DigitalOcean (DOCN) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $192.5 million, up 13% year-over-year, driven by higher ARPU, growth in Builders and Scalers, and strong AI/ML momentum with ARR at $781 million, up 15% year-over-year.

• Adjusted EBITDA margin was 42%, with net income of $19.1 million (10% margin), and non-GAAP diluted EPS of $0.48, both increasing year-over-year.

• ARPU increased 9% year-over-year to $99.45, and net dollar retention rate remained stable at 97%.

• Product innovation accelerated with 24 new features released, including GPU Droplets and HIPAA-compliant offerings, and the Deploy developer conference was revived.

• Leadership team expanded with new C-level hires, and integration of the Paperspace acquisition drove over 200% AI/ML ARR growth.

Financial highlights

• Q2 2024 revenue was $192.5 million, up from $169.8 million in Q2 2023; ARR reached $781 million, up 15% year-over-year.

• Adjusted EBITDA for Q2 2024 was $82 million (42% margin); net income was $19.1 million; gross margin was 61%.

• Adjusted free cash flow was $37 million (19% margin); cash and cash equivalents stood at $443 million at quarter-end.

• Diluted net income per share was $0.20 (GAAP) and $0.48 (non-GAAP), both increasing year-over-year.

• Builders and Scalers accounted for 87% of revenue, with their cohort revenue growing 15% year-over-year.

Outlook and guidance

• Q3 2024 revenue expected between $196–$197 million, with adjusted EBITDA margin of 37–39%.

• FY 2024 revenue guidance raised to $770–$775 million, with non-GAAP diluted EPS expected at $1.60–$1.70.

• Adjusted free cash flow margin projected at 15–17% for the year.

• Management expects continued growth from IaaS, PaaS, SaaS, and AI/ML adoption, focusing on higher-spend customer segments and platform innovation.

• Macroeconomic conditions and global uncertainties are being monitored for potential impact on IT spending.