DigitalOcean Holdings, Inc. (NYSE: DOCN) has reported a robust start to 2024, underpinned by solid 12% year-over-year revenue growth, reaching $185 million for the first quarter. This growth is attributed to the strong performance of its core cloud services and the burgeoning demand for its AI platform.
The company’s profitability metrics have also seen a significant uptick, with a net income margin of 8% and an impressive adjusted EBITDA margin of 40%. The annual run-rate revenue (ARR) growth to $749 million, marking a 12% increase from the previous year, further underscores DigitalOcean’s growing market presence and operational efficiency.
The company’s financial health is further evidenced by its gross profit, which surged by 20% year-over-year to $112 million, accounting for 61% of the revenue. Additionally, DigitalOcean’s strategic financial management has led to a notable improvement in its liquidity position, with cash and cash equivalents standing at $419 million as of March 31, 2024.
Notably, this financial stability is complemented by a disciplined approach to capital allocation, as seen in the adjusted free cash flow of $34 million, up from $26 million in the first quarter of 2023.
DigitalOcean Holdings Beats EPS and Revenue Forecasts for Q1
When juxtaposed against the pre-set expectations for the quarter, DigitalOcean’s performance reveals a narrative of exceeding benchmarks. Analysts had projected earnings per share (EPS) of $0.38 and revenue of $182.61 million for the quarter.
The results surpassed these expectations, with the company reporting an EPS of $0.43 on a non-GAAP basis and revenue of $185 million. This outperformance indicates DigitalOcean’s robust business model and ability to capitalize on the growing demand for cloud and AI solutions among startups and growing technology businesses.
The company’s ability to meet and exceed revenue expectations speaks volumes about its competitive positioning and operational effectiveness.
Furthermore, the growth in ARPU to $95.13, an 8% increase over the first quarter of 2023, and the strategic expansion of its customer base, particularly among Builders and Scalers, who saw an 8% increase in numbers and a 13% growth in revenue year-over-year, are testament to DigitalOcean’s compelling value proposition and its success in driving customer engagement and retention.
DigitalOcean Holdings Expects Momentum to Sustain Through 2024
DigitalOcean has provided guidance that reflects its confidence in sustaining momentum through 2024. For the second quarter, the company anticipates revenue to be in the range of $188 to $189 million, with an adjusted EBITDA margin between 37% to 38%.
The non-GAAP diluted net income per share is expected to be between $0.38 to $0.40. For the full year, DigitalOcean projects total revenue to be between $760 to $775 million, with an adjusted EBITDA margin of 36% to 38%, and adjusted free cash flow margin in the range of 19% to 21% of revenue.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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