Core Insights - DigitalOcean's stock price surged following the release of its Q4 2024 earnings report and full-year 2025 guidance, both of which surpassed analyst expectations [1][15] - The company is positioned as a strong player in the cloud computing sector, particularly with its focus on small and medium-sized businesses (SMBs) and emerging artificial intelligence (AI) offerings [2][18] Financial Performance - Q4 2024 revenue reached $204.9 million, a 13.3% increase year-over-year, exceeding the consensus estimate of $200.54 million [2] - Non-GAAP EPS for Q4 2024 was $0.49, significantly above the analyst consensus of $0.34, indicating effective cost management and strong core business profitability [3][4] - The adjusted EBITDA margin for Q4 2024 was 42%, reflecting substantial profits from sales after covering operating expenses [5][6] - For the full fiscal year 2024, DigitalOcean reported annual revenue of $781 million, a 13% increase from the previous year, and a net income of $84 million, a 335% increase year-over-year [7][8] - The company's adjusted EBITDA for FY2024 was $328 million, maintaining a solid 42% adjusted EBITDA margin [9] Cash Flow and Guidance - Free cash flow for 2024 was reported at $96.1 million, down from $110.1 million in 2023, which is noteworthy but should be viewed in the context of overall strong financial performance [10][11] - DigitalOcean provided strong guidance for Q1 2025, expecting revenue between $207 million and $209 million, slightly above the analyst consensus of $207.7 million [12] - The company raised its full-year 2025 revenue guidance to between $870 million and $890 million, exceeding the prior consensus estimate of $877.7 million [13] Market Sentiment - Following the earnings report, DigitalOcean's stock price jumped approximately 10%, reflecting positive investor sentiment, although analysts maintain a cautious outlook with a consensus rating of Hold [15][19] - The average target price for DigitalOcean stock is $42.40, suggesting limited upside potential, though some analysts have raised their targets towards $55.00, indicating a more promising outlook [16][17]

Core Insights - DigitalOcean Holdings, Inc. reported Q4 revenue of $204.93 million, exceeding the consensus estimate of $200.51 million, with adjusted earnings of 49 cents per share, surpassing analyst expectations of 34 cents per share [1][2] Financial Performance - Total revenue increased by 13% year-over-year, with an Annual Run-Rate Revenue (ARR) of $820 million, also up by 13% [4] - Net cash from operating activities was $71 million, a decrease from $81 million a year ago [4] - Adjusted free cash flow reached $37 million, compared to $29 million in the previous year [4] - The company ended the quarter with $428 million in cash, cash equivalents, restricted cash, and investments [4] - Increased net dollar retention to 99% [4] - Achieved an 18% adjusted free cash flow margin [4] Product and Customer Growth - In Q4, DigitalOcean released over four times as many products and features compared to the previous year [2] - Revenue from the top 500 customers, which account for 22% of total revenue, grew by 37% year-over-year, driven by continued traction in AI [2] Future Outlook - DigitalOcean anticipates Q1 revenue between $207 million and $209 million, slightly below the estimate of $207.71 million, with adjusted EPS expected between $0.41 and $0.46 [3] - For fiscal year 2025, the company projects revenue of $870 million to $890 million, compared to estimates of $877.56 million, and adjusted EPS of $1.85 to $1.95 against a consensus of $1.84 [3] Stock Performance - DOCN stock increased by 12.30%, reaching $41.73 [3]

Financial Data and Key Metrics Changes - Revenue growth accelerated in Q4 2024 to 13% year-over-year, reaching $205 million, with net dollar retention improving to 99% from 96% in Q4 2023 [10][50] - Adjusted EBITDA margins were 42% for both Q4 and the full year, maintaining cost discipline while investing for future growth [13][52] - Full year revenue for 2024 increased 13% year-over-year to $781 million, driven by strong customer acquisition and growth in AI services [55][56] Business Line Data and Key Metrics Changes - Revenue from higher spend customers, including Builders and Scalers, grew 16% year-over-year in Q4, representing 88% of total revenue [48][49] - Scalers+ customers, those with an annual run rate of over $100,000, accounted for 22% of total revenue in Q4 and grew 37% year-over-year [11][49] - The AI/ML platform contributed over 160% ARR growth in Q4, exceeding initial guidance [12][55] Market Data and Key Metrics Changes - The company reported a 37% year-over-year increase in revenue from Scalers+ customers, indicating strong wallet share opportunities [12][49] - The number of Scalers+ customers increased by 17% year-over-year, reaching over 500 for the first time [11][58] Company Strategy and Development Direction - The company aims to enhance product innovation and customer engagement, focusing on larger customers' needs and AI/ML growth [15][41] - The upcoming Atlanta data center is part of a long-term optimization strategy, providing lower costs and increased capacity for both AI and core cloud offerings [14][60] - The company is committed to democratizing AI for customers, simplifying access to AI technologies and enhancing infrastructure offerings [27][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the baseline growth rate heading into 2025, with expectations of continued revenue growth in the low to mid-teens [13][61] - The company anticipates adjusted EBITDA margins to remain in the range of 38% to 40% for 2025, reflecting ongoing operational efficiencies [62][64] Other Important Information - The company released 49 new products and features in Q4, significantly increasing the pace of innovation compared to the previous year [16][41] - The company hosted the Deploy Conference, enhancing its presence in the developer and AI/ML space [39][40] Q&A Session Summary Question: Customer migration from hyperscalers - Management highlighted that customers are migrating due to the complexity and total cost of ownership associated with hyperscalers, emphasizing DigitalOcean's simplicity and scalability [68][70] Question: EBITDA guidance performance - Management explained that the outperformance in EBITDA was due to resource reallocation and prioritization of key initiatives, indicating a commitment to improving gross margins and operating efficiencies [73][75] Question: AI/ML ARR base size - Management did not disclose specific ARR for AI but noted that it is intermingled with other revenue streams, indicating a healthy mix of AI revenue among existing customer cohorts [90][92] Question: Gross margin outlook with new data center - Management expects a slight dip in gross margins initially with the new Atlanta data center, but overall confidence in maintaining gross margin levels throughout the year [97][100] Question: Product investment areas for 2025 - Management outlined continued investment in core cloud capabilities and AI innovations, focusing on meeting larger customer needs and enhancing the GenAI platform [111][113]

Core Insights - DigitalOcean's stock surged over 20% after Q4 results exceeded analysts' expectations, with a current increase of 12.6% [1] - The company reported earnings of $0.49 per share on sales nearing $205 million, surpassing the anticipated $0.34 per share and $200.5 million in sales [1][2] - Year-over-year sales growth was 13%, consistent with earlier growth rates, and the annual run-rate revenue also increased by 13%, indicating strong growth potential for 2025 [2] Financial Performance - For the full year 2024, DigitalOcean achieved revenue of $781 million, maintaining a 13% growth rate, with GAAP profits at $0.89 per share, significantly lower than the non-GAAP figure of $1.92 per share [3] - The company forecasts Q1 2025 sales of approximately $208 million and non-GAAP earnings of about $0.44 per share, both slightly above Wall Street expectations [4] - For the entirety of 2025, DigitalOcean anticipates revenue of around $880 million and non-GAAP profits of about $1.90 per share, again exceeding market expectations [4] Cash Flow and Valuation - DigitalOcean's 2024 free cash flow was reported at $96.1 million, a 13% decline from $110.1 million in 2023, with no guidance provided for GAAP net income or free cash flow [5] - The stock is currently trading at 46.5 times trailing earnings and 35.7 times trailing free cash flow, raising concerns about its valuation given the decline in free cash flow [6]

Core Insights - DigitalOcean Holdings, Inc. (DOCN) reported revenue of $204.93 million for Q4 2024, marking a year-over-year increase of 13.3% and exceeding the Zacks Consensus Estimate by 2.35% [1] - The company achieved an EPS of $0.49, which is a 40.00% surprise over the consensus estimate of $0.35, compared to $0.44 a year ago [1] Financial Performance Metrics - The Net Dollar Retention Rate was reported at 99%, surpassing the three-analyst average estimate of 97.7% [4] - Average Revenue Per Customer (ARPU) was $105.75, exceeding the estimated $102.85 by two analysts [4] - Annual Run-Rate Revenue (ARR) reached $820 million, slightly above the estimated $819.18 million by two analysts [4] Stock Performance - DigitalOcean's shares have returned -7.4% over the past month, in contrast to the Zacks S&P 500 composite's -1.8% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - DigitalOcean Holdings, Inc. (DOCN) reported quarterly earnings of $0.49 per share, exceeding the Zacks Consensus Estimate of $0.35 per share, and showing an increase from $0.44 per share a year ago, representing a 40% earnings surprise [1] - The company achieved revenues of $204.93 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.35% and up from $180.87 million year-over-year [2] - DigitalOcean has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.41 on revenues of $207.02 million, and for the current fiscal year, it is $1.81 on revenues of $874.7 million [7] - The estimate revisions trend for DigitalOcean is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Market Performance - DigitalOcean shares have increased approximately 9.1% since the beginning of the year, compared to a 1.7% gain in the S&P 500 [3] - The outlook for the Internet - Software industry, where DigitalOcean operates, is currently in the top 28% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Earnings Presentation Q4 2024 February 25, 2025 Safe Harbor This presentation contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "estimate," "believe," "predict," "potential" or "continue" or the negative terms or other similar expressions intended to identify statements about the future. These statements speak on ...

Customer Base and Revenue - As of December 31, 2024, approximately 165,000 Higher Spend Customers (Builders, Scalers, and Scalers+) accounted for 87% of total revenue for the year[32]. - As of December 31, 2024, the company had approximately 165,000 Higher Spend Customers, an increase from approximately 156,000 as of December 31, 2023[55]. - The Average Revenue Per User (ARPU) increased from $82.76 in 2022 to $90.99 in 2023, reaching $100.71 in 2024[55]. Product Development and Innovation - In 2024, new product releases included GPU Droplets, a GenAI platform, and enhancements to Managed Hosting offerings, reflecting a commitment to innovation[36]. - The company’s AI/ML offerings include GPU Droplets and a GenAI platform, enabling customers to easily deploy AI applications without requiring specific expertise[48]. - DigitalOcean's product portfolio includes IaaS, PaaS/SaaS, and AI/ML solutions, with a commitment to simplicity and scalability for growing technology companies[44]. - The Managed Databases offering includes fully-managed solutions for relational databases like PostgreSQL and MySQL, as well as NoSQL databases such as Redis and MongoDB[46]. - The DigitalOcean Marketplace features over 350 preconfigured one-click applications, streamlining the deployment process for developers[48]. Financial Performance and Metrics - The net dollar retention (NDR) decreased from 101% in 2023 to 98% in 2024, attributed to the effects of 2022 price increases[35]. - The company owned cash, cash equivalents, and marketable securities totaling $428 million, primarily for working capital purposes[369]. - The effective tax rate for the years ended December 31, 2024 and 2023 was estimated at 16% and 17%, respectively[373]. Infrastructure and Expansion - DigitalOcean operates a global infrastructure with 16 data centers across nine geographic regions, enhancing performance and minimizing latency for users[38]. - The company plans to open a new data center in Atlanta in 2025, further expanding its global footprint[38]. Strategic Initiatives - Strategic acquisitions, such as Paperspace and Cloudways, have enhanced DigitalOcean's AI/ML and Managed Hosting capabilities[40]. - The company emphasizes a transparent and predictable pricing model, which is designed to eliminate surprises for customers[35]. - The company’s sales and marketing strategy focuses on customer acquisition, community education, and partnership development to drive revenue growth[52]. Community and Customer Engagement - DigitalOcean's community ecosystem supports developer engagement through educational content and events, fostering brand loyalty and product adoption[40]. - Customer support is a strategic differentiator, with a focus on high-quality technical advice and a feedback loop to influence product development[53]. Compliance and Risk Management - The company is subject to extensive U.S. and foreign laws and regulations, which may increase compliance costs in the future[68][69]. - The company controls access to proprietary technology through internal and external controls, including confidentiality agreements with employees and partners[67]. - The company has not entered into any hedging arrangements for foreign currency risk, although it may consider doing so in the future[372]. - A hypothetical 10% change in interest rates would have an immaterial effect on the fair value of the company's investments in cash equivalents and marketable securities[369]. Intellectual Property - The company has five issued patents scheduled to expire in 2039 and 2040, and one published patent expected to expire in 2039[66]. - The company has filed applications for two additional trademarks in non-U.S. jurisdictions, expanding its intellectual property portfolio[66]. Workforce - The company had a total of 1,210 employees as of December 31, 2024, with 703 located outside the United States[61]. Social Responsibility - The company is committed to social responsibility, evidenced by its participation in the Pledge 1% movement and the launch of DO Impact in 2022[64].

Exhibit 99.1 DigitalOcean Announces Fourth Quarter and Fiscal Year 2024 Financial Results Q4 2024 Revenue of $205 million, up 13% year-over-year; Full year 2024 revenue of $781 million, up 13% year-over-year 2024 Net Income was $84 million, up 335% year-over-year, at 11% margin and Adjusted EBITDA was $328 million, up 19% year- over-year, at 42% margin NEW YORK, February 25, 2025 – DigitalOcean Holdings, Inc. (NYSE: DOCN), the simplest scalable cloud for growing tech companies, today announced results for i ...

Needham analyst Mike Cikos reiterated a Hold rating on the shares of DigitalOcean Holdings Inc DOCN.The analyst has a favorable outlook on DigitalOcean ahead of its earnings report, as the analyst notes the increased pace of product development under CEO Paddy Srinivasan will lead to stronger growth among Scalers & Builders, while improving customer retention before they transition to Hyperscalers.Net Dollar Retention is expected to stay below 100%, but the comparison will become easier as the analyst anniv ...