DigitalOcean's Q2 Earnings Surge Driven by AI Growth and Cloud Services

DigitalOcean stock jumps nearly 29% as second quarter earnings and revenue top expectations - SiliconANGLE

DigitalOcean stock jumps nearly 29% as second quarter earnings and revenue top expectations Shares in DigitalOcean Holding Inc. closed regular trading up 28.88% today after the developer-oriented cloud infrastructure provider reported earnings and revenue beats in its fiscal second quarter and also gave an outlook ahead of expectations. For the quarter that ended on June 30, DigitalOcean reported adjusted earnings per share of 59 cents, up from 48 cents in the same quarter of 2024, on revenue of $219 million, up 14% year-over-year. Both figures were solid beats, as analysts had been expecting earnings of 47 cents on revenue of $216.7 million. DigitalOcean's annual run-rate revenue in the quarter was $875 million, up 14% year-over-year, gross profit was $131 million, up 15% and net cash from operating activities was $92 million, up from $71 million in the second quarter of 2024. Business highlights in the quarter included strong adoption of DigitalOcean's artificial intelligence offerings and continued growth within its higher-spending customer segments. Revenue from customers spending more than $500 monthly, what DigitalOcean refers to as "Scalers+" was up 35% year-over-year and now accounts for nearly a quarter of total revenue. The group also saw a net dollar retention rate of 109%, above the 99% overall company rate. DigitalOcean made the Gradient AI Platform, a new AI platform designed to streamline access to GPU infrastructure and foundational models generally available. Gradient AI Platform is a managed AI platform that enables developers to combine their data with foundation models from Anthropic PBC, Meta Platforms Inc., Mistral AI SAS and OpenAI to add customized Generative AI agents to their applications. The company also partnered with Advanced Micro Devices Inc. to provide expanded capabilities through GPU Droplets and the AMD Developer Cloud. The company's AI push helped AI-related revenue to more than double year-over-year, reflecting growing traction among developers and startups building AI-driven applications. On the general products and features front, DigitalOcean shipped more than 60 new product features and enhancements across its compute, storage, networking and developer experience categories. "We delivered another quarter of solid performance across both AI and core cloud," said Paddy Srinivasan, chief executive officer of DigitalOcean, in the company's earnings release. "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." For its fiscal third quarter, DigitalOcean expects adjusted earnings per share of 45 cents to 50 cents on revenue of $226 million to $227 million. Both figures at the midpoint were ahead of the 47 cents per share on revenue of $223.19 million expected by analysts. For the full year, the company expects adjusted earnings of $2.05 to $2.10 per share and revenue of $888 million to $892 million. Once again, both figures were ahead of what analysts had forecast - $1.99 per share and revenue of $880.81 million.

DigitalOcean Shares Surge Nearly 30% After Strong Q2 Earnings, Upbeat Outlook - DigitalOcean Holdings (NYSE:DOCN)

DigitalOcean Holdings Inc. DOCN shares are trading higher on Tuesday after the company reported strong second-quarter 2025 financial results and raised its full-year guidance. See DOCN real-time price here. What To Know: The cloud infrastructure provider posted solid growth across both core cloud and AI services, exceeding expectations on revenue, profitability, and customer expansion. For the second quarter, DigitalOcean reported $219 million in revenue, a 14% year-over-year increase. Net income surged 93% to $37 million, with a net income margin of 17%. Adjusted EBITDA rose to $89 million, representing a 41% margin. These results were accompanied by $92 million in operating cash flow and $57 million in adjusted free cash flow, a 26% margin. The company ended the quarter with $388 million in cash and cash equivalents. The performance was driven by strength in high-spending customers, referred to as Scalers+, whose revenue rose 35% year-over-year and now accounts for nearly a quarter of total revenue. DigitalOcean reported $32 million in incremental annual recurring revenue (ARR), its best figure since the fourth quarter of 2022. Overall ARR now stands at $875 million, also up 14% from last year. Net Dollar Retention improved to 99%, and average revenue per customer climbed 12% to $111.70. Trending Investment OpportunitiesAdvertisementArrivedBuy shares of homes and vacation rentals for as little as $100. Get StartedWiserAdvisorGet matched with a trusted, local financial advisor for free.Get StartedPoint.comTap into your home's equity to consolidate debt or fund a renovation.Get StartedRobinhoodMove your 401k to Robinhood and get a 3% match on deposits.Get Started DigitalOcean highlighted ongoing expansion in its AI offerings, including the general availability of its Gradient AI Platform and a new partnership with AMD to deliver GPU-based infrastructure for AI workloads. The Gradient platform allows customers to integrate their data with foundation models from Anthropic, Meta, Mistral and OpenAI, enabling fast deployment of customized generative AI agents without managing infrastructure. The company also released more than 60 new products and features in the quarter, reflecting aggressive product development in key areas. Looking ahead, DigitalOcean raised its full-year revenue forecast to between $888 and $892 million and increased its adjusted EBITDA margin guidance to 39%-40%. It also guided for full-year non-GAAP diluted earnings per share of $2.05 to $2.10. For the company expects revenue between $226 and $227 million, with EPS in the range of 45 cents to 50 cents. Investors are reacting positively to both the current results and the stronger guidance, particularly in a market where profitability and free cash flow margins are increasingly in focus. The surge in share price reflects renewed confidence in DigitalOcean's ability to scale profitably, especially as it deepens its presence in the AI infrastructure space. DOCN Price Action: DigitalOcean shares were up 28.88% at $34.81 at market close on Tuesday, according to Benzinga Pro. Read Next: Stocks Drop As Trump Tariffs Fuel Inflation, Palantir Hits $400 Billion Value: What's Moving Market Tuesday? Image Via Shutterstock. DOCNDigitalOcean Holdings Inc$34.8729.1%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum19.70Growth46.44QualityN/AValue23.60Price TrendShortMediumLongOverview This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs

Why DigitalOcean Stock Skyrocketed Today | The Motley Fool

DigitalOcean (DOCN 29.01%) stock posted massive gains in Tuesday's trading. The cloud service specialists' share price rose 28.8% in a daily session that saw the S&P 500 index dip 0.5% and the Nasdaq Composite index fall 0.7%. DigitalOcean published its second-quarter results before the market opened this morning, and sales and earnings in the quarter beat Wall Street's expectations. In addition to artificial intelligence (AI) catalysts leading to better-than-expected performance in Q2, the company issued a significant raise for its full-year performance outlook. DigitalOcean's recent business momentum has proven to be significantly stronger than Wall Street expected. The company posted earnings per share of $0.59 on revenue of $218.7 million in the second quarter. Earnings were $0.12 per share better than the average analyst target, and sales were roughly $2.1 million ahead of the consensus analyst target. Revenue was up roughly 13.6% year over year, and management pointed to sales more than doubling for AI and machine learning services as a key driver for the performance beats in Q2. DigitalOcean expects strong sales momentum to continue in the near term. The company set guidance for Q3 sales to be between $226 million and $227 million -- good for growth of roughly 14% at the midpoint of the target range. Meanwhile, full-year sales are projected to come in between $888 million and $892 million, up from its previous guidance for sales of between $870 million and $890 million. The midpoint of the new guidance range suggests annual revenue growth of roughly 14% year over year, representing a meaningful increase from the previous midpoint target for sales growth of 13%. Even better, the bump up in expected sales is being driven by the highly valued AI and machine learning categories.

DigitalOcean (DOCN) Q2 Revenue Jumps 14% | The Motley Fool

DigitalOcean (DOCN 29.01%), a cloud computing company known for its simple, developer-friendly approach, reported its Q2 2025 results on August 5, 2025. The company's earnings release featured GAAP revenue of $219 million -- topping the analyst consensus of $216.62 million (GAAP). Non-GAAP earnings per share (EPS) were $0.59, exceeding the $0.47 non-GAAP estimate by a significant margin. These results represented double-digit year-over-year growth. The company also achieved strong profitability, with a net income margin of 17% (GAAP) and an adjusted EBITDA margin of 41%, and issued higher full-year guidance, while highlighting robust momentum in both core cloud and AI product adoption. Overall, the quarter reflected strong execution on strategic priorities. Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report. DigitalOcean provides cloud computing services, including virtual servers ("droplets"), managed databases, and scalable storage, primarily for software developers, small businesses, and emerging digital enterprises. The platform emphasizes simplicity, ease of use, and transparent pricing. DigitalOcean stands out by offering a user-friendly interface and support, attracting both early-stage ventures and larger digital native businesses seeking less complexity than traditional hyperscale providers offer. In recent years, DigitalOcean's main priorities have been expanding its base of high-spend customers, growing its product portfolio -- particularly in artificial intelligence (AI) and machine learning (ML), and maintaining a reputation for straightforward, approachable services. Success for DigitalOcean depends on growing these larger accounts, increasing average revenue per customer, and rolling out features that keep pace with evolving demand from both small businesses and digital native enterprises. GAAP revenue for Q2 2025 was $219 million, a 14% year-over-year increase, beating market estimates. Non-GAAP EPS was $0.59, outpacing expectations by $0.12 (non-GAAP). Net income (GAAP) was $37 million, an increase of 93% year-over-year, with a net income margin increase from 10% to 17% (GAAP) over the prior year period. Adjusted EBITDA reached $89.5 million, reflecting steady operational profitability at a 41% adjusted EBITDA margin. The most notable progress came from DigitalOcean's higher spend customer segment, which the company calls "Scalers+". Revenue from these customers increased 35% year-over-year. The Scalers+ group now makes up 24% of DigitalOcean's total revenue. The average revenue per customer (ARPU) across this cohort climbed to $30,000, up 9% year-over-year, while overall ARPU increased by 12%. The number of Scalers+ customers grew by 23%, though this growth rate slowed slightly from earlier in the year. A key indicator for recurring revenue, the net dollar retention rate, improved to 99% from 97% compared to Q2 2024 DigitalOcean continued to build out its product line, releasing more than 60 new products and features. Major launches included the DigitalOcean Gradient AI Platform, which lets customers build generative AI agents drawing from a range of industry-leading AI foundation models, and new GPU droplets powered by AMD Instinct AI accelerators. The partnership with AMD also enabled DigitalOcean to host the AMD Developer Cloud, enhancing its position in the AI/ML market. Management confirmed that AI/ML-related revenue more than doubled year-over-year, though specific figures were not disclosed. Annualized run-rate revenue increased by $32 million, marking the highest incremental ARR growth since Q4 2022. Simplicity and ease-of-use remained a central theme as the company sought to differentiate itself from larger, more complex cloud platforms. More than 80% of new Gradient AI Platform users were existing DigitalOcean customers as of Q1 2025. The company expanded support for large customers by extending dedicated account management to its top 3,000 clients, up from 1,500 previously. This move, along with additional investments in customer support and a growing developer community, aims to deepen relationships and boost customer retention. The company continued to host events and maintain a robust online community as part of its engagement strategy. In terms of financial operations, adjusted free cash flow rose to $57 million, up 52.4% from last year. Cash from operating activities (GAAP) improved to $92 million. However, cash and equivalents fell to $387.7 million, reflecting higher capital expenditures and share repurchases. Long-term debt was $1.49 billion as of June 30, 2025. DigitalOcean bought back 0.7 million shares, bringing its total repurchases since the IPO to $1.6 billion through June 30, 2025. Remaining performance obligation was $53 million, up from $3 million last year. Management indicated that these larger deals introduce both new opportunities for revenue and risks related to capital intensity and possible revenue lumpiness. The company is exploring new funding tools, such as leasing, to maintain cash flow while expanding capacity. Management stated in Q1 2025 that they are evaluating leasing arrangements to support cloud and AI growth capital investment, with the goal of maintaining or improving strong cash flow generation. Management raised its outlook for the remainder of FY2025 following these results. For Q3 2025, revenue is projected at $226-227 million, with an adjusted EBITDA margin of 39-40% for FY2025. Non-GAAP EPS is expected to be between $0.45 and $0.50 for Q3 2025. For the full year FY2025, guidance was raised to $888-892 million in revenue and a 39-40% adjusted EBITDA margin for the full year. Management expects non-GAAP diluted net income per share of $2.05-$2.10 for FY2025, up from prior estimates. Investors should focus on the company's ability to continue growing its higher spend customer base, further expand ARPU, and keep up its pace of product launches, especially in AI/ML and managed services. The shift toward larger enterprise deals is increasing the company's cash needs, prompting management to consider additional funding strategies similar to those used by larger public cloud providers. Other key topics for future quarters include digital native enterprise customer expansion, gross margin improvement, and the balance between capital investment, debt, and free cash flow.

This AI Stock Is Soaring, but It's Not Too Late to Buy | The Motley Fool

DigitalOcean (DOCN -10.62%), 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. 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. 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.