Core Insights - Corero Network Security has renewed a significant contract with DigitalOcean, valued at over $1 million, extending their partnership for an additional three years [1][3] - DigitalOcean, known for its affordable cloud computing solutions, relies on Corero's DDoS protection to maintain seamless operations across its global network of over 17 data centers [2][3] - The renewed contract includes Corero's SecureWatch Managed Services, which offers configuration optimization, proactive monitoring, and rapid DDoS incident response [3][4] Company Overview - Corero Network Security specializes in DDoS protection solutions, focusing on automatic detection and protection with network visibility, analytics, and reporting tools [5] - The company operates from Marlborough, Massachusetts, and Edinburgh, UK, and is listed on the London Stock Exchange's AIM market and the US OTCQB Market [5]

Core Insights - Nvidia is recognized as a leading stock in the AI sector, with a market cap nearing $2.6 trillion, significantly benefiting investors [1] - There are other smaller stocks in the AI space, such as Zscaler and DigitalOcean, that present substantial growth potential [2] Company Analysis: Zscaler - Zscaler is a cybersecurity firm specializing in zero trust technology, which assumes all network logins are potential threats [3] - The company’s zero-trust technology secures generative AI workloads and utilizes AI to proactively identify security threats [4] - In the first half of fiscal 2024, Zscaler reported revenue of $1.0 billion, a 38% increase year-over-year, while operating expenses rose by 24%, leading to a reduced net loss of $62 million compared to a loss of $126 million in the same period last year [5] - The stock has appreciated approximately 35% over the past year, and despite a P/S ratio of 14, it is near record lows, suggesting a potential buying opportunity [6] Company Analysis: DigitalOcean - DigitalOcean is a cloud infrastructure provider with a market cap of $3.4 billion, targeting small and medium-sized enterprises [7] - The company differentiates itself by providing transparent pricing and a supportive community, which aids customers in utilizing its cloud platform [8] - DigitalOcean acquired Paperspace to enhance its AI capabilities and has appointed a new CEO, Paddy Srinivasan, who has a strong background in tech leadership [9] - In Q1, DigitalOcean reported revenue of $185 million, an 11% increase year-over-year, and achieved a net income of $14 million, a turnaround from a $16 million loss in the same quarter last year [10] - The company has a P/S ratio of 5 and a forward P/E ratio of 23, indicating potential for stock price growth given its improved financial condition and large addressable market estimated at $213 billion by 2027 [11][12]

Group 1 - The article discusses the investment position of Parkev Tatevosian, CFA, who has no holdings in the stocks mentioned [1] - The Motley Fool has positions in and recommends DigitalOcean, indicating a positive outlook on the company [1] - There is a disclosure policy in place by The Motley Fool regarding its investment recommendations [1] Group 2 - Parkev Tatevosian is affiliated with The Motley Fool and may receive compensation for promoting its services, which could influence his opinions [1] - The article emphasizes that Tatevosian's opinions remain his own and are not affected by The Motley Fool [1]

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].