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DigitalOcean (DOCN) Empowers Startups With Managed Kafka

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DigitalOcean Holdings (DOCN - Free Report) recently introduced Managed Kafka, a data streaming platform, as a service offering for Apache Kafka. Managed Kafka simplifies Kafka administration for small and medium-sized businesses (SMBs) operating across the Internet of Things, video streaming, data analytics, gaming and e-commerce domains.

DigitalOcean Managed Kafka offers scalability, proactive maintenance alerts, end-to-end security, and budget-friendly pricing starting at $147 for a three-node cluster.

DigitalOceanis is strengthening its footprint among SMBs through its expanding portfolio that includes products with GPUs AI/ML apps, premium CPU-Optimized Droplets, and enhanced memory and storage for Basic Premium Droplets and Object Storage in the Bangalore data center.

Expanding Portfolio Aids Prospect

DigitalOcean’s shares have declined 8.4% year to date, underperforming the Zacks Computer and Technology sector’s growth of 30.8%. The underperformance can be attributed to the intensifying challenges in the competitive cloud infrastructure market.

DigitalOcean has been riding on an expanding clientele.


Builders and Scalers (accounted for 86% of revenues), representing customers spending more than $50 per month, witnessed an impressive 42% year-over-year growth in the second quarter of 2023.

DigitalOcean added more than 3,600 builders and scalers in the second quarter compared with approximately 2,300 it added in the first quarter of 2023.

This surge in Builders and Scalers clientele played a pivotal role in achieving a remarkable 28% year-over-year growth in revenue. Average Revenue Per Customer (ARPU) was $90.84, reflecting a 14% increase.

For the third quarter of fiscal 2023, DigitalOcean expects total revenues between $172.5 million and $174 million. The Zacks Consensus Estimate for the third quarter is currently pegged at $173.51 million, suggesting a year-over-year growth of 14.06%.

For fiscal 2023, DOCN anticipates total revenues between $680 million and $685 million.

Zacks Rank & Stocks to Consider

Currently, DOCN carries a Zacks Rank #3 (Hold).

Dell Technologies (DELL - Free Report) , NVIDIA (NVDA - Free Report) and Splunk (SPLK - Free Report) are some other top-ranked stocks that investors can consider in the broader sector, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DELL, NVDA and SPLK shares have returned 69%, 190.6% and 70.3%, respectively, year-to-date.

Long-term earnings growth rates for Dell Technologies, NVIDIA and SPLUNK are pegged at 12%,13.5% and 26.6%, respectively.

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