Q1 2024 DigitalOcean Holdings Inc Earnings Call Transcript
Key Points
- Revenue growth accelerated quarter-over-quarter, demonstrating the strength of DigitalOcean Holdings Inc (DOCN)'s business model.
- Net dollar retention improved to 97%, indicating increasing customer loyalty and product usage.
- Introduced new products like daily Droplet backups and memory and storage optimized droplets, enhancing customer experience and platform capabilities.
- AI and machine learning platforms are seeing strong uptake, with AI ARR growing to $19 million, a 128% annualized increase from December 2023.
- Managed hosting product, Cloudways, contributed significantly to revenue, growing 34% year-over-year.
- Despite improvements, net dollar retention is still below 100%, indicating room for growth in customer expansion and retention.
- AI and machine learning solutions are still in early stages, with demand outstripping supply, indicating potential scalability challenges.
- Gross margin expected to moderate in coming quarters due to planned AI investments.
- Total customer count declined by 7,400 quarter-over-quarter, driven by a reduction in lower spending customers.
- Free cash flow margins may reduce in the future to support accelerated AI growth, impacting overall profitability.
Thank you for standing by and welcome to the DigitalOcean first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions)
I would now like to turn the call over to Rob Bradley, Vice President of Investor Relations. Please go ahead.
Thank you, Rochelle. And good morning. Thank you all for joining us to review DigitalOcean's first quarter 2024 financial results. Joining me today are Paddy Srinivasan, our Chief Executive Officer, and Matt Steinfort, our Chief Financial Officer. After our prepared remarks, we will open the call to a question-and-answer session.
Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements which reflect management's best judgment based on currently available information. I refer specifically to the discussion of our expectations
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