Digital Ocean posted better-than-expected June quarter profit, while lifting its outlook for full year earnings and cash flow.
A provider of cloud computing services to small businesses, Digital Ocean (ticker: DOCN) posted second quarter revenue of $133.9 million, up 29% from a year ago, in the middle of the company’s guidance range of $133 million to $135 million, but slightly below the Street consensus forecast at $134.4 million.
On an adjusted basis, Digital Ocean earned 20 cents a share, well above both the company’s guidance range of 9 to 10 cents, and consensus estimates at 10 cents. Non-GAAP operating margin was 17%, well above the company’s estimate of 13% to 15%. Under generally accepted accounting principles, the company lost $6.2 million in the quarter, or 6 cents a share.
Digital Ocean said that average revenue per user was $71.76, up 24% from a year ago. Customers spending more than $50 a month grew 16% to 105,000, together accounting for 85% of overall revenue.
For the third quarter, Digital Ocean sees revenue of $145.5 million to $147 million, with adjusted profit of 22 to 23 cents a share; Street consensus had been $146.7 million and 22 cents.
For the full year, the company continues to see revenue of $564 million to $568 million, up about 32% from a year earlier. Digital Ocean now sees full year adjusted operating margin of 15% to 16%, up from a previous target of 13% to 15%, with non-GAAP profit of 74 to 75 cents a share, up from a previous range of 70 to 71 cents.
The company also announced that CFO Bill Sorenson will retire from the company in 2023. Sorenson, 67, said in an interview that he will stay until a successor is in place.
Sorenson said the company has taken three key steps to address the uncertain macroeconomic and geopolitical landscape.
He notes that the company in May announced a price increase that took effect on July 1, with an average hike of about 11%. Sorenson said the company has been looking for ways to reduce costs. He also says that the company, which has largely been reliant on a self-service model for obtaining new customers, has expanded its sales staff to help larger customers come on board the platform.
Sorenson says that the company has seen some moderation in growth from customers in Europe and some parts of Asia, but that there is no sign of increased churn.
In Monday’s regular session, Digital Ocean shares were about 3.5% higher $47.43. The stock is off 41% for the year.