Why DigitalOcean Stock Popped Today

Core Insights - DigitalOcean's stock surged over 20% after Q4 results exceeded analysts' expectations, with a current increase of 12.6% [1] - The company reported earnings of $0.49 per share on sales nearing $205 million, surpassing the anticipated $0.34 per share and $200.5 million in sales [1][2] - Year-over-year sales growth was 13%, consistent with earlier growth rates, and the annual run-rate revenue also increased by 13%, indicating strong growth potential for 2025 [2] Financial Performance - For the full year 2024, DigitalOcean achieved revenue of $781 million, maintaining a 13% growth rate, with GAAP profits at $0.89 per share, significantly lower than the non-GAAP figure of $1.92 per share [3] - The company forecasts Q1 2025 sales of approximately $208 million and non-GAAP earnings of about $0.44 per share, both slightly above Wall Street expectations [4] - For the entirety of 2025, DigitalOcean anticipates revenue of around $880 million and non-GAAP profits of about $1.90 per share, again exceeding market expectations [4] Cash Flow and Valuation - DigitalOcean's 2024 free cash flow was reported at $96.1 million, a 13% decline from $110.1 million in 2023, with no guidance provided for GAAP net income or free cash flow [5] - The stock is currently trading at 46.5 times trailing earnings and 35.7 times trailing free cash flow, raising concerns about its valuation given the decline in free cash flow [6]