reported<\/a> earnings before certain costs such as stock compensation of 48 cents per share on $192.5 million sales in the quarter, up 13% from a year earlier. Those results easily surpassed Wall Street analysts\u2019 consensus estimate of 39 cents per share in earnings and $188.6 million in sales.<\/p>\nWith those results, DigitalOcean was able to boost its bottom line, reporting net income for the quarter of $19.4 million, up from a minuscule profit of just $665,000 in the same period one year earlier.<\/p>\n
DigitalOcean Chief Executive Paddy Srinivasan (pictured) hailed what was a third successive earnings and revenue beat since taking over the reins of the company in January.\u00a0\u201cWe delivered another strong quarter of business results and exciting product announcements,\u201d he said. \u201cWe saw revenue growth continue to re-accelerate at 13%, with AI and machine learning continuing to accelerate, with annual recurring revenue up over 200% year-over-year.\u201d<\/p>\n
Investors reacted positively to the report, as DigitalOcean\u2019s stock rose almost 4% in extended trading, adding to a gain of just over 5% earlier in the day.<\/p>\n
DigitalOcean is a plucky rival to much larger public cloud infrastructure providers such as Amazon Web Services Inc., Microsoft Corp. and Google LLC. Rather than attempt to take on those giants directly, it has carved out a niche for itself as a boutique cloud plaform serving small businesses. The company operates what it likes to call a \u201cdeveloper cloud\u201d that keeps things simple for smaller teams of developers.<\/p>\n
Its main offering is the DigitalOcean App Platform, which allows developers to deploy application code in production with a few simple clicks. The company\u2019s promise is that it takes care of all of the cloud infrastructure and deployment stuff, while developers simply focus on maintaining and updating their code.<\/p>\n
One example of its developer-friendly nature is its GPU droplets offering, which provides access to Nvidia Corp.\u2019s powerful H100 graphics processing units for artificial intelligence workloads. The offering is tailored to small businesses that likely need only short-term access to a small number of GPUs. In contrast, the large cloud providers have optimized their GPU services for much bigger enterprises.<\/p>\n
That offering, along with the rest of its developer-friendly infrastructure, has kept DigitalOcean firing on all cylinders, and it showed decent growth across all of its key metrics. Its annual revenue run rate grew 15% from a year earlier, to $781 million, while its average revenue per customer increased by 9%, to $99.45, at the end of the quarter. The company also said that \u201cbuilders and scalers,\u201d a term for customers that spend more than $50 per month on its cloud services, increased their revenue contribution by 15% compared to a year earlier.<\/p>\n
Holger Mueller of Constellation Research Inc. said DigitalOcean\u2019s ongoing growth is being fuelled by innovation such as its improved access to Nvidia GPUs, Intel Xeon computing instances and other flexible infrastructure offerings.<\/p>\n
\u201cThe revenue growth is impressive, but the return to profitability is the real achievement,\u201d the analyst said. \u201cPaddy Srinivasan and his team have transformed the company\u2019s bottom line, resulting in a swing from a net loss of almost $70 million in the first six months of 2023, to a profit of $33 million in the first half of fiscal 2024. That\u2019s an impressive turnaround and it\u2019s exactly what investors wanted to see from the new CEO.\u201d<\/p>\n
The company expects the good times to continue. For the third quarter, it\u2019s forecasting revenue of between $196 million and $197 million and earnings of 39 to 41 cents per share. Those numbers contrast with the Street\u2019s consensus estimate of $195.2 million in sales and earnings of 41 cents per share.<\/p>\n
For the full year, DigitalOcean slightly raised its outlook. It said it now sees revenue of between $765 million and $770 million, up from an earlier range of $770 million to $775 million. Full year earnings are forecast in a range of $1.60 to $1.70 per share.\u00a0Wall Street is looking for full-year revenue of $769.6 million and earnings of just $1.64 per share.<\/p>\n
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