DigitalOcean: AI Momentum Drives 13% Revenue Growth in Q4, Raises Full-Year Guidance

DigitalOcean Holdings, Inc. (NYSE: DOCN), the simplest scalable cloud for growing tech companies, reported solid financial results for the fourth quarter and fiscal year ended December 31, 2024. The company's focus on AI infrastructure and higher-spending customers has driven its revenue growth and market position. Here's a closer look at DigitalOcean's impressive performance and the key drivers behind its success.

Q4 Earnings and Revenue Growth

DigitalOcean reported revenue of $205 million for the fourth quarter, up 13% year-over-year, and adjusted earnings of 49 cents per share, beating analyst estimates of 34 cents per share. The company's total revenue increased 13% year-over-year, driven by strong growth in its top 500 customers, who accounted for 22% of total revenue and grew at a rate of 37% year-over-year.

AI Momentum and Higher-Spending Customers

DigitalOcean's continued traction in AI and its focus on higher-spending customers have been key drivers behind its revenue growth. The company's CEO, Paddy Srinivasan, attributed the growth in revenue for the top 500 customers to the company's "continued traction in AI" and its efforts to cater to higher-spend customers.

In the fourth quarter, DigitalOcean released over four times as many products and features as it did a year ago, demonstrating its commitment to innovation and staying ahead of competitors. Some notable product releases include:

* The general availability of the GenAI Platform, enabling customers to create, deploy, and integrate agents for real applications.
* The public preview of Cloudways Copilot, a suite of AI solutions designed to bring intelligent managed hosting to small and medium-sized businesses (SMBs).
* Per-Bucket Access Keys for Spaces (GA), an S3-compatible object storage service that enhances data security and simplifies management.
* VPC Peering, which enables seamless communication between resources hosted in different Virtual Private Clouds (VPCs) using private IP addresses.

Strong Customer Retention and Net Dollar Retention Rate

DigitalOcean's net dollar retention rate (NDR) increased to 99% in the fourth quarter, indicating that the company is effectively retaining its existing customers and minimizing churn. This strong retention rate contributes to the overall growth in revenue and demonstrates the company's ability to maintain its market position.

Raising Full-Year Guidance

DigitalOcean raised its full-year guidance for fiscal 2025, reflecting its confidence in the company's growth prospects. The company expects first-quarter revenue of $207 million-$209 million and adjusted EPS of $0.41-$0.46. For the full year, DigitalOcean expects revenue of $870 million-$890 million and adjusted EPS of $1.85-$1.95.

Conclusion

DigitalOcean's focus on AI infrastructure and higher-spending customers has driven its revenue growth and market position. The company's continued traction in AI, strong customer retention, and rapid innovation have all contributed to its impressive performance. As DigitalOcean continues to execute on its strategy, investors can expect the company to maintain its momentum and deliver strong results in the coming quarters.