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DigitalOcean (DOCN) Q2 Earnings Beat, Revenues Rise Y/Y

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DigitalOcean (DOCN - Free Report) delivered non-GAAP diluted earnings of 20 cents per share in second-quarter 2022, which beat the Zacks Consensus Estimate of 10 cents. In the year-ago period, the company reported a loss of 8 cents.

Revenues of $133.9 billion increased 29% on a year-over-year basis but missed the consensus mark by 0.29%. Revenues were driven by the positive ARR growth. However, the growth was slowed down due to the Russia-Ukraine war, and reduced expansion spend rate on the company’s platform, particularly in Europe and Asia and for customers operating in the blockchain vertical.

Quarter in Details

In the second quarter of 2022, Annual Run-Rate Revenue (ARR) was $544.1 million, representing 28% year-over-year growth.

Net dollar retention (NDR) in the second quarter was 112%, reflecting a decline of 100 bps from the year-ago period. The company’s NDR declined due to the conflict in Eastern Europe and the impact of a new product launch in the second quarter of 2021.

DigitalOcean Holdings, Inc. Price, Consensus and EPS Surprise

DigitalOcean Holdings, Inc. Price, Consensus and EPS Surprise

DigitalOcean Holdings, Inc. price-consensus-eps-surprise-chart | DigitalOcean Holdings, Inc. Quote

In the second quarter of 2022, Average Revenue Per Customer (ARPU) was $71.76, which increased 24% from the year-ago quarter.

Customers spending more than $50 per month increased 16% to 105,000, with revenue growth of 34% year-over-year. These customers had an NDR of 113% and represented 85% of revenues in the second quarter.

In the second quarter, non-GAAP income from operations was $22.3 million, and non-GAAP operating margin was 17%, which expanded by 800 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash, cash equivalents, and marketable securities was $1.2 billion compared with $1.6 billion as of Mar 31, 2022.

Cash flow from operations was $76.65 million in the second quarter compared with first-quarter 2022’s cash flow of $30.28 million.

Free cash flow for the second quarter was $18.37million compared with the first quarter of 2022’s cash flow of $5 million.

Guidance

For the third quarter of 2022, DigitalOcean anticipates total revenues of $145.5 to $147 million. Non-GAAP operating margin is expected between 17% and 18%.

In the third quarter, DigitalOcean expects non-GAAP diluted net income per share of 22-23 cents.

For the full year 2022, the company expects total revenues of $564 million to $568 million. Non-GAAP operating margin is expected between 15% and 16%.

For the full year, DigitalOcean expects Non-GAAP diluted net income per share of 74-75 cents.

Zacks Rank & Stocks to Consider

DigitalOcean currently has a Zacks Rank #3 (Hold).

DigitalOcean’s shares have returned 40.4% against the Zacks Computer and Technology sector’s decline of 22.7% in the year-to-date period.

Here are some better-ranked stocks worth considering in the broader sector.

Intuit (INTU - Free Report) carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuit’s shares have slumped 27.5% in the year-to-date period compared with the Zacks Computer - Software industry’s decline of 18.6%. INTU is scheduled to report second-quarter 2022 results on Aug 23.

Keysight Technologies (KEYS - Free Report) also carries a Zacks Rank #2.

KEY’s shares have slipped 19.5% in the year-to-date period compared with the Zacks Electronics - Measuring Instruments industry’s decline of 21.2%. KEYS is scheduled to report second-quarter 2022 results on Aug 17.

Arco Platform (ARCE - Free Report) also carries a Zacks Rank #2.

ARCE’s shares have slumped 26.2% in the year-to-date period compared with the Zacks Internet - Software industry’s decline of 45.2%. ARCE is scheduled to report second-quarter 2022 results on Aug 18.

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