean as a cloud hoster has a lot of capital equipment (servers etc) to worry about as well.

Many analysts will capitalize R&D spend.

Which makes a lot of sense, especially when it comes to compensation where not capitalizing end would lead to incentives to not invest in it even if it is profitable. It doesn't make sense to expense it right away when it's something that, like capex, is meant to essentially purchase assets that can pay off later. If those revenues fail to materialize, then the bottom line takes a hit then, just as a company would take a hit if expenditure on a factory proves to be worthless. The goal of this sort of accounting is to reflect economics better, we have statements of cash flows to keep a track of cash and you're more than free to use that in valuing a company (and many analysts do ignore everything but cash)

Do they run their own servers? I thought they were wrapping t other big cloud providers.

DigitalOcean owns their own servers and networking infrastructure inside existing datacenters.

https://www.quora.com/Does-DigitalOcean-have-its-own-datacen...