DigitalOcean 2025 Q1 Earnings Mixed Performance with Net Income Surging 170.2%
Daily EarningsWednesday, May 7, 2025 7:48 am ET

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Revenue
DigitalOcean's total revenue increased by 14.1% in Q1 2025, reaching $210.70 million compared to $184.73 million in Q1 2024.
Earnings/Net Income
DigitalOcean's EPS rose significantly, reaching $0.42 in Q1 2025 from $0.16 in Q1 2024, highlighting ongoing earnings growth. The company's net income also saw substantial growth, reaching $38.20 million, a 170.2% increase from $14.14 million in Q1 2024. This marks a record high for fiscal Q1 net income in six years. The EPS growth indicates strong financial health despite recent stock volatility.
Post-Earnings Price Action Review
Over the past five years, investing in DigitalOcean (DOCN) shares post-revenue raise on a quarterly basis and holding for 30 days resulted in a -0.40% return, underperforming the benchmark return of 36.00%. The strategy's compound annual growth rate (CAGR) was -0.10%, reflecting a decline in value, and experienced a maximum drawdown of -9.64%, underscoring its high risk without adequate compensation from returns. These figures suggest the strategy is not favorable for investors seeking financial growth.
CEO Commentary
Paddy Srinivasan, CEO, expressed optimism about DigitalOcean's performance, highlighting a 14% year-over-year revenue growth to $211 million in Q1 2025, driven by a 160% increase in AI annual recurring revenue and improved net dollar retention rate of 100%. He emphasized the strategic focus on scaling with digital native enterprises and democratizing AI access, noting significant progress in product innovation with over 50 new releases. Srinivasan underscored the importance of recent investments in data center capacity, stating, "We are now seeing and winning larger and even multimillion-dollar deals," reflecting a strong market positioning and growth potential.
Guidance
For Q2 2025, DigitalOcean expects revenue between $215.5 million and $217.5 million, representing approximately 12.5% year-over-year growth. For the full year, the company maintains its revenue guidance of $870 million to $890 million, reflecting around 13% year-over-year growth. Adjusted EBITDA margins are projected to range from 38% to 40% for Q2, with a full-year outlook of 37% to 40%. Non-GAAP diluted EPS is anticipated to be between $0.42 and $0.47 for Q2, with a full-year estimate of $1.85 to $1.95.
Additional News
DigitalOcean Holdings Inc. has made notable strategic moves recently, including focusing on increasing AI-related annual recurring revenue, which saw a significant 160% rise this quarter. Furthermore, the company has enhanced its product offerings with over 50 new releases, aiming to capture larger and multimillion-dollar deals. This strategic focus on expanding its AI capabilities and refining its product portfolio positions DigitalOcean as a competitive player in the cloud computing market, potentially attracting more digital native enterprises. Additionally, the company continues investing in data center capacity, which is crucial for supporting its growing customer base and large-scale deals.

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