Q3 2024 DigitalOcean Holdings Inc Earnings Call Transcript
Key Points
- DigitalOcean Holdings Inc (DOCN) reported a steady revenue growth of 12% year over year in Q3 2024, with significant contributions from AI/ML products.
- The company increased the lower end of its full-year revenue guidance by $5 million and the top end by $2 million, indicating confidence in future performance.
- Adjusted EBITDA margins were strong at 44%, reflecting effective cost management while continuing to invest in product innovation.
- DigitalOcean Holdings Inc (DOCN) released 42 new product features in Q3, nearly doubling the previous quarter's output, enhancing its core cloud computing platform.
- The company is seeing increased adoption of its AI/ML platform, with annual run rate revenue (ARR) for AI/ML products growing close to 200% year over year.
- Net dollar retention rate remained steady at 97%, indicating challenges in achieving higher customer expansion.
- Managed hosting platform growth was muted due to difficult comparisons from previous price increases and a temporary surge in revenue in Asia.
- Gross margin for the quarter was 60%, which was 100 basis points lower than the prior quarter.
- Free cash flow margin decreased to 13% of revenue in Q3, down approximately 600 basis points from the prior quarter due to timing of capital expense payments.
- The company faces challenges in translating product innovation into immediate financial performance, as adoption and impact on financial metrics take time.
Thank you for standing by and welcome to the DigitalOcean third-quarter, 2024 earnings conference call (Operator Instructions)
Thank you. I'd now like to turn the call over to Melanie Strate, Head of Investor Relations. You may begin.
Thank you, and good morning. Thank you all for joining us today to review DigitalOcean's third-quarter, 2024 financial results. Joining me on the call today are Paddy Srinivasan, our Chief Executive Officer; and Matt Steinfort, our Chief Financial Officer. After our prepared remarks, we will open the call up to a question-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 and beliefs regarding our financial outlook for the fourth-quarter and full year 2024 as well as our business goals and outlook. Our actual
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