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DigitalOcean (DOCN) Expands AI Footprint With Paperspace Buyout
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DigitalOcean (DOCN - Free Report) has made a significant move to expand its artificial intelligence (AI) offerings by acquiring Paperspace, a leading provider of cloud infrastructure as a service, for $111 million in cash.
The acquisition allows DigitalOcean to integrate Paperspace's advanced technology into its platform, providing customers with enhanced capabilities for testing, developing, and deploying AI and machine learning (ML) applications.
Paperspace brings valuable GPU-powered infrastructure and an AI/ML-focused software stack to DigitalOcean's portfolio, catering to the increasing demand for AI/ML cloud solutions. This acquisition aligns with DigitalOcean's mission to simplify cloud experiences for small and medium-sized businesses (SMBs) and startups. Both companies share a commitment to making AI/ML accessible and cost-effective for businesses of all sizes.
The acquisition will benefit customers of both organizations. Paperspace customers will gain access to DigitalOcean's comprehensive cloud services platform, extensive documentation, tutorials and support system. This will assist them in building and deploying AI applications more effectively. On the other hand, DigitalOcean customers will now be able to leverage GPUs alongside their CPU workloads, empowering them to explore and implement AI/ML technologies more efficiently.
While the acquisition is not expected to have a substantial impact on the 2023 results, DigitalOcean anticipates enhanced revenue growth in 2024 and beyond.
Expanding Clientele to Drive Prospects
DigitalOcean shares have surged 77% year to date, outperforming the Zacks Computer and Technology sector’s increase of 37%. DOCN has been benefiting from strong demand for its Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) offerings.
While DigitalOcean’s IaaS offerings include Droplet virtual machines, storage and networking solutions, its PaaS solutions comprise Managed Database and Managed Kubernetes. Managed Hosting and Marketplace solutions are notable SaaS offerings.
DigitalOcean has been riding on strong customer growth and the Cloudways acquisition. In first-quarter 2023, the number of customers spending more than $50 per month (Builders and Scalers) jumped 43% year over year to 147K. Average revenue per user increased 16% to $88.35 million, driven by the continued adoption of DOCN’s solutions.
The Paperspace acquisition further expands DigitalOcean’s footprint among SMBs, particularly among individuals and companies with less than 500 employees. IDC estimates the aggregate worldwide IaaS and PaaS markets for these companies to witness 25.5% CAGR between 2023 and 2026.
In fact, DigitalOcean currently derives almost 86% of its revenues from Builders and Scalers. Builders are customers spending between $50 and $500 per month, while Scalers are the ones that spend more than $500 per month. In first-quarter 2023, while Scalers Annual Recurring Revenues (ARR) jumped 24%, Builders ARR surged 41%.
2023 Earnings Guidance Raised
For 2023, DigitalOcean expects revenues between $700 million and $720 million. It raised its earnings guidance, driven by improving EBITDA margin, cost savings and benefits from the share repurchase program. Earnings are now expected between $1.70 and $1.73 per share, better than the previous guidance of $1.65-$1.69.
The Zacks Consensus Estimate for 2023 revenues is pegged at $701.95 million, indicating 21.8% year-over-year growth. Earnings are pegged at $1.68 per share, unchanged over the past 30 days.
For the second quarter of 2023, DigitalOcean expects revenues between $169.5 million and $170.5 million. Earnings per share are expected in the range of 40-41 cents.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $169.82 million, indicating 26.85% year-over-year growth. The consensus mark for earnings is pegged at 40 cents per share, unchanged over the past 30 days.
Zacks Rank & Stocks to Consider
DigitalOcean currently has a Zacks Rank #3 (Hold).
Shares of NVIDIA, Meta, and Palo Alto Networks are up 188.2%, 141.8% and 81.7%, respectively, on a year-to-date basis. The long-term earnings growth rate for NVDA, PANW and META is 23.02%, 31.50% and 21.93%, respectively.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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DigitalOcean (DOCN) Expands AI Footprint With Paperspace Buyout
DigitalOcean (DOCN - Free Report) has made a significant move to expand its artificial intelligence (AI) offerings by acquiring Paperspace, a leading provider of cloud infrastructure as a service, for $111 million in cash.
The acquisition allows DigitalOcean to integrate Paperspace's advanced technology into its platform, providing customers with enhanced capabilities for testing, developing, and deploying AI and machine learning (ML) applications.
Paperspace brings valuable GPU-powered infrastructure and an AI/ML-focused software stack to DigitalOcean's portfolio, catering to the increasing demand for AI/ML cloud solutions. This acquisition aligns with DigitalOcean's mission to simplify cloud experiences for small and medium-sized businesses (SMBs) and startups. Both companies share a commitment to making AI/ML accessible and cost-effective for businesses of all sizes.
The acquisition will benefit customers of both organizations. Paperspace customers will gain access to DigitalOcean's comprehensive cloud services platform, extensive documentation, tutorials and support system. This will assist them in building and deploying AI applications more effectively. On the other hand, DigitalOcean customers will now be able to leverage GPUs alongside their CPU workloads, empowering them to explore and implement AI/ML technologies more efficiently.
DigitalOcean Holdings, Inc. Price and Consensus
DigitalOcean Holdings, Inc. price-consensus-chart | DigitalOcean Holdings, Inc. Quote
While the acquisition is not expected to have a substantial impact on the 2023 results, DigitalOcean anticipates enhanced revenue growth in 2024 and beyond.
Expanding Clientele to Drive Prospects
DigitalOcean shares have surged 77% year to date, outperforming the Zacks Computer and Technology sector’s increase of 37%. DOCN has been benefiting from strong demand for its Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) offerings.
While DigitalOcean’s IaaS offerings include Droplet virtual machines, storage and networking solutions, its PaaS solutions comprise Managed Database and Managed Kubernetes. Managed Hosting and Marketplace solutions are notable SaaS offerings.
DigitalOcean has been riding on strong customer growth and the Cloudways acquisition. In first-quarter 2023, the number of customers spending more than $50 per month (Builders and Scalers) jumped 43% year over year to 147K. Average revenue per user increased 16% to $88.35 million, driven by the continued adoption of DOCN’s solutions.
The Paperspace acquisition further expands DigitalOcean’s footprint among SMBs, particularly among individuals and companies with less than 500 employees. IDC estimates the aggregate worldwide IaaS and PaaS markets for these companies to witness 25.5% CAGR between 2023 and 2026.
In fact, DigitalOcean currently derives almost 86% of its revenues from Builders and Scalers. Builders are customers spending between $50 and $500 per month, while Scalers are the ones that spend more than $500 per month. In first-quarter 2023, while Scalers Annual Recurring Revenues (ARR) jumped 24%, Builders ARR surged 41%.
2023 Earnings Guidance Raised
For 2023, DigitalOcean expects revenues between $700 million and $720 million. It raised its earnings guidance, driven by improving EBITDA margin, cost savings and benefits from the share repurchase program. Earnings are now expected between $1.70 and $1.73 per share, better than the previous guidance of $1.65-$1.69.
The Zacks Consensus Estimate for 2023 revenues is pegged at $701.95 million, indicating 21.8% year-over-year growth. Earnings are pegged at $1.68 per share, unchanged over the past 30 days.
For the second quarter of 2023, DigitalOcean expects revenues between $169.5 million and $170.5 million. Earnings per share are expected in the range of 40-41 cents.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $169.82 million, indicating 26.85% year-over-year growth. The consensus mark for earnings is pegged at 40 cents per share, unchanged over the past 30 days.
Zacks Rank & Stocks to Consider
DigitalOcean currently has a Zacks Rank #3 (Hold).
NVIDIA (NVDA - Free Report) , Palo Alto Networks (PANW - Free Report) and Meta Platforms (META - Free Report) are better-ranked stocks in the broader sector. While NVIDIA and PANW currently sport a Zacks Rank #1 (Strong Buy), Meta has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of NVIDIA, Meta, and Palo Alto Networks are up 188.2%, 141.8% and 81.7%, respectively, on a year-to-date basis. The long-term earnings growth rate for NVDA, PANW and META is 23.02%, 31.50% and 21.93%, respectively.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.