Cloud computing provider DigitalOcean (NYSE: DOCN) will be announcing earnings results tomorrow after market hours. Here's what to look for.
DigitalOcean beat analysts' revenue expectations by 1.2% last quarter, reporting revenues of $184.7 million, up 11.9% year on year. It was a decent quarter for the company, with a significant improvement in its gross margin.
Is DigitalOcean a buy or sell going into earnings? Read our full analysis here, it's free.
This quarter, analysts are expecting DigitalOcean's revenue to grow 11.1% year on year to $188.6 million, slowing from the 26.8% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.39 per share.
The majority of analysts covering the company have reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. DigitalOcean has missed Wall Street's revenue estimates twice over the last two years.
Looking at DigitalOcean's peers in the data and analytics software segment, some have already reported their Q2 results, giving us a hint as to what we can expect. Commvault Systems delivered year-on-year revenue growth of 13.4%, beating analysts' expectations by 4.2%, and Confluent reported revenues up 24.1%, topping estimates by 2.1%. Commvault Systems traded up 24.1% following the results while Confluent was down 17.6%.
Read our full analysis of Commvault Systems's results here and Confluent's results here.
Inflation progressed towards the Fed's 2% goal at the end of 2023, leading to strong stock market performance. 2024 has been a bumpier ride as the market switches between optimism and pessimism around rate cuts thanks to mixed inflation data, and while some of the data and analytics software stocks have fared somewhat better, they have not been spared, with share prices down 4.8% on average over the last month. DigitalOcean is down 13.2% during the same time and is heading into earnings with an average analyst price target of $38.8 (compared to the current share price of $28.14).
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