In This Article:
Key Points
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Revenue is growing at a higher rate than in the same period last year, continuing a positive trend that began in the prior quarter.
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Customers continue to increase their spending on the platform, with improving retention rates and average revenue per user.
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Large capex spending in the first half of the year is expected to drive further revenue growth acceleration in the second half of 2025.
Here's our initial take on DigitalOcean's (NYSE: DOCN) fiscal 2025 first-quarter financial results.
Key Metrics
| Metric | Q1 FY24 | Q1 FY25 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $185 million | $210.7 million | +14% | Beat |
| Earnings per share | $0.15 | $0.39 | +160% | Beat |
| Avg. revenue per customer (ARPU) | $95.13 | $108.56 | +14% | n/a |
| Net dollar retention rate | 99% | 100% | +100 bps | n/a |
Spending on Capacity Is Renewing Growth for DigitalOcean
Over the past year and a half, DigitalOcean's growth rates have slowed significantly, with revenue growth falling from 30% in the first quarter of 2023 to 12% revenue growth in Q1 of fiscal 2024. However, the cloud infrastructure-as-a-service platform operator is starting to build some momentum -- if modest -- in the right direction. After reporting 13% revenue growth in Q4 of 2024, a 2-percentage-point increase from 11% growth in the prior year, revenue increased 14% to start fiscal 2025, another 2-percentage-point acceleration year over year.
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It's also doing a better job of retaining -- and growing -- customers and their spending. Net dollar retention rate (NRR) was 100%, up from 97% (indicating a certain degree of customer churn when combined with revenue growth) in the year-ago quarter. This was also the first quarter in nearly two years that DigitalOcean's NRR was 100% or above.
The company continues to deliver on its efforts to transition its focus and products to "digital native" companies, and the results are improving. Revenue from customers that spend $100,000 per year or more in ARR was up 41% and now represents 23% of total revenue. The number of higher-spend customers, which the company defines as customers who spend more than $600 per year, increased 9% and now represents 88% of total revenue.
DigitalOcean's strategy is delivering solid bottom-line results too. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin was 41%, down a little from recent quarters but up from the year-ago period, while GAAP gross margin of 61% continues a positive margin trend. Both GAAP and adjusted earnings metrics continue to trend higher.