Latest news with #PaddySrinivasan
Yahoo
2 days ago
- Business
- Yahoo
This AI Stock Is Soaring, but It's Not Too Late to Buy
Key Points DigitalOcean's growth is starting to accelerate as its AI platform matures. The stock soared after the second-quarter earnings report as AI revenue more than doubled. It's not too late to buy the stock at a reasonable valuation. 10 stocks we like better than DigitalOcean › DigitalOcean (NYSE: DOCN), a cloud computing platform that pitches itself as a simpler alternative to Amazon Web Services and Microsoft Azure, is rapidly scaling up its artificial intelligence (AI) ambitions. The company acquired AI start-up Paperspace in mid-2023 to get its foot in the door. Under CEO Paddy Srinivasan, who took over in early 2024, DigitalOcean has been building out a full-scale AI computing platform. On top of offering virtual servers outfitted with powerful graphics processing units (GPUs), DigitalOcean's new Gradient AI platform enables customers to build AI agents without managing infrastructure. The company's AI-related revenue more than doubled year over year in the second quarter, which was one reason why the stock exploded higher. The day after that earnings report, DigitalOcean stock soared nearly 29%. AI is helping reaccelerate growth for DigitalOcean, and the stock looks like a solid buy, despite the higher price tag. Moving in the right direction DigitalOcean's total revenue rose by 14% year over year in the second quarter, a bit faster than the 13% growth the company reported for the same period last year. Under the surface, revenue is shifting toward larger customers willing to spend more on the platform. The number of Scalers+ customers, which spend at least $100,000 annually on DigitalOcean's platform, rose by 23%, while the revenue generated by those large customers surged by 35%. These larger customers help make DigitalOcean's revenue more reliable and predictable. The company still has plenty of small customers, with 174,000 customers who spend at least $50 per month. But 24% of total revenue now comes from the roughly 500 customers spending at least $100,000 per year on the platform. This growth in larger customers and the improvement in the net dollar retention rate in the second quarter to 99% is partly due to DigitalOcean's quicker pace in launching new products and features. The company launched more than 60 new features across its cloud computing and AI products in the second quarter, including the general availability of its Gradient AI platform. While DigitalOcean must strike a balance between keeping its platform simple and rolling out new features, the AI industry is moving so quickly that the company can't afford to sit still. With a strong second quarter under its belt, DigitalOcean raised its outlook for the full year. Revenue is now expected to grow by 13.8% to 14.3%, and the free-cash-flow margin is now expected to be between 17% and 19%. Free cash flow had taken a hit from the company's AI infrastructure investments, but it now appears to be recovering as the AI business takes flight. DigitalOcean's accelerating revenue growth and boosted guidance come despite a tough economic backdrop. By not having a customer base loaded with big enterprise customers, the company may be less exposed to the phenomenon of cloud customers hunting for cost savings during tough times. A reasonable valuation Based on DigitalOcean's outlook for 2025, the company is on track to generate around $160 million in free cash flow at the midpoint of its guidance range for the full year. With a market capitalization hovering around $3 billion, that puts the price-to-free-cash-flow ratio at just under 19. With DigitalOcean's revenue growth accelerating, thanks in part to the company's progress building out its AI platform, that seems like a reasonable price to pay. While a volatile macroeconomic environment could negatively impact the company later this year, DigitalOcean's AI efforts look likely to drive revenue and free-cash-flow growth in the long run as companies embrace AI technology. Should you invest $1,000 in DigitalOcean right now? Before you buy stock in DigitalOcean, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and DigitalOcean wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,119,863!* Now, it's worth noting Stock Advisor's total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 11, 2025 Timothy Green has positions in DigitalOcean. The Motley Fool has positions in and recommends Amazon, DigitalOcean, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. This AI Stock Is Soaring, but It's Not Too Late to Buy was originally published by The Motley Fool
Globe and Mail
2 days ago
- Business
- Globe and Mail
This AI Stock Is Soaring, but It's Not Too Late to Buy
Key Points DigitalOcean's growth is starting to accelerate as its AI platform matures. The stock soared after the second-quarter earnings report as AI revenue more than doubled. It's not too late to buy the stock at a reasonable valuation. 10 stocks we like better than DigitalOcean › DigitalOcean (NYSE: DOCN), a cloud computing platform that pitches itself as a simpler alternative to Amazon Web Services and Microsoft Azure, is rapidly scaling up its artificial intelligence (AI) ambitions. The company acquired AI start-up Paperspace in mid-2023 to get its foot in the door. Under CEO Paddy Srinivasan, who took over in early 2024, DigitalOcean has been building out a full-scale AI computing platform. On top of offering virtual servers outfitted with powerful graphics processing units (GPUs), DigitalOcean's new Gradient AI platform enables customers to build AI agents without managing infrastructure. The company's AI-related revenue more than doubled year over year in the second quarter, which was one reason why the stock exploded higher. The day after that earnings report, DigitalOcean stock soared nearly 29%. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » AI is helping reaccelerate growth for DigitalOcean, and the stock looks like a solid buy, despite the higher price tag. Moving in the right direction DigitalOcean's total revenue rose by 14% year over year in the second quarter, a bit faster than the 13% growth the company reported for the same period last year. Under the surface, revenue is shifting toward larger customers willing to spend more on the platform. The number of Scalers+ customers, which spend at least $100,000 annually on DigitalOcean's platform, rose by 23%, while the revenue generated by those large customers surged by 35%. These larger customers help make DigitalOcean's revenue more reliable and predictable. The company still has plenty of small customers, with 174,000 customers who spend at least $50 per month. But 24% of total revenue now comes from the roughly 500 customers spending at least $100,000 per year on the platform. This growth in larger customers and the improvement in the net dollar retention rate in the second quarter to 99% is partly due to DigitalOcean's quicker pace in launching new products and features. The company launched more than 60 new features across its cloud computing and AI products in the second quarter, including the general availability of its Gradient AI platform. While DigitalOcean must strike a balance between keeping its platform simple and rolling out new features, the AI industry is moving so quickly that the company can't afford to sit still. With a strong second quarter under its belt, DigitalOcean raised its outlook for the full year. Revenue is now expected to grow by 13.8% to 14.3%, and the free-cash-flow margin is now expected to be between 17% and 19%. Free cash flow had taken a hit from the company's AI infrastructure investments, but it now appears to be recovering as the AI business takes flight. DigitalOcean's accelerating revenue growth and boosted guidance come despite a tough economic backdrop. By not having a customer base loaded with big enterprise customers, the company may be less exposed to the phenomenon of cloud customers hunting for cost savings during tough times. A reasonable valuation Based on DigitalOcean's outlook for 2025, the company is on track to generate around $160 million in free cash flow at the midpoint of its guidance range for the full year. With a market capitalization hovering around $3 billion, that puts the price-to-free-cash-flow ratio at just under 19. With DigitalOcean's revenue growth accelerating, thanks in part to the company's progress building out its AI platform, that seems like a reasonable price to pay. While a volatile macroeconomic environment could negatively impact the company later this year, DigitalOcean's AI efforts look likely to drive revenue and free-cash-flow growth in the long run as companies embrace AI technology. Should you invest $1,000 in DigitalOcean right now? Before you buy stock in DigitalOcean, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,119,863!* Now, it's worth noting Stock Advisor's total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 11, 2025 Timothy Green has positions in DigitalOcean. The Motley Fool has positions in and recommends Amazon, DigitalOcean, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Yahoo
05-08-2025
- Business
- Yahoo
DigitalOcean Announces Second Quarter 2025 Financial Results
Q2 2025 Revenue of $219 million, up 14% year-over-year; Raised full year revenue guidance to $888 to $892 million Q2 2025 Net Income was $37 million, up 93% year-over-year, at 17% margin and Adjusted EBITDA was $89 million, up 10% year-over-year, at 41% margin; Raised full year Adjusted EBITDA margin guidance to 39% to 40% Q2 2025 Incremental ARR of $32 million, the highest incremental ARR since Q4 of 2022 BROOMFIELD, Colo., August 05, 2025--(BUSINESS WIRE)--DigitalOcean Holdings, Inc. (NYSE: DOCN), the simplest scalable cloud for digital native enterprises, today announced results for its second quarter ended June 30, 2025. "We delivered another quarter of solid performance across both AI and core cloud. Total revenue grew 14% year-over-year, we achieved the highest incremental ARR since Q4 of 2022, and we more than doubled our AI/ML revenue year-over-year." said Paddy Srinivasan, CEO of DigitalOcean. "Our strategic focus on higher spending digital native enterprises and key strategic partners drove Scalers+ revenue up 35% year-over-year, reaching 24% of total revenue. We also continue to effectively balance higher growth and attractive free cash flow margins, which is reflected in our increased guidance on both full year revenue and profitability metrics." Second Quarter 2025 Financial Highlights: Revenue was $219 million, an increase of 14% year-over-year. Annual Run-Rate Revenue (ARR)(1) ended the quarter at $875 million, an increase of 14% year-over-year. Gross profit(2) was $131 million, an increase of 15% year-over-year, and gross profit margin was 60%. Net income attributable to common stockholders was $37 million, an increase of 93% year-over-year, and net income margin was 17%. Adjusted EBITDA was $89 million, an increase of 10% year-over-year, and adjusted EBITDA margin was 41%. Diluted net income per share was $0.39 and non-GAAP diluted net income per share was $0.59. Net cash from operating activities was $92 million as compared to $71 million in the second quarter 2024. Adjusted free cash flow was $57 million at 26% margin, as compared to $37 million at 19% margin adjusted free cash flow generated in the second quarter 2024. Cash and cash equivalents was $388 million as of June 30, 2025. Remaining Performance Obligation was $53 million compared to $3 million in the second quarter 2024. Second Quarter 2025 Operational Highlights: The number of Scalers+(1) within our Higher Spend Customers cohort grew 23%, while the revenue from these customers, which now represents 24% of total revenue, grew 35% year-over-year. Net Dollar Retention Rate (NDR) increased to 99% from 97% in the second quarter 2024. Average Revenue Per Customer (ARPU) was $111.70, an increase of 12% over the second quarter 2024. ARPU for our Scalers+ customer category was $30 thousand, an increase of 9% over the second quarter 2024. The Company released more than 60 new products and features during the quarter. The Company announced a collaboration with AMD that provides DigitalOcean customers with access to AMD Instinct™ GPUs as DigitalOcean GPU Droplets to power their AI workloads. Customers will also have access to the AMD Developer Cloud, a new platform powered by DigitalOcean that is purpose-built for rapid, high-performance AI development. The Company announced the General Availability of the DigitalOcean Gradient™ AI Platform, which brings simplicity and scale to digital native enterprises building with AI. The Company's Gradient AI Platform is a managed AI platform that enables developers to combine their data with foundation models from Anthropic, Meta, Mistral and OpenAI to add customized Generative AI agents to their applications. The Company's Gradient AI Platform is a fully managed service where customers do not need to manage infrastructure and can deploy Generative AI capabilities in minutes to their applications. The Company repurchased 0.7 million shares during the quarter; our cumulative share repurchases since IPO are $1.6 billion and 34.8 million shares through June 30, 2025. ___________________ (1) Beginning in the fourth quarter of 2024, we changed our methodology for calculating customer count and ARR, and changed our customer categories. Prior periods have been recast to reflect the effects of the changes. Refer to our Annual Report on Form 10-K for the year ended December 31, 2024 for further details. (2) Beginning in the fourth quarter of 2024, we reclassified certain costs from sales and marketing and research and development to cost of revenue. Amounts for the three and six months ended June 30, 2024 have been recast to conform with current period presentation. Refer to our Annual Report on Form 10-K for the year ended December 31, 2024 for further details. Financial Outlook: DigitalOcean is initiating guidance for the third quarter ending September 30, 2025 as follows: Total revenue of $226 to $227 million. Adjusted EBITDA margin of 39% to 40%. Non-GAAP diluted net income per share of $0.45 to $0.50. Fully diluted weighted average shares outstanding of approximately 102 to 103 million shares. For the full year 2025, we expect: Total revenue of $888 to $892 million. Adjusted EBITDA margin of 39% to 40%. Adjusted free cash flow margin in the range of 17% to 19% of revenue. Non-GAAP diluted net income per share of $2.05 to $2.10. Fully diluted weighted average shares outstanding of approximately 103 to 104 million shares. A reconciliation of non-GAAP outlook measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation expense-related charges are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. Accordingly, a reconciliation is not available without unreasonable effort and we are unable to assess the probable significance of the unavailable information, although it is important to note that these factors could be material to our results computed in accordance with GAAP. Conference Call Information: DigitalOcean will host a conference call today, August 5, 2025, at 8:00 a.m. ET to review its results. The conference call and presentation can be accessed by registering for the webcast at A live webcast and replay of the conference call in addition to the presentation can be accessed from the DigitalOcean investor relations website at About DigitalOcean DigitalOcean is the simplest scalable cloud platform that democratizes cloud and AI for digital native enterprises around the world. Our mission is to simplify cloud and AI so builders can spend more time creating software that changes the world. More than 600,000 customers trust DigitalOcean to deliver the cloud, AI, and ML infrastructure they need to build and scale their organizations. To learn more about DigitalOcean, visit Forward‑Looking Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding our performance, including but not limited to statements in the section titled "Financial Outlook." The forward-looking statements contained in this release and the accompanying earnings call referenced in this release are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. These risks, uncertainties, assumptions, and other factors include, but are not limited to: (1) fluctuations in our financial results make it difficult to project future results; (2) our ability to sustain profitability in the future; (3) our ability to expand usage of our platform by existing customers and/or attract new customers and/or retain existing customers; (4) the speed at which the market for our platform and solutions develops; (5) the success of the development and use of our artificial intelligence and machine learning (AI/ML) product offerings or use of third-party AI/ML-based tools; (6) our ability to release updates and new features to our platform and adapt and respond effectively to rapidly changing technology or customer needs; (7) our ability to control costs, including our operating expenses, and the timing of payment for expenses; (8) the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges; (9) breaches in our security measures allowing unauthorized access to our platform, our data, or our customers' data; (10) the competitive markets in which we participate; (11) our ability to effectively integrate and retain new members of our executive leadership team and senior management; (12) the effects of acquisitions and their integration; (13) general market, political, economic, and business conditions, including changes in trade policies, such as trade wars, tariffs and other restrictions or the threat of such actions; (14) the impact of new accounting pronouncements; (15) our ability to control fraudulent registrations and usage of our platform, reduce bad debt and lessen capacity constraints on our data centers, servers and equipment; and (16) our customers' ability to have continued and unimpeded access to our platform, including as a result of evolving laws and industry standards. Further information on these and additional risks, uncertainties, assumptions and other factors that could cause actual results or outcomes to differ materially from those included in or contemplated by the forward-looking statements contained in this release are included under the caption "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024 and subsequent filings and reports we make with the SEC. We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this release. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur. The forward-looking statements made in this release relate only to events as of the date on which the statements are made. We assume no obligation to, and do not currently intend to, update any such forward-looking statements after the date of this release. About Non-GAAP Financial Measures To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including: (i) adjusted EBITDA and adjusted EBITDA margin; (ii) non-GAAP net income and non-GAAP diluted net income per share; and (iii) adjusted free cash flow and adjusted free cash flow margin. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, adjusted free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of adjusted free cash flow as a measure of our financial performance and liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. Our calculations of each of these measures may differ from the calculations of measures with the same or similar titles by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth in the tables in the section "Reconciliation of GAAP to Non-GAAP Data." Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net income attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, acquisition related compensation, acquisition and integration related costs, income tax expense (benefit), restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, interest income and other income, net, revaluation of warrants, loss on extinguishment of debt, release of a VAT reserve, and other charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. We believe that adjusted EBITDA, when taken together with our GAAP financial results, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, evaluating our operating performance, and for internal planning and forecasting purposes. Our calculation of adjusted EBITDA and adjusted EBITDA margin may differ from the calculations of adjusted EBITDA and adjusted EBITDA margin by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including our net income attributable to common stockholders and other GAAP results. Non-GAAP Net Income and Non-GAAP Diluted Net Income Per Share We define non-GAAP net income as net income attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of certain long-lived assets, loss on extinguishment of debt, revaluation of warrants, release of a VAT reserve, and other charges. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of our stock options, RSUs, PRSUs, and Convertible Notes. We believe non-GAAP diluted net income per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of unusual or non-recurring items from period to period for reasons unrelated to overall operating performance. Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin Adjusted free cash flow is a non-GAAP financial measure that we define as Net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, purchase of intangible assets, and excluding cash paid for restructuring and other charges, acquisition related compensation, restructuring related charges, and acquisition and integration related costs. Adjusted free cash flow margin is calculated as adjusted free cash flow divided by total revenue. We believe that adjusted free cash flow and adjusted free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our core operations that can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments. We further believe that historical and future trends in adjusted free cash flow and adjusted free cash flow margin, even if negative, provide useful information about the amount of Net cash provided by operating activities that is available (or not available) to be used for strategic initiatives. One limitation of adjusted free cash flow and adjusted free cash flow margin is that they do not reflect our future contractual commitments. Additionally, adjusted free cash flow does not represent the total increase or decrease in our cash balance for a given period. Key Business Metrics: We utilize the key metrics set forth below to help us evaluate our business and growth, identify trends, formulate financial projections and make strategic decisions. Customers We calculate customer count as the average number of customers as of the last day of the month for each month in the most recent quarter. Customers are classified in the following categories based on the amount of their spend in a given month and individual customers may fall within different categories within a reporting period: Testers: users that both (i) spend less than or equal to $50 in a month and (ii) have been on our platform for three months or less. Learners: users that both (i) spend less than or equal to $50 in a month and (ii) have been on our platform for more than three months. Builders: users that spend more than $50 and less than or equal to $500 in a month. Scalers: users that spend more than $500 and less than or equal to $8,333 in a month. Scalers+: users that spend more than $8,333 in a month. We refer to our Builders, Scalers and Scalers+ customers collectively as our Higher Spend Customers. ARPU We calculate ARPU on a monthly basis as our total revenue from Learners, Builders, Scalers and Scalers+ in that period divided by the total number of Learners, Builders, Scalers and Scalers+ customers determined as of the last day of that month. For a quarterly or annual period, ARPU is determined as the weighted average monthly ARPU over such three or 12-month period. ARR We calculate ARR by multiplying the revenue for the most recent quarter by four. For our ARR calculations, we include the total revenue from all customers, including Testers, Learners, Builders, Scalers, and Scalers+. Net Dollar Retention Rate We calculate net dollar retention rate monthly by starting with the revenue from all customers, including Testers, Learners, Builders, Scalers and Scalers+ for our IaaS and PaaS/SaaS offerings during the corresponding month 12 months prior, or the Prior Period Revenue. We then calculate the revenue from these same customers as of the current month, or the Current Period Revenue, including any expansion and net of any contraction or attrition from these customers over the last 12 months. The calculation also includes revenue from customers that generated revenue before, but not in, the corresponding month 12 months prior, but subsequently generated revenue in the current month and are therefore reflected in the Current Period Revenue. We include this group of re-engaged customers in this calculation because some of our customers use our platform for projects that stop and start over time. We then divide the total Current Period Revenue by the total Prior Period Revenue to arrive at the net dollar retention rate for the relevant month. For a quarterly or annual period, the net dollar retention rate is determined as the average monthly net dollar retention rates over such three or 12-month period. Other Metrics: Remaining Performance Obligation Remaining performance obligation ("RPO") represents commitments in customer contracts for future services that have not yet been recognized in the condensed consolidated financial statements. We have applied the optional exemption to exclude contracts with an original expected term of one year or less from this amount. RPO is not necessarily indicative of future revenue growth because it does not account for the timing of customers' consumption or their usage beyond their contracted capacity. Additionally, RPO may increase when customers transition from usage-based to commitment-based agreements, which does not always reflect incremental revenue growth. RPO is influenced by a number of factors, including the timing and size of renewals, the timing and size of purchases of additional capacity and average contract term. Due to these factors, it is important to review RPO in conjunction with revenue and other financial metrics contained in this release and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024 and subsequent filings and reports we make with the SEC. DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) (unaudited) June 30, 2025 December 31, 2024 Current assets: Cash and cash equivalents $ 387,745 $ 428,446 Accounts receivable, less allowance for credit losses of $6,066 and $5,940, respectively 81,260 72,486 Prepaid expenses and other current assets 40,768 40,786 Total current assets 509,773 541,718 Property and equipment, net 465,521 432,544 Restricted cash 1,747 1,747 Goodwill 348,674 348,674 Intangible assets, net 109,332 117,718 Operating lease right-of-use assets, net 269,133 187,877 Deferred tax assets 586 200 Other assets 15,042 8,537 Total assets $ 1,719,808 $ 1,639,015 Current liabilities: Accounts payable $ 31,349 $ 54,565 Accrued other expenses 34,764 38,156 Deferred revenue 11,264 5,397 Operating lease liabilities, current 98,223 75,785 Other current liabilities 48,931 47,052 Total current liabilities 224,531 220,955 Deferred tax liabilities 4,580 4,123 Long-term debt 1,489,164 1,485,366 Operating lease liabilities, long-term 176,196 130,431 Other long-term liabilities 554 1,095 Total liabilities 1,895,025 1,841,970 Preferred stock ($0.000025 par value per share; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024) — — Common stock ($0.000025 par value per share; 750,000,000 shares authorized; 91,114,675 and 92,234,517 issued and outstanding as of June 30, 2025 and December 31, 2024, respectively) 2 2 Additional paid-in capital 8,883 57,282 Accumulated other comprehensive loss (591 ) (1,497 ) Accumulated deficit (183,511 ) (258,742 ) Total stockholders' deficit (175,217 ) (202,955 ) Total liabilities and stockholders' deficit $ 1,719,808 $ 1,639,015 DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Revenue $ 218,700 $ 192,476 $ 429,403 $ 377,206 Cost of revenue 87,755 78,328 169,014 153,910 Gross profit 130,945 114,148 260,389 223,296 Operating expenses: Research and development 39,644 32,984 79,238 65,911 Sales and marketing 19,288 17,997 38,689 36,907 General and administrative 36,394 40,839 69,201 86,612 Total operating expenses 95,326 91,820 187,128 189,430 Income from operations 35,619 22,328 73,261 33,866 Other income (expense): Interest expense (2,239 ) (2,321 ) (4,447 ) (4,625 ) Loss on extinguishment of debt (269 ) — (269 ) — Interest income and other income, net 9,337 4,802 15,283 9,823 Other income, net 6,829 2,481 10,567 5,198 Income before income taxes 42,448 24,809 83,828 39,064 Income tax expense (5,421 ) (5,671 ) (8,597 ) (5,787 ) Net income attributable to common stockholders $ 37,027 $ 19,138 $ 75,231 $ 33,277 Net income per share attributable to common stockholders Basic $ 0.41 $ 0.21 $ 0.82 $ 0.37 Diluted $ 0.39 $ 0.20 $ 0.77 $ 0.35 Weighted-average shares used to compute net income per share attributable to common stockholders Basic 91,097 91,318 91,538 91,049 Diluted 100,617 93,832 101,521 94,005 ______________ (1) Amounts for the three and six months ended June 30, 2024 have been recast to conform with current period presentation. Refer to Note 2. Summary of Significant Accounting Policies, Prior Period Reclassification, in Item 8. in the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2024 for further details. DIGITALOCEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 2025 2024 Operating activities Net income attributable to common stockholders $ 75,231 $ 33,277 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 61,975 65,016 Stock-based compensation 40,513 44,710 Provision for expected credit losses 8,607 7,985 Operating lease right-of-use assets and liabilities, net (13,816 ) 1,423 Loss on extinguishment of debt 269 — Net accretion of discounts and amortization of premiums on investments — 2,569 Non-cash interest expense 4,005 3,988 Impairment of certain long-lived assets — 356 Other (7,853 ) 361 Changes in operating assets and liabilities: Accounts receivable (17,064 ) (13,234 ) Prepaid expenses and other current assets 1,201 (4,346 ) Accounts payable and accrued expenses (3,029 ) (3,655 ) Deferred revenue 5,867 1,462 Other assets and liabilities 631 (1,879 ) Net cash provided by operating activities 156,537 138,033 Investing activities Capital expenditures - property and equipment (95,160 ) (75,534 ) Capital expenditures - internal-use software development (3,412 ) (4,046 ) Purchase of intangible assets (1,835 ) — Maturities of marketable securities — 91,675 Net cash (used in) provided by investing activities (100,407 ) 12,095 Financing activities Payment of debt issuance costs (4,081 ) — Proceeds related to the issuance of common stock under equity incentive plan 2,771 7,948 Proceeds from the issuance of common stock under employee stock purchase plan 2,660 2,231 Principal repayments of finance leases (2,733 ) (2,720 ) Employee payroll taxes paid related to net settlement of equity awards (16,294 ) (13,469 ) Repurchase and retirement of common stock including related costs (79,199 ) (18,183 ) Net cash used in financing activities (96,876 ) & (24,193 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 45 (61 ) (Decrease) increase in cash, cash equivalents and restricted cash (40,701 ) 125,874 Cash, cash equivalents and restricted cash - beginning of period 430,193 318,983 Cash, cash equivalents and restricted cash - end of period $ 389,492 $ 444,857 DIGITALOCEAN HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) Adjusted EBITDA and Adjusted EBITDA Margin Three Months Ended Six Months Ended June 30, June 30, (In thousands) 2025 2024 2025 2024 GAAP Net income attributable to common stockholders $ 37,027 $ 19,138 $ 75,231 $ 33,277 Adjustments: Depreciation and amortization 32,765 33,129 61,975 65,016 Stock-based compensation(1) 21,081 21,833 40,513 44,563 Interest expense 2,239 2,321 4,447 4,625 Acquisition related compensation — 3,716 — 8,246 Acquisition and integration related costs — (19 ) — — Income tax expense 5,421 5,671 8,597 5,787 Loss on extinguishment of debt 269 — 269 — Restructuring related charges(1)(2) — 243 — 3,863 Impairment of certain long-lived assets — 356 — 356 Interest income and other income, net(3) (9,337 ) (4,802 ) (15,283 ) (9,823 ) Adjusted EBITDA $ 89,465 $ 81,586 $ 175,749 $ 155,910 As a percentage of revenue: Net income margin 17 % 10 % 18 % 9 % Adjusted EBITDA margin 41 % 42 % 41 % 41 % ___________________ (1) For the six months ended June 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in restructuring related charges. (2) For the three and six months ended June 30, 2024, primarily consists of executive reorganization charges. (3) For the three and six months ended June 30, 2025, primarily consists of interest income from our cash and cash equivalents. For the three and six months ended June 30, 2024, primarily consists of interest and accretion income from our cash and cash equivalents and marketable securities. Non-GAAP Net Income and Non-GAAP Diluted Net Income Per Share Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2025 2024 2025 2024 GAAP Net income attributable to common stockholders $ 37,027 $ 19,138 $ 75,231 $ 33,277 Stock-based compensation(1) 21,081 21,833 40,513 44,563 Acquisition related compensation — 3,716 — 8,246 Amortization of acquired intangible assets 5,031 5,735 10,228 11,470 Acquisition and integration related costs — (19 ) — — Loss on extinguishment of debt 269 — 269 — Restructuring related charges(1)(2) — 243 — 3,863 Impairment of certain long-lived assets — 356 — 356 Non-GAAP income tax adjustment(3) (5,593 ) (3,397 ) (12,977 ) (11,423 ) Non-GAAP Net income $ 57,815 $ 47,605 $ 113,264 $ 90,352 Non-cash charges related to convertible notes(4) $ 1,596 $ 1,588 $ 3,191 $ 3,174 Non-GAAP Net income used to compute net income per share, diluted $ 59,411 $ 49,193 $ 116,455 $ 93,526 GAAP Net income per share attributable to common stockholders, diluted $ 0.39 $ 0.20 $ 0.77 $ 0.35 Stock-based compensation(1) 0.21 0.21 0.40 0.44 Acquisition related compensation — 0.04 — 0.08 Amortization of acquired intangible assets 0.05 0.06 0.10 0.11 Acquisition and integration related costs — — — — Loss on extinguishment of debt — — — — Restructuring related charges(1)(2) — — — 0.04 Impairment of certain long-lived assets — — — — Non-cash charges related to convertible notes(4) 0.02 0.02 0.03 0.03 Non-GAAP income tax adjustment(3) (0.08 ) (0.03 ) (0.15 ) (0.11 ) Non-GAAP Net income per share, diluted(5) $ 0.59 $ 0.48 $ 1.15 $ 0.91 GAAP Weighted-average shares used to compute net income per share, diluted 100,617 93,832 101,521 94,005 Weighted-average dilutive effect of potentially dilutive securities — 8,403 — 8,403 Non-GAAP Weighted-average shares used to compute net income per share, diluted 100,617 102,235 101,521 102,408 ______________ (1) For the six months ended June 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in restructuring related charges. (2) For the three and six months ended June 30, 2024, primarily consists of executive reorganization charges. (3) For the periods in fiscal year 2025 and 2024, we used a tax rate of 16%, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for each respective year. (4) Consists of non-cash interest expense for amortization of deferred financing fees related to the Convertible Notes. (5) May not foot due to rounding. Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin Three Months Ended Six Months Ended June 30, June 30, (In thousands) 2025 2024 2025 2024 GAAP Net cash provided by operating activities $ 92,447 $ 71,340 $ 156,537 $ 138,033 Adjustments: Capital expenditures - property and equipment (33,197 ) (31,869 ) (95,160 ) (75,534 ) Capital expenditures - internal-use software development (1,383 ) (2,483 ) (3,412 ) (4,046 ) Purchase of intangible assets (852 ) — (1,835 ) — Restructuring and other charges — — 64 61 Restructuring related charges(1) — 437 — 4,630 Acquisition related compensation — — — 8,326 Acquisition and integration related costs — 4 — 302 Adjusted free cash flow $ 57,015 $ 37,429 $ 56,194 $ 71,772 As a percentage of revenue: GAAP Net cash provided by operating activities 42 % 37 % 36 % 37 % Adjusted free cash flow margin 26 % 19 % 13 % 19 % ________________ (1) For the three and six months ended June 30, 2024, primarily consists of executive reorganization charges. View source version on Contacts Investor Melanie Strateinvestors@ Media Ken Lotichpress@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
29-06-2025
- Business
- Yahoo
5 Revealing Analyst Questions From DigitalOcean's Q1 Earnings Call
DigitalOcean's first quarter performance for 2025 saw revenue and non-GAAP profit surpass Wall Street expectations, but the market responded negatively, reflecting investor caution about the company's outlook. Management attributed the quarter's results to continued momentum with digital native enterprise customers, particularly those with high annual spending, and strong AI workload growth. CEO Paddy Srinivasan highlighted a '41% year-over-year increase in revenue from customers who are at $100,000-plus annual run rate,' emphasizing the impact of targeted product innovation and expanded account coverage. The company also pointed to improvements in net revenue retention and efficient cost management, with gross margin expansion aided by data center optimization. Is now the time to buy DOCN? Find out in our full research report (it's free). Revenue: $210.7 million vs analyst estimates of $208.6 million (14.1% year-on-year growth, 1% beat) Adjusted EPS: $0.56 vs analyst estimates of $0.44 (26.3% beat) Adjusted Operating Income: $62.27 million vs analyst estimates of $53.38 million (29.6% margin, 16.7% beat) The company reconfirmed its revenue guidance for the full year of $880 million at the midpoint Management reiterated its full-year Adjusted EPS guidance of $1.90 at the midpoint Operating Margin: 17.9%, up from 6.2% in the same quarter last year Net Revenue Retention Rate: 100%, up from 99% in the previous quarter Annual Recurring Revenue: $843 million at quarter end, up 14.1% year on year Billings: $210.9 million at quarter end, up 14.1% year on year Market Capitalization: $2.53 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Jason Ader (William Blair) asked about the timeline for the GenAI platform's general availability and DigitalOcean's AI differentiation. CEO Paddy Srinivasan projected a launch by the end of Q2 or early Q3 and emphasized a 'full stack' approach across infrastructure, platform, and application layers. Pinjalim Bora (JPMorgan) questioned macroeconomic impacts on customer demand. Srinivasan noted that while some segments, such as AdTech, showed caution, the diversified customer base limited exposure to any one sector. Gabriela Borges (Goldman Sachs) inquired about the potential for more large, multi-year deals. Srinivasan described increasing predictability and larger deal discussions, driven by product and go-to-market advances, enabling staged workload migrations. James Fish (Piper Sandler) probed the rationale for front-loaded capital expenditures and future CapEx plans. CFO Matt Steinfort responded that new capacity, especially in Atlanta, underpins growth projections and that alternative financing tools are being considered for larger opportunities. Mark Zhang (Citi) asked how DigitalOcean achieved sales and marketing leverage despite new programs. Srinivasan explained the company is in early stages of optimizing its sales motions and will ramp investments cautiously as unit economics become clearer. In the coming quarters, our team will closely monitor (1) the adoption and monetization of the GenAI platform as it moves from beta to general availability; (2) the success of the expanded named account model in driving high-value customer growth and retention; and (3) the impact of alternative capital strategies on growth and cash flow. Execution on AI initiatives, new product launches, and continued gross margin improvements will be key signposts for progress. DigitalOcean currently trades at $28.02, down from $32.76 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
19-05-2025
- Business
- Yahoo
DOCN Q1 Earnings Call: Large Enterprise Momentum and AI Investments Drive Results
Cloud computing provider DigitalOcean (NYSE: DOCN) reported Q1 CY2025 results exceeding the market's revenue expectations , with sales up 14.1% year on year to $210.7 million. The company expects next quarter's revenue to be around $216.5 million, close to analysts' estimates. Its non-GAAP profit of $0.56 per share was 25.8% above analysts' consensus estimates. Is now the time to buy DOCN? Find out in our full research report (it's free). Revenue: $210.7 million vs analyst estimates of $208.6 million (14.1% year-on-year growth, 1% beat) Adjusted EPS: $0.56 vs analyst estimates of $0.44 (25.8% beat) Adjusted Operating Income: $62.27 million vs analyst estimates of $53.38 million (29.6% margin, 16.7% beat) The company reconfirmed its revenue guidance for the full year of $880 million at the midpoint Management reiterated its full-year Adjusted EPS guidance of $1.90 at the midpoint Operating Margin: 17.9%, up from 6.2% in the same quarter last year Free Cash Flow was -$821,000, down from $36.71 million in the previous quarter Net Revenue Retention Rate: 100%, up from 99% in the previous quarter Annual Recurring Revenue: $843 million at quarter end, up 14.1% year on year Billings: $210.9 million at quarter end, up 14.1% year on year Market Capitalization: $2.83 billion DigitalOcean's latest quarterly results reflected continued growth with management crediting strong demand from larger digital native enterprises and the expansion of AI-related services as primary drivers. CEO Paddy Srinivasan highlighted the company's focus on scaling with these customers, noting a 41% year-over-year increase in revenue from clients spending over $100,000 annually. This expansion was further supported by product innovation and increased account engagement, particularly through enhanced support for complex workloads in both core cloud and AI infrastructure. Looking ahead, management emphasized a cautious yet optimistic outlook for the remainder of the year, citing the diverse customer base and robust demand for AI inferencing capabilities. Srinivasan stated, "We have taken a very appropriately cautious approach to projecting the outlook for the rest of the year," acknowledging macroeconomic uncertainty while reaffirming guidance for both revenue and profitability. The ongoing rollout of AI platform features and investments in capacity are expected to support future growth, with management monitoring evolving customer needs and potential financing strategies to enable larger-scale deals. DigitalOcean's management attributed quarterly performance to customer mix shifts, product innovation, and targeted go-to-market efforts. The company's ability to serve rapidly growing digital native enterprises and expand AI workloads drove both the top line and improved operating metrics. Enterprise customer expansion: Revenue from customers spending over $100,000 annually grew 41% year-over-year, supported by targeted engagement and new product capabilities tailored to larger workloads. AI workload acceleration: The company's AI annual recurring revenue (ARR) grew over 160% year-over-year, with most new AI business focused on real-world inferencing workloads. Access to advanced GPUs from NVIDIA and AMD underpinned this growth. Product innovation pace: Over 50 new products and features were released in the quarter—five times more than the prior year's comparable period—without a significant increase in R&D spending as a percentage of revenue. Enhanced customer engagement: DigitalOcean doubled named account coverage to its top 3,000 customers, assigning dedicated managers and technical specialists to deepen relationships and identify new workload opportunities. Capacity and infrastructure strategy: The opening of a new Atlanta data center enabled the company to win larger, multi-year deals, but required substantial upfront capital investment, influencing short-term free cash flow. Management's outlook for the next quarter and full year centers on sustained expansion with digital native enterprises and increased adoption of AI offerings, with a focus on maintaining operational efficiency and managing capital investments. AI and cloud platform adoption: Management expects continued demand for AI inferencing and scalable cloud solutions to fuel revenue growth, especially as larger customers migrate more workloads to DigitalOcean's infrastructure. Capacity investments and financing: The company is evaluating additional funding strategies, including leasing arrangements, to support rapid deployment of infrastructure needed for larger customer commitments without compromising free cash flow. Customer diversification and macro risks: While customer concentration risk remains low, management is monitoring for changes in macroeconomic conditions that could impact usage trends or delay enterprise purchasing decisions. Jason Ader (William Blair): Asked about timing for general availability of the GenAI platform and differentiation in the AI market; management expects GA by end of Q2 or early Q3 and highlighted their full-stack approach to AI inferencing. Pinjalim Bora (JPMorgan): Inquired about macro environment impacts; management stated that observed trends are reflected in guidance and noted cautious optimism due to diversified customer base. Gabriela Borges (Goldman Sachs): Sought clarity on the nature of large multi-year deals; management explained these deals are enabled by new enterprise features and staged migration capabilities, with more such opportunities expected. James Fish (Piper Sandler): Probed on capital expenditure needs for supporting large deals; management clarified that recent CapEx was front-loaded for new capacity and outlined plans to maintain flexibility for future large contracts. Kingsley Crane (Canaccord Genuity): Asked about expansion of the named account model; management described the current focus on top 3,000 customers and a data-driven approach to scaling targeted engagement. In the coming quarters, the StockStory team will be monitoring (1) the general availability and customer adoption of DigitalOcean's GenAI platform, (2) progress on winning and onboarding large-scale enterprise and AI inferencing deals, and (3) the company's execution on alternative capital strategies to support infrastructure growth. Continued innovation in core cloud offerings and expansion of targeted account engagement models will also be key areas of focus. DigitalOcean currently trades at a forward price-to-sales ratio of 3.5×. Should you load up, cash out, or stay put? See for yourself in our free research report. Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years. Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
