Global cloud infrastructure provider DigitalOcean, a company aiming its cloud infrastructure services at developers, startups, and SMBs, has shared the financial results for its third quarter ending September 30, 2022. In addition to Cloudways’ $4.1 million net revenue contribution (acquired last August for $350M), revenue for the quarter increased by 33% to $152.1 million, a 37% Year-over-Year rise.
“I’m proud that we delivered top-line acceleration combined with significant operating margin and free cash flow leverage in the third quarter, despite the difficult operating environment due to global macro challenges,” said Yancey Spruill, CEO at DigitalOcean. “In addition, we made a significant investment to expand our addressable market with the acquisition of Cloudways. We will continue to leverage our capabilities to provide exceptional value to support the growth of SMBs. We are committed to delivering durable 30% growth with increasing profitability and cash flow.”
Other third quarter 2022 financial highlights for DigitalOcean include the following:
- In addition to Cloudways’ $4.1 million net revenue contribution, revenue for the quarter increased by 33% to $152.1 million, a 37% year-over-year rise
- ARR increased by 41% Year over Year to $640.6 million at the conclusion of the third quarter
- Gross profit increased by 300 basis points Year over Year to $97.6 million, or 64% of sales, while adjusted gross profit increased to $121.5 million, or 80% of revenue
- Operating margin was 6% and income from operations was $9.4 million
Third quarter 2022 operational highlights for DigitalOcean include the following:
- Paid $350 million to acquire Cloudways, a managed hosting business with rapid growth
- The Net Dollar Retention Rate (NDR) increased by 600 basis points to 118 percent over the previous quarter
- The average revenue per customer (ARPU) increased by 28 percent to $79.22 during the third quarter of 2021
- Clients who spend more than $50 per month increased by 50 percent year over year to 142,000, up 37,000 from the previous quarter. During that time, Cloudways and DigitalOcean each made 20,000 new additions
- The company’s share repurchase operations were finished with the quarter’s 1.1 million share purchase
Financial Outlook, Cloudways Acquisition
For the fourth quarter of 2022, DigitalOcean anticipates total revenue of $160 to $162 million. For the full year 2022, the company expects total revenue of $573 to $575 million.
The acquisition of Cloudways has increased DigitalOcean’s global staff by 30 percent, adding expertise in key growing industries that would continue to increase platform performance and efficiency. Additionally, the company’s technologies and tools were expanded.
According to the cloud infrastructure provider, the serviceable market for DigitalOcean among foreign SMBs has been greatly increased with the acquisition of Cloudways. Through the acquisition, DigitalOcean is now able to provide more options for managed cloud hosting solutions that include WordPress, PHP, and Magento to digital agencies, e-commerce websites, bloggers, freelance developers, and builders.
Since 2014, DigitalOcean and Cloudways have already collaborated extensively. At the time of the acquisition, DigitalOcean’s cloud infrastructure would already power nearly half of Cloudways’ customers.