Core Viewpoint - DigitalOcean is positioned as a promising AI stock with strong growth potential, particularly in the cloud AI market, which is expected to grow significantly in the coming years [1][2]. Company Performance - DigitalOcean's Q1 revenue increased by 12% year over year to $185 million, surpassing the consensus estimate of $182.6 million [4]. - Adjusted earnings rose over 50% to $0.43 per share, exceeding the consensus estimate of $0.38 per share [4]. - The company raised its full-year revenue guidance from a lower end of $755 million to $760 million, with a higher end expectation of $775 million, indicating an 11% revenue increase for the year [5]. AI Market Contribution - AI is projected to contribute 3 percentage points to DigitalOcean's growth this year, with expectations for increased contributions in the future [6]. - The demand for DigitalOcean's AI services is strong, with significant growth in early-stage AI solutions and GPU capacity [6]. - The AI platform-as-a-service (PaaS) market is expected to grow almost 21% annually through 2028, while the GPU-as-a-service market could grow almost 36% annually through 2032 [8]. Customer Metrics - DigitalOcean's average revenue per user (ARPU) increased by 8% year over year to $95.13, with a 3% increase in the overall customer base [9]. - The increasing adoption of AI services is anticipated to accelerate growth, leading to higher ARPU in the long run [9]. Valuation and Growth Potential - DigitalOcean is currently valued at 5.3 times sales, lower than the U.S. technology sector's average of 7.2 times [11]. - If DigitalOcean achieves nearly $999 million in revenue by 2026, its market cap could potentially double to $7.2 billion, making it an attractive investment opportunity [11][12].

Core Viewpoint - DigitalOcean is positioning itself as a competitive player in the cloud computing market, specifically targeting small and mid-sized businesses (SMBs) while expanding into artificial intelligence (AI) services to enhance growth opportunities [3][4][15] Company Overview - DigitalOcean focuses on providing cloud services tailored for SMBs, offering personalized support, transparent pricing, and simplified functionality [5] - The company has a market valuation of approximately $3.5 billion, significantly lower than major competitors like Amazon, Microsoft, and Alphabet [4] Recent Developments - DigitalOcean acquired Paperspace for $111 million, enhancing its capabilities in AI and providing access to advanced semiconductor hardware at competitive prices [6][7] - The demand for DigitalOcean's AI GPU compute capacity is expected to exceed supply, with annual recurring revenue for AI services growing at an annualized rate of 128% from December 2023 to March 2024 [8] Financial Performance - In Q1 2024, DigitalOcean reported a record revenue of $184.7 million, reflecting a 12% growth year-over-year, a slowdown compared to previous years [9] - The company has shifted its strategy from aggressive growth to cost management, reducing operating expenses by 20% year-over-year, resulting in a net income of $14.1 million [11][10] Market Potential - The addressable market for SMB cloud services is valued at $114 billion annually, with projections suggesting it could reach $213 billion by 2027 [13] - AI's potential impact on the economy is significant, with estimates suggesting it could add $15.7 trillion globally by 2030, positioning DigitalOcean favorably to capitalize on this growth [14] Investment Outlook - DigitalOcean's stock is currently trading about 70% below its all-time high, presenting a potential buying opportunity for long-term investors as AI could become a major revenue driver in the future [16]

Core Viewpoint - DigitalOcean is well-positioned to capitalize on trends in enterprise cloud computing and artificial intelligence, with a bullish outlook from analysts [1][4]. Financial Performance - In the first quarter, DigitalOcean exceeded revenue and profitability estimates, achieving a 54% year-over-year increase in non-GAAP net income per share [3]. Analyst Recommendations - Canaccord Genuity's David Hynes raised the price target for DigitalOcean shares by $1 to $42, reflecting a cautious optimism with a potential upside of 6.6% over the next 12 months [2][4]. Market Positioning - DigitalOcean is undergoing a model turnaround and is exposed to strong secular trends in managed service adoption among small- and mid-sized businesses, as well as AI application development [4][5]. Growth Potential - The combination of the ongoing migration to cloud computing and the high demand for AI presents significant growth opportunities for DigitalOcean, suggesting that the current price target may be conservative [5].

Three Months Ended Non-GAAP Net Income 1) For the three months ended March 31, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. For the three months ended March 31, 2023, non-GAAP stock-based compensation excludes $3.9 million as it is presented in Restructuring and other charges. 3) For the periods in fiscal year 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-G ...

Financial Data and Key Metrics Changes - Revenue in Q1 2024 was $184.7 million, representing a 12% year-over-year increase and a sequential increase from Q4 2023 [43] - Adjusted EBITDA margin was 40%, consistent with the previous quarter, while gross margin improved to 61% from 56% year-over-year [17][18] - Net dollar retention (NDR) improved to 97% in Q1, showing a steady increase since July 2023 [16][36] Business Line Data and Key Metrics Changes - The managed hosting product, Cloudways, generated $22 million in revenue in Q1, growing 34% year-over-year [44] - AI and machine learning platforms contributed $4 million in revenue in Q1, with annual recurring revenue (ARR) for AI exceeding $19 million, a 128% annualized increase [12][44] - Average revenue per customer increased by 8% year-over-year to $95.13, with the number of builders and scalers on the platform increasing by 8% year-over-year [46] Market Data and Key Metrics Changes - The company saw a 150% month-over-month increase in overall droplets being backed up daily from March to April 2024 [38] - GPU hours sold and consumed increased by 67% from March to April 2024, indicating strong traction in the AI infrastructure market [12][44] Company Strategy and Development Direction - The company is focusing on product innovation and enhancing customer experience to meet the emerging needs of its core target customers [4][8] - There is a strong emphasis on AI and machine learning as a growth opportunity, with plans to integrate these capabilities into the developer experience [13][42] - The company aims to democratize access to AI and machine learning capabilities while maintaining a focus on profitability and cash flow [14][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's near and long-term growth potential, citing solid performance and improving growth fundamentals [14][36] - The company anticipates Q2 revenue to be in the range of $188 million to $189 million, representing an 11% year-over-year growth at the midpoint [19] - Management highlighted the importance of customer feedback in shaping the company's product roadmap and strategy [8][41] Other Important Information - The company ended Q1 with $419 million in cash and cash equivalents and repurchased 200,000 shares of common stock for $8 million [46] - The company is committed to maintaining attractive overall margins while investing in faster-growing platforms [47] Q&A Session Summary Question: What is the current state of AI adoption on the platform? - Management noted that they are in the early stages of AI adoption, focusing on the needs of customers who are primarily AI extenders and consumers [50] Question: How is net dollar retention (NDR) expected to evolve? - Management indicated that NDR has been steadily improving, driven by enhancements in product development and customer success initiatives [51] Question: What is the expected contribution from Paperspace? - Management remains confident that Paperspace will contribute approximately 3% to overall growth, with early signs of success already visible [79] Question: Can you provide insights on GPU CapEx spend and its impact? - Management confirmed that they are capacity constrained but are deploying capital to increase revenue growth, with expected paybacks in less than three years for GPU investments [64] Question: What gaps in the product portfolio were identified? - Management highlighted the importance of understanding customer needs deeply to address gaps, particularly in AI and machine learning capabilities [72]

For the quarter ended March 2024, DigitalOcean Holdings, Inc. (DOCN) reported revenue of $184.73 million, up 11.9% over the same period last year. EPS came in at $0.43, compared to $0.28 in the year-ago quarter.The reported revenue represents a surprise of +1.11% over the Zacks Consensus Estimate of $182.7 million. With the consensus EPS estimate being $0.38, the EPS surprise was +13.16%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare ...

Customer Metrics - As of March 31, 2024, DigitalOcean had approximately 637,000 active customers categorized as Learners, Builders, and Scalers, with Learners accounting for 479,387, Builders for 140,306, and Scalers for 17,243[105][120]. - DigitalOcean's customer base is geographically diverse, with 37% of revenue from North America, 29% from Europe, 24% from Asia, and 10% from the rest of the world for the three months ended March 31, 2024[110]. Revenue and Growth - Average Revenue Per User (ARPU) increased from $88.35 in Q1 2023 to $95.13 in Q1 2024, indicating a growth in customer spending[111][120]. - Annual Run-Rate Revenue (ARR) reached $749 million as of March 31, 2024, up from $669 million in the same period of 2023, reflecting a year-over-year growth of approximately 12%[111][120]. - Revenue for the three months ended March 31, 2024, was $184.7 million, a 12% increase from $165.1 million in the same period of 2023, driven by new customer acquisitions and increased utilization from existing customers[137]. - Revenue from Builders and Scalers increased by 9% and 15%, respectively, for the three months ended March 31, 2024, contributing to 87% of total revenue[112]. Profitability and Expenses - Gross profit margin improved to 61% for the three months ended March 31, 2024, up from 56% in the same period of 2023, primarily due to a decrease in ancillary equipment and bandwidth expenses[138]. - Total operating expenses decreased by 20% to $100.5 million for the three months ended March 31, 2024, compared to $126.3 million in the same period of 2023, largely due to the absence of restructuring charges[139]. - Research and development expenses decreased by 11% to $34.0 million for the three months ended March 31, 2024, compared to $38.3 million in the same period of 2023[139]. - Sales and marketing expenses increased by 14% to $20.8 million for the three months ended March 31, 2024, compared to $18.2 million in the same period of 2023, driven by higher affiliate fees and advertising expenses[140]. - Net income attributable to common stockholders was $14.1 million for the three months ended March 31, 2024, compared to a net loss of $16.4 million in the same period of 2023[135]. - Adjusted EBITDA for the same period was $74,324,000, representing a 33.5% increase from $55,682,000 in the prior year, with an adjusted EBITDA margin of 40% compared to 34%[162]. - Non-GAAP net income for the three months ended March 31, 2024, was $42,747,000, up from $29,685,000 in 2023, resulting in a non-GAAP diluted net income per share of $0.43, compared to $0.28 in the previous year[166]. - The company reported a net income margin of 8% for the three months ended March 31, 2024, compared to a negative margin of 10% in the same period of 2023[162]. Cash and Investments - As of March 31, 2024, the company had $419.1 million in cash and cash equivalents, primarily consisting of cash and money market funds[148]. - The Board of Directors approved a stock repurchase program of up to $140 million through fiscal year 2025, with $7.8 million spent on repurchasing 200,258 shares in the three months ended March 31, 2024[147]. Market Conditions and Risks - Macroeconomic conditions, including inflation and geopolitical tensions, are monitored as potential risks that could impact business investments in information technology[117][118]. - The company did not experience any material changes in market risk compared to the previous fiscal year[169]. Accounting and Compliance - There were no recent accounting pronouncements that had or are expected to have a material impact on the consolidated financial statements[158]. - The company continues to evaluate its estimates and assumptions, which may lead to differences in actual results compared to reported estimates[159].

Exhibit 99.1 DigitalOcean Announces First Ouarter 2024 Financial Results Revenue Growth Increases to 12% on Improving Core Cloud Performance and Robust Al Platform Demand Strong Profitability with Net Income Margin of 8% and Adjusted EBITDA Margin of 40% NEW YORK, May 10, 2024 – DigitalOcean Holdings, Inc. (NYSE: DOCN), the developer cloud optimized for startups and growing technology businesses, today announced results for its first quarter ended March 31, 2024. "The first quarter was a strong start to the ...

DigitalOcean (DOCN) is scheduled to report first-quarter 2024 results on May 10.For the first quarter, DigitalOcean anticipates revenues between $182 million and $183 million.The Zacks Consensus Estimate for first-quarter revenues is pegged at $182.7 million, suggesting growth of 10.64% year over year.The company projects earnings in the range of 37-39 cents. The consensus mark for first-quarter earnings remained unchanged in the past 30 days at 38 cents per share, suggesting growth of 35.71% year over year ...

DigitalOcean Holdings, Inc. (DOCN) shares rallied 8.1% in the last trading session to close at $35.53. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 11.7% loss over the past four weeks.DOCN is benefiting from strong spending in the cloud computing domain. Annual Run-Rate Revenue (ARR) ended the quarter at $730 million, representing 11% year-over-year growth.This company is expected to post quarterly earning ...