or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 001-40252 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 DigitalOcean Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 45-5207470 ( State or other jur ...

Exhibit 99.1 DigitalOcean Announces Fourth Quarter and Fiscal Year 2024 Financial Results Q4 2024 Revenue of $205 million, up 13% year-over-year; Full year 2024 revenue of $781 million, up 13% year-over-year 2024 Net Income was $84 million, up 335% year-over-year, at 11% margin and Adjusted EBITDA was $328 million, up 19% year- over-year, at 42% margin NEW YORK, February 25, 2025 – DigitalOcean Holdings, Inc. (NYSE: DOCN), the simplest scalable cloud for growing tech companies, today announced results for i ...

Needham analyst Mike Cikos reiterated a Hold rating on the shares of DigitalOcean Holdings Inc DOCN.The analyst has a favorable outlook on DigitalOcean ahead of its earnings report, as the analyst notes the increased pace of product development under CEO Paddy Srinivasan will lead to stronger growth among Scalers & Builders, while improving customer retention before they transition to Hyperscalers.Net Dollar Retention is expected to stay below 100%, but the comparison will become easier as the analyst anniv ...

Core Viewpoint - DigitalOcean Holdings, Inc. (DOCN) is expected to report a quarterly earnings per share (EPS) of $0.35, reflecting a year-over-year decline of 20.5%, while revenues are anticipated to reach $200.22 million, marking a 10.7% increase compared to the previous year [1]. Earnings Estimates - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not reassessed their initial estimates during this period [2]. - Changes in earnings estimates are crucial for predicting potential investor reactions, with empirical studies showing a strong relationship between earnings estimate revisions and short-term stock price performance [3]. Key Metrics - Analysts project a 'Net Dollar Retention Rate' of 97.7%, up from 96% in the previous year [4]. - The estimated 'Total Customers' is expected to be 658,455, an increase from 644,000 year-over-year [5]. - The 'Average Revenue Per Customer (ARPU)' is anticipated to reach $102.85, compared to $92.63 in the same quarter last year [5]. - The average prediction for 'Annual Run-Rate Revenue (ARR)' is $819.18 million, up from $730 million reported in the same quarter of the previous year [6]. Stock Performance - DigitalOcean shares have returned +15.7% over the past month, outperforming the Zacks S&P 500 composite, which saw a +2.6% change [7].

Company Overview - DigitalOcean Holdings, Inc. (DOCN) shares increased by 5.2% to close at $42.95, with notable trading volume indicating higher activity than usual [1] - The stock has gained 16.9% over the past four weeks, driven by a strong portfolio of innovative solutions and an expanding partner base [1] Earnings Expectations - DigitalOcean is expected to report quarterly earnings of $0.35 per share, reflecting a year-over-year decline of 20.5% [2] - Revenue is projected to be $200.22 million, which is an increase of 10.7% compared to the same quarter last year [2] Stock Performance Insights - The consensus EPS estimate for DigitalOcean has remained unchanged over the last 30 days, indicating stability in earnings expectations [3] - The stock's price typically does not continue to rise without trends in earnings estimate revisions, suggesting that monitoring future earnings revisions is crucial [3] Industry Context - DigitalOcean is part of the Zacks Internet - Software industry, which includes other companies like Synchronoss (SNCR) [3] - Synchronoss has a consensus EPS estimate of $0.10, representing a significant year-over-year increase of 111.8% [4] - Synchronoss currently holds a Zacks Rank of 1 (Strong Buy), indicating strong market confidence [4]

Core Viewpoint - DigitalOcean (DOCN) demonstrates strong cash flow growth, but this alone does not indicate that it is an undervalued investment [1] Group 1 - The stock prices referenced were from the afternoon of January 28, 2025 [1] - The video discussing this information was published on January 30, 2025 [1]

Group 1: DigitalOcean - DigitalOcean is focusing on artificial intelligence (AI) to drive growth after experiencing sluggish revenue growth in recent years [1][2] - The company acquired AI platform Paperspace in 2023 and launched virtual servers with GPUs, enhancing its AI compute capacity [6] - DigitalOcean's total addressable market is projected to exceed $200 billion by 2027, with estimated revenue of around $775 million for 2024 [7][8] - The stock is valued at less than $4 billion and trades at approximately 23 times the average analyst estimate for 2024 earnings [7] Group 2: PubMatic - PubMatic specializes in programmatic digital advertising, helping clients maximize revenue through its platform [10] - The company faced a slowdown in growth in 2023, with revenue increasing by only 4%, but has since rebounded with a 13% year-over-year growth in Q3 2024 [11] - Connected TV (CTV) is a significant growth area for PubMatic, with CTV impressions more than doubling year-over-year [11] - PubMatic operates its own infrastructure, allowing efficient processing of 1.8 trillion advertiser bids daily, and recorded free cash flow of $26 million in the first nine months of 2024 [12] - The stock trades at about 20 times the average analyst estimate from adjusted earnings per share, with a market capitalization of approximately $716 million [12]

Core Viewpoint - DigitalOcean is expanding its offerings to include artificial intelligence (AI) services for small and mid-sized businesses (SMBs), presenting a significant investment opportunity as the stock is currently trading 71% below its all-time high from 2021 [1][2][13]. Group 1: Company Overview - DigitalOcean primarily serves SMBs with under 500 employees, a segment often overlooked by larger cloud service providers like AWS and Azure, which focus on larger organizations [3][4]. - The company has created a user-friendly environment for its SMB customers through transparent pricing and easy-to-deploy tools, which is also being applied to its AI services [5][6]. Group 2: AI Services and Market Demand - DigitalOcean's AI-related annual recurring revenue increased by over 200% year over year in Q3 2024, indicating strong demand for its AI offerings [7]. - The company has introduced fractional computing capacity, allowing SMBs to access Nvidia's GPUs, making AI technology more accessible to smaller businesses [5][6]. Group 3: Customer Segmentation and Revenue - DigitalOcean categorizes its customers into three groups: Learners (474,000 customers, average spend $15/month), Builders (145,000 customers, average spend $145/month), and Scalers (18,000 customers, average spend $2,153/month) [10]. - Scalers, despite being only 2.8% of the customer base, contribute 58% of total revenue, with their annual recurring revenue growing 19% year over year [8][9]. Group 4: Financial Performance - The company anticipates a record total revenue of $776 million for the full year 2024, reflecting a modest 12% increase from 2023, attributed to careful cost management [11]. - DigitalOcean reduced its total operating expenses by 4% year over year in the first three quarters of 2024, resulting in a net income of $66.2 million, a significant increase from the previous year [12]. Group 5: Valuation and Market Potential - DigitalOcean's price-to-sales (P/S) ratio has decreased to 4.7, representing a 43% discount to its lifetime average of 8.3, making the stock more attractively valued [13]. - The addressable market for SMB cloud services is estimated at $114 billion in 2024, projected to grow to $213 billion by 2027, with AI services expected to contribute significantly to future revenue [14].

Company Overview - DigitalOcean stock lost more than 70% of its value since late 2021, leading to a CEO change from Yancey Spruill to Paddy Srinivasan [1] - The company has shifted its focus to AI under the new leadership, aiming for improved financial performance and a potential stock recovery by 2025 [2] Market Position and Differentiation - DigitalOcean differentiates itself by offering simplicity in cloud and AI services, targeting small and medium-sized businesses (SMBs) with transparent pricing and a supportive community [3][4] - The acquisition of Paperspace in 2023 enhanced its AI capabilities, allowing users to build and scale accelerated computing applications without significant investments [5] - The company holds a competitive advantage in its niche, as larger players like AWS and Azure cannot easily replicate its approach without disrupting their business models [6] Financial Performance and Growth - DigitalOcean forecasts a compound annual growth rate (CAGR) of 23% in its cloud market segment through 2027 [7] - Revenue grew by 34% in 2022 and 20% in 2023, with the company turning profitable in 2023, reporting $19 million in net income [8] - Revenue for the first nine months of 2024 reached $576 million, a 12% year-over-year increase, while net income rose to $66 million [9] - Analysts project 13% revenue growth in 2025, indicating a potential stabilization or reacceleration of growth [9] Valuation Metrics - The company's P/E ratio is 41, considered low given its recent profitability, and the forward P/E ratio of 19 is likely undervalued if revenue growth remains in the low teens or higher [10] Outlook for 2025 - Despite slowing revenue growth and investor uncertainty due to AI competition and the CEO change, the low forward P/E ratio and continued profit growth suggest a potential turnaround for DigitalOcean stock in 2025 [12][13]

AI Industry Overview - The AI revolution is still in its early stages, with tech giants and startups heavily investing in AI infrastructure, exemplified by Microsoft's planned $80 billion investment in AI data centers this year [1] - The industry is shifting focus from training AI models to AI inference, as current training methods face limitations and AI-generated data is increasingly used for training [3] Cloudflare's AI Strategy - Cloudflare is focusing on AI inference, leveraging its global network of AI-capable servers to run AI models close to users as quickly as possible [2][4] - The company's Workers platform supports a wide range of AI models for tasks like text generation, image classification, and translation [4] - Cloudflare offers an AI Gateway to help developers manage AI models running on third-party platforms, with most features being free [5] - While AI is currently a small part of Cloudflare's business, the company's extensive platform and large user base (221,000 paying customers, including 3,200 spending over $100,000 annually) position it well for future growth in AI [6][7] DigitalOcean's AI Approach - DigitalOcean, a traditional cloud computing provider, is expanding into AI with a focus on simplicity and accessibility for individual developers and small businesses [8][9] - The company acquired AI platform Paperspace in mid-2023 and is now offering GPU-backed virtual servers for AI workloads and a new GenAI platform for training and deploying AI agents [9][10] - DigitalOcean has over 600,000 paying customers, including more than 150,000 spending at least $50 monthly, and aims to capture a greater share of cloud spending as AI proliferates [11]