The cloud computing service provider just proved how marketable its small-business offerings are even in a wobbly economic environment.
Shares of DigitalOcean Holdings (DOCN 13.08%) are up 14.2% as of 2:40 p.m. ET today, according to numbers from S&P Global Market Intelligence. The surge follows Thursday’s post-close release of the company’s second-quarter results. Not only did the small technology outfit top estimates, but it also reminded investors of just how resilient its business is.
The DigitalOcean wave is still rolling
DigitalOcean’s business isn’t complicated. The company offers cloud computing solutions, alongside a slew of other providers. It is different than most of those other outfits, however, in that it specializes in meeting the needs of smaller customers that may wish to first experiment with the technology on a small scale, and then expand their cloud computing operation as the need grows.
The differentiated model is clearly working. Last quarter’s revenue of $192.5 million was up 13% year over year despite economic headwinds, topping estimates of around $188.6 million. Per-share earnings of $0.48 beat the consensus of $0.39, improving on the year-ago comparison of $0.44 per share.
The foreseeable future looks bright, too. The company raised the lower end of its full-year revenue guidance from a range of $760 million to $775 million to a new range of $770 million to $775 million. Its prior per-share profit outlook of between $1.60 and $1.67 was revised to range of $1.60 to $1.70. Analysts are collectively modeling 2024 top-line growth of 11.1% to just under $770 million, and further expecting earnings to improve from last year’s $1.59 per share to $1.64 this time around.
DigitalOcean just proved there’s good reason to expect such growth, although analysts’ outlook may still underestimate what’s actually in store.
Room and reason to move higher
But is the stock a buy in the wake of such a big daily gain?
Normally this kind of move would be a tough act to follow simply because it invites profit-taking once the euphoria wears off. And we may well see some bearish pushback early next week once the dust settles.
On balance though, there’s still far more upside than downside here. Shares are much closer to October’s low than 2021’s peak, and are down from February’s high as well. There’s room — and now reason — for the stock to move higher.
This might help: An outlook from market research outfit Imarc Group indicates the worldwide cloud computing industry that’s specifically serving small and medium-size businesses is set to grow at an annualized pace of 14.9% through 2032.