DigitalOcean (DOCN) Q3 Earnings: What To Expect

Petr Huřťák /
2022/11/07 2:04 am EST

Cloud computing provider DigitalOcean (NYSE: DOCN) will be reporting earnings today after market hours. Here's what investors should know.

Last quarter DigitalOcean reported revenues of $133.8 million, up 28.9% year on year, missing analyst expectations by 0.44%. It was a slower quarter for the company, with a decline in net revenue retention rate and a miss of the top line analyst estimates.

Is DigitalOcean buy or sell heading into the earnings? Read our full analysis here, it's free.

This quarter analysts are expecting DigitalOcean's revenue to grow 32.6% year on year to $147.7 million, slowing down from the 37.2% year-over-year increase in revenue the company had recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.23 per share.

DigitalOcean Total Revenue

The analysts covering the company have been growing increasingly bullish about the business heading into the earnings, with revenue estimates seeing three upwards revisions over the last thirty days.The company only missed Wall St's revenue estimates once over the last two years, and has on average exceeded top line expectations by 2.11%.

Looking at DigitalOcean's peers in the data and analytics software segment, some of them have already reported Q3 earnings results, giving us a hint of what we can expect. Commvault Systems delivered top-line growth of 5.74% year on year, beating analyst estimates by 0.81% and Alteryx reported revenues up 74.6% year on year, exceeding estimates by 12.1%. Commvault Systems traded flat on the results, Alteryx was up 10.1%. Read our full analysis of Commvault Systems's results here and Alteryx's results here.

Triggered by the Federal Reserve's hawkish stance on interest rates, shares of technology companies have been facing sell-off in 2022 and while some of the software stocks have fared somewhat better, they have not been spared, with share price declining 5.91% over the last month. DigitalOcean is down 12.8% during the same time, and is heading into the earnings with analyst price target of $51.30, compared to share price of $30.96.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.