DOCN - Earnings call 3 2023 | DigitalOcean Holdings, Inc.

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Operator

Hello, good afternoon. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to the DigitalOcean Q3 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Rob Bradley, Vice President of Investor Relations.

Rob Bradley

welcome, DigitalOcean's and Earnings Quarter Jeremy, Call. you, everyone, Third to XXXX Thank

is Chief Spruill, Matt me Yancey Joining today our Chief Officer. Steinfort, Financial Executive our and Officer;

harbor want Before started, to statement. cover we I our get safe

expectations this and business our outlook year outlook, market including as industry During forward-looking as similar statements and and fourth financial call, trends, be for we making for conference about performance statements, quarter well the items. future full financial will goals opportunities and

uncertainties risks, to assumptions. subject are statements these of and All

You We can these results the that review any undertake more information in update statements. filings actual or we forward-looking Risk about our of no with Factors revise obligation may our remind section differ, and the to SEC. everyone

on GAAP in issued between can our call, Finally, on the will which press and we and in our and investor be presentation, found financial investor measures our results our can earnings this afternoon was release, which be discussing earlier financial found non-GAAP reconciliations be website. non-GAAP

let me Yancey the our CEO, over Spruill. Yancey? to that, With call turn

Yancey Spruill

Rob. and share outlook. the you for go briefly financial of enthusiasm will an joining to been exciting and trajectory the balance us pleased over to and some our turning growth CEO, today. product product we've I'm recap that macro partner financial a highlight quarter results call afternoon, This solid all also I before interactions recent share made on representing attractive our the over updated that thank Good our by afternoon, recently. us customer to with customer Matt and for the QX gives broader some announcements observations of for an results, Thanks, update I'll informed profitability. and another have next search that win

has are that Board the and making move specific Board continue is cloud but On hire the of hiring the Directors new we and role. to There is we an from engaged outstanding with technology and CEO. progress line expertise. search our early extensive recruitment well confident executive candidates new CEO a focus of fill communicate is for good of The very numerous search is working leading been with the to strong executives, several candidates, a process with in critical front, the deeply the the Board underway, process through interest this we a transition will as to progresses. time It still interview will deliberate too these and is speed infrastructure CEO,

performance tail in to that the signs started were we bottom are from the seen results grew we to trends line in And and QX lapped over XX% quarter quarter our have XXXX the end from headwinds Revenue having growth QX, see Third pricing encouraging actions. the abating of both QX the delivered early at solid indicated, XX see positive we QX we months. as to the and to our business XX perspective. top year-over-year as through $XXX continue million from first there have that past cohort,

very free the was cash allowing range us strong cash a revenue is deliver business, the combination margins. adjusted margins. cost us in flow flow Paperspace stabilizing of absorb growth have and free remaining and The created EBITDA incremental core Our to for the while of rate we the business our to efficiency targeted our robust our for and profile acquisition DigitalOcean within quarter margin core enabled from

and of businesses. simplicity enable our scale our has interactions to and to as our growth product is A deliver proposition their they to customers, efforts to look growth drivers critical several markets. consistent capabilities can we continue map been the we partners, to that our build ongoing is for to distinct past product we own and best complexities how we rate, over the to of investments. revenue is the continue cloud infrastructure them. line build foundational DigitalOcean relying big Through value the As portion on multiplier and top navigate through and add customers our our serve months from on accelerate remove complexities on evolve to customers customers that a our prospects continue numerous road of productivity the with and fine-tune The sentiment cloud focus

which focused platform's us grow enables positions on customers security spend the of customers. and are us We retain our reliability, performance, to and to scalability, enhancing and our new win

velocity product database we service, delivered needs. we whose involves launched increase streaming. as have a September, new Managed focus announcements tool and In our Over an on a managed meeting evolving as we businesses Kafka of model for Managed the months, critical releases fully data significant several Kafka in past customers'

development have by Managed to complex customers, positive feedback our Kafka However, resources them With their fully their activities, a game focus their and their complexity. it for medium small customer-facing often new and environment service allowing be to down referring not productivity that business can and changer. Kafka with processes. increased is increased slowed on Customers citing it comes a on companies offering, about Managed provided time strong focus as as

applications. CPU, to droplets premium In extending premium of also a September, offer performance broader to improved we cloud-native and way storage features enhanced introduced memory the purpose general of

strong first-generation growth this and adoption to and droplets offering. capabilities migrated certain launched computing XXXX expanded ARPU saw customers beginning premium their drove premium compute Our broad workloads in of dedicated as when the

we've and new offering. opportunity the these Now use it customers with more general-purpose this expanded further step features to taken for one premium enhanced

weeks ago, to just utilization and productivity is storage cloud effort to their customers get we databases can on customer better introducing their platform. deliberate compute our return our customers memory few spend a by configurations. scaling optimize storage, ] better to needing managed to introduction By without and their they similarly And best meet better help ] scalable Postgres to MySQL investment. the utilize we and This enable [ serving [ are their their as for requirements scale storage on introduced scalable monitor a

addition very the front, On their Paperspace DigitalOcean. continue capabilities expanded for the business of AI/ML the this market we to and that by creates opportunity excited be

While integration a process, we And we Paperspace has to more months for the are market strong. services the only continue businesses. demand to capabilities and how about their the are grow learn leveraging still very into our been few and customers develop

intelligence. overview provide GPT to improve which XXXX the we released Company To ] has case, one model, is [ build added ] Nomac customers GitHub is our history high-performance AI give with compute, you explainability intuitive an use to open-source unstructured exciting platform. sense DigitalOcean artificial sets language Nomic and used X accessibility tool is reliability. software, X and the a such customer [ of an a allows the to along founded for users support to in Paperspace growing recently in excess the products: repository for [ I'll was which that models. of Today, Nomac selected data visualize Atlas, all, large which third ] fastest of and

simplicity, support managing Their us Their and co-founder building providers. our loves demand team products opportunity It PaaS time was intuitive multiple with other less The quoted as that and the but environment customers. spend more saying, allows of far along great for utilizing build for DigitalOcean's breadth current verticals their to IaaS join new the to of and ahead. our applications reliability platform time more infrastructure than opportunity we Paperspace. testimony not only to products AI that combination the to we across our compute for capabilities. seeing and span us their to the RFPs scale are demonstrate multiple applications customers for our excite also while see It's

good summary, free while seeing new to stabilizing In this revenue trends flow. CEO. efforts continuing cash deliver with we're our during business transition, a progress our to significant on making bring is And

quarters well are top We last signals very of rate the stabilizing is encouraging that deceleration. growth seeing to line X our

our in growth is about product addressable large strategic cloud for We and continue work go-to-market compelling which We us improved The make in enabling flow the investments to while and created billion excited $XXX cash through initiatives. delivering infrastructure past remain near market compete. the we the still over to long-term free our to we potential margins. in year operating targeted leverage business have rate reaccelerate SMB

like their year, As the solid our thank we results. Digital of to for the delivering approach member each commitment of Ocean every team to and I'd the customers these end and for

like over turn outlook for I'd to provide our financial the it that, to on details and results to of year. Matt With the our outlook balance

Matt Steinfort

macro call ongoing solid organic business. achievement earnings despite strategy future welcome of of while us today's Thanks, In our QX in continued the investment growth in platform the QX, review who execute our our long-term the to we core as the on margin Yancey, and of positioning we accelerated for company both are you DigitalOcean accelerating our inorganic to and joining through targets headwinds. all results.

identified we savings of improvements the capacity driven these in we nonheadcount-related have We had gross of into included investments which at that headcount by the identified both the margin achievement XXXX and beginning as made expenses. this and in achieving margin our improvements grew year, in savings

continued on to With X Paperspace. quarters, our as the cash year-over-year. have share which by increasing the meaningfully July, balance our XX% investments we Allowing strong made road sheet, and in focus execute to And improving make continued our growth we our in flexibility driving per increased progress in market. first in In to targeted repurchases, have increases As earnings us product described. our the we to on free Yancey we we growth. operating significantly. of margin have addressable savings, commitment our flow invested leverage overall material continued total organic these invest and profitability have map, share, inorganically acquisition

remains we the As strategy our approach same. XXXX,

opportunities We I and while and drive investment the review in mind, will the will across highlights organic leverage With balancing repurchases. to of inorganic operating continue share third that context quarter. growth

margin improvements as very into grew the adjusted the was $XX.X quarter. million data are improvements that made a benefit XXXX of margins the in late quarter The the was laps XX% quarter and the of in our was surpassed the which in increase for pricing to implemented our an addition first we million $XXX.X XX% Adjusted Contributing XXXX. have improving center efficiency consecutive of and EBITDA, been in million, throughout strong quarter EBITDA monthly year. this Profitability margin in million we AI increase third identified which which of delivered platform as In early the ongoing Paperspace. and realizing and XX% result in QX this full Revenue for incremental September. revenue in the quarter-over-quarter. and bandwidth acquired grew and the July, $X $X early investments which that the QX gross contributed growth mark capacity we year to had X% results was year-over-year second of that Cloudways, of we had we we QX order

highlight million, Free a cash which we XX% result as point of improvement of was QX a lower revenue. capital flow was expense generated also basis $XX the in capital both and timing. was working from XXX quarter This

the coupled in near-term levels. Given capital working timing lower be with expect Paperspace investments, free QX anticipated we QX cash to flow than margin dynamic, our

flow cash quarter-to-quarter, can confident to in year margins lumpy flow expectations. free free full cash While be continue our margin we be

have $X.XX program. having is per non-GAAP Finally, share a systematic while share outstanding simultaneously which margins our increased our through year-over-year buyback earnings our XX% we was shares reduced increase profit as

net increase implemented at XX% we expected, the mid-XXs, QX in in to XXXX. dollar As price in of July lapped coming retention the declined was that as

that ongoing comp of in difficult stabilization the did year-over-year started the in we to had continue QX, show despite demand signs bottoming of see to of QX. market Fortunately, evidence

has XXXX, to in QX, churn levels which is to early of of remained been stable each at historical for consistent prior XX% the months the levels, historical with churn most for market slowdown. around in XXXX it As XX%

XX% Contraction, XX%. historically at in progress XXXX, as quarter XX% range been improvement ending which at the starting through after quarter, early should has the the we in over

signs positive expansion a had the said for and was continued QX, stabilization at rate. saw see QX, to decelerating as in final we which to metric also We in it albeit we needed decline

the and fairly for at over in XX%. a In QX, first declining consistent year stopped expansion time was

meaningful a in metrics component encouraged in relative the seen NDR, key by we we are stability of improvement While yet have not the QX.

business key to and and XXX,XXX environment. NDR continue We acquisition in than scalers platform. continued on we and builders graduation and perspective, driven of expect We the more on X,XXX comparison. growth customer $XX in more platform favorable in focus our XX% challenging strength have quarter, our our sales These remains than despite a QX customer who spend model part product, our DigitalOcean to month revenue solid by represent Cloud year-over-year remain ways the and From of and graduated the now success overall with of per a and customers DigitalOcean improve investments. durable XXXX, more early the the customer

or $XX.XX comp X% year-over-year, July. lapped which Average per price ARPU, NDR, a of last faced increase difficult year-over-year from revenue which, customer, was monthly was an increase we like the as

Before providing for guidance to we planning and are full important the where process. year understand in for XXXX, QX it the is XXXX

are our margins. with and focus healthy We cash XXXX plan diligently working double-digit to a free on growth delivering flow for budget finalize profit and with

remain strategy the Our in will same XXXX.

We operating opportunity drive core we will take while of the compelling to Paperspace. in continue investing DigitalOcean leverage the to have market business with advantage

and above getting accomplish. forward our aggressively We Key producing shared some growth. specifics QX growing point continued generating XXX% faster when top results. pressures, double-digit for self-serve than plan we'll Paperspace X% more line growth which Cloudways February foundation are this, to to for at to market growth least in we call with we funnel look around we quarter, on around have the last X% -- we full a year steady in despite at next be XXXX, As earnings working growth, our our and NDR X% report XXXX our generating believe providing solid we

of be financial QX for guidance of we million. to are revenue XXXX, terms In targeting $XXX

For $X.XX $XXX expect quarter, million to XX% EBITDA based $X.XX share And to fourth earnings of in on to fully outstanding. shares XX%. in to be adjusted the the margins range average non-GAAP million weighted to per we $XXX be diluted approximately

revenue full year, million. to $XXX targeting are the we be For

per improvement core DigitalOcean EBITDA project the our in range margin to adjusted of we driving for despite in XX% our increased XX% business, performance be strong to to year non-GAAP the continue Given full margins the range investment be in our million. to $XXX weighted $X.XX diluted outstanding shares $XXX to fully in $X.XX, of to Paperspace earnings the million XXXX We project for business. average AI/ML share with of

into free made consistent up given despite be making the full incremental the XX% business. and will for with of our our February we the XX% we'll initial formal to the open paper are now progress our call year margins cash our concludes in space strong And finally, improving XXXX have business to DigitalOcean guide we Q&A. remarks, investment That on core revenue, flow

Operator

[Operator Instructions] from the of comes Our first line from Barclays. Lenshow Raimo question

Raimo Lenschow

companies improvement. Paperspace. terms My you're and little of you follow-up see Can lot are kind moment bit stabilization AI And for I cases, first like the on one nice use quarter, of seeing is great copilots and that? of congrats like using a like this? like practical in question are about about it's is on how to a what big seeing terms the see there? a in And the how you in then Can and stuff what a talk had of you Because talk the customs about you adoption bit there on And like and financials. at that. excitement SMBs little us,

Yancey Spruill

], cases, Nomac is people know good people I cases. tech-enabled enable cases. there they are a that for verticals, we would diverse are aspirations use I set supporting them example broad language of productively. have building think, we array use tools businesses, that base, provide to to I SMBs use AI of grow These a because rapidly, very call models think customer use large Creating specific [ of don't the that example targeting, Well, an

the and complementary value come which for AI good the see DigitalOcean to that's news the move of opportunity. the think we the easy characteristic a that people built as over the is weighted around simplicity the platform. we proposition on value it be Paperspace for And exciting and into making that proposition heavily us offer of I been is platform to is But aspect distinguishing life to

Raimo Lenschow

And then Okay. Perfect. question a cash free flow. quick on the

mentioned out very of X be that that some But So could obviously, terms in there capital you theory, do called timing? strong this as performance a that a factors forward? and driven factors think you of there. those it in was little just quarter. And bit CapEx you Or how working like, about

Yancey Spruill

Thanks, Raimo.

XX%, guide for up XX% basis, It's a the just that's by because it's the at catch it's influenced our of are timing -- quarter. lot some payments. on staying of working to in year year this will looking we capital have free cash flow quarterly with We still a full margin and tough fourth of

we we well. that So the the normalize in, the acquired are given coming in fourth to expect purchases some the in will that fourth fourth quarter made And that as quarter. when quarter, hit then we partially in also of equipment Paperspace

to into the of in opportunity high have able XX% and it said, end still yet as cash have revenue way evidence, do XXs we guide still about core And margins So margins thinking in using that quarter, side the to right of drive the to that of growth we that. by the again, come the done at it's we the that this to of year the the drive XX and in and -- funding to a the approach free DO we be means going to year, we is year. business XX% were again, XX% as full business. we're we've we're for the is the XX% Paperspace great which flow more

with made. progress So and really happy we're the we've

Operator

right. All

Mike Our Cikos next from question comes the from Co. Needham of line &

Unknown Analyst

reduction know of Is or This on over coming is to that hit EBITDA Cikos far at guide? a call the expenses you as the of XQ kind onetime Matt anything a just as the bit, you guess, timing there from ] out this different [ little Mike out implied angle. sticks that Needham. Clichy I on I but in for anything, would

Matt Steinfort

decline it's this causing -- -- And -- couple that's point No, on we being to it's the nothing the one Timing of just invest sequential board, -- there's it's I it's with business, to is some time a a next both expenses grow on in the the Paperspace The again, EBITDA. DigitalOcean of the core It's into business scale. Paperspace the given kind related nature. year, at margins. and impact as basis of different business, that's then margin EBITDA. mean not business in clearly

kind margin It's longer is a up over it of the XX% is to of about EBITDA you think what about for the got it. get again, the for quarter-over-quarter period. year to the don't caught I XX% -- the way margin right to think guide fluctuations. It's in

Unknown Analyst

Got way, then customer any in helpful. And caution news broader the you. potential the space? That's SMB and in given showing the greater or any native is signs pressures base digital on of macro

Yancey Spruill

said the months we been seeing with saw we at move it year. through as several in through relatively that as better was is than improvement what has we're ago. expansion. level QX and we And and think I churn X contraction move now for pleased stable quarters a stabilizing signs We continues we're

think are biggest as I customers and it be new customers and signs so existing those seeing And stabilizing. telltale to customers us relates seem things that our to the are what for

Operator

the of next Josh comes from question line Baer Our from Morgan Stanley.

Josh Baer

Was think around the just could to contribution some and the different of cohorts? how hoping the the about to metrics contribution some to you Paperspace, out the break customer of ARR

Yancey Spruill

was over -- to X, X we a little the the in I standpoint, quarter. ARR for It's $X.X end million said we're the going up around going an be it from just to was the So think -- year.

total of standpoint, customer customers there that's again, because be a customer is an where quarter from want about, And account is north XX,XXX per say, a revenue ARR the to base. lot it's customer the added I in going the to to bigger. average standpoint, XX% ending. it from But So

average to is closer it's XXX-ish. So

and builder they to segment the to So added the scalers segment. be tended

Josh Baer

I Great. missed And apologies if this.

we it is good your low. as trajectory a priority growth? the and CapEx demand can at I line a be Paperspace. and -- is looking of leading a think spend? how And Just of revenue and should for sort percent invest understand in that that about lumpy pretty top to of CapEx indicator is it But

Yancey Spruill

be because year. is What I year. indicator it leading were revenue And for about of a Paperspaces it No, the to as demand closer lumpy. will XX%. don't We with XX% originally pans for we of it's the tracking think in the be to good CapEx said

that out And per just I the seeing we of amount the a good some it's GPUs, of we're gear lumpy. chain that of demand because bought gate we ordered and right supply it's mean unpredictable. lot space is we when really -- just and increased around

in QX, we're didn't -- in some and we start to QX get and to get some of in next of going in to then so ordered more we'll And year. start everything get get that early QX, that it we

the but the is to flow of So we're really CapEx saying it's revenue timing XX% CapEx and that it for year. the percentage XX% still -- the XX% the that's why full not as still we're around of purchase, sticking working and target capital a for free year, cash to of

Operator

Our next JMP. from question comes from the Patrick? line of Patrick Walravens

Patrick Walravens

Great. stabilizing. And see the it's business to nice

how lately. question centers the today? different cloud a my footprint Obviously, digital what's industry data centers is issue cloud that center big you GPU ocean, traditional take are to with on data going it? look cloud your and had with it's are been like CPU than you And So your Paperspace, in that where GPU data

Yancey Spruill

much heat servers higher heat consumption, Well, heat consumption. have different GPU

you So than dense the footprint less is with might physical standard compute.

the of we data same see we'll that the the to the center in and XXXX pacing the that's for standard building. in that I going it's very compute infrastructure process of and planning Matt fact of close data in think combined think particular one and footprints around companies We're case level be as been Paperspace of evaluating, for forward. made investment a think proximity, that differences. principal I as about the mentioned, including still decisions demand. company evolving include are don't going been both fortunate evolve any CPU that. mix have the how on We've what And center GPU some one how the to may incorporate the

the our just And footprint we're servers, in Obviously, playing get terms to the need how support strong. of where we're to demand to into and seeing going grow and what is make decisions lot. to that buying input in add and capacity that to that the a market as but physical we're next are incredibly we're looking it how -- going year. to on growth, not learning We're we

Operator

of comes question the from next Piper line [ Fish from Jim Our ] Stanley.

Unknown Analyst

[ is on ] This Quinton Fish. for Jim

the we've of product how kind the it, and of compute launches we with team of compute is maybe storage potentially the about seen space kind or Digital paper that? recent go-to-market thinking and ones. Managed First, bundling on and with significant of, most Kafka in those noncore call with compute with can some packaging side Ocean motions noncore Can of to about coming you talk kind how adapt the

Yancey Spruill

some functionality, of some tools security the standard we've board the products. make feature for to the it the easy other customers, and Well, incorporated seamless the combined across and AI that of and use

learn in customer a decoupling network about we bandwidth and cases attributes the as storage, the set. I verticals, droplets reflect use for bundling, scalable theme -- of been product that highlighted, that compute keep of a with the security us is key that of and concept to X and other a about this investors which I some real is we the opportunity for to from storage items of think premium talking year more hearing bundling industry we've years

be strong to in the blocks and and giving and in us foundation meet that's we to growth path to them launch it's building efficient more compute as doesn't customers' so strong bundling unbundling other bandwidth and need highlighted better think needs And customers. able scalable now security AI I having for storage. of our case storage, foundation and -- today standard capabilities let's storage, with that do but If more with needs compute, the recent the more as give we a option, a use

compute. us. I the think get and integrated AI both theme. bundling is a about sort to say certainly to into be we'll relates as that's year, more standard of process pretty have a as opportunity packaging of continuing And significant product bundling next more to that's for going it But So in we

Unknown Analyst

someone talked Makes sense. for of about of And a of kind you you has think of the then, the with you new technical a like bit helpful. cloud looking the for operational wanting in an you're background, the leader. fact search as are give core kind you skills for be color you underlying of on CEO, looking that Maybe skills can more a or But any obviously, Or kind background? would the about are experience. sales wanting leader little sort

Yancey Spruill

Board a now The Yes. right is in very finding CEO. engaged

candidate more clearly pool line As we process that. to for to we've time -- we're process. but process, or sort with possible in to to a prepared little any the an speak market. of cloud somebody fast to a I'm remarks. bit It's sacrificing the announce anything There's It's moving beyond needed as and spoke looking with active described experience, but canvass not screens the as a the it's without to the going not

Operator

of comes Genuity. Our Kingsley? next line from from the Kingsley question Canaccord Crane

Unknown Analyst

SMB options and cloud GCP. longer like website only including ] We no Volt that public AWS competitors from noticed offers like Cloudways [ on clouds for infrastructure services

So business Is this are DigitalOcean over infrastructure? primarily dynamic? you converting a new customers actively

Matt Steinfort

support that a some to as we installed customers are the clearly, to support other providers other but through multi-cloud It's from base partners our that But And healthy a offer the of through have of We still we leveraging to well. hyperscalers mostly those opportunities options customers new have each continue drive providers. on business those platform. basis, platforms. such a or go we dynamic. through of go-forward still

Yancey Spruill

That's a change this earlier made was that year in QX.

Unknown Analyst

you? has is as the Hatch opportunity momentum mechanism Accelerator Okay. customer ramping program? the would it be, And Paperspace behind an second of to Very oneX include of part How there the is the program? helpful. And how the become important for

Yancey Spruill

program it's more of the continue and certainly include something Hatch in an for There's of certainly the in. part it's that areas kind long ways to of program and part through opportunity company we a been a bring and as accelerate certainly program. adoption for the But the time, a an self-serve funnel the look to is as the to that Paperspace into and of drive Paperspace and that's Cloudways -- one to both and business opportunity invest we

Operator

question line next of comes from Jason? Jason Ader the from Our William Blair.

Jason Ader

I to about strategy. just wanted go-to-market ask the

Rob Bradley

we a you little Can louder? really you. Jason, hear can't speak

Jason Ader

better? Is that any

Rob Bradley

Much.

Jason Ader

Okay.

much sort look was I of how over the just of standpoint? doing of kind as you in would what you from and you you've changes of go-to-market years, especially bottom-up just and the then where now driven strategy of very historically? go couple been, to frame terms Because out, overall some an sort where maybe asking I about want next you're Sorry. been you've go-to-market know

Yancey Spruill

in -- customers. call good about it smaller some that to new target acquiring invested $XX And Clearly, savings primarily simplicity for of also customer where expand be NDR the would as to them. from the net maybe it it, customers been new direct a to of primary very healthy, new would channels talk the the the kind valuable drives of is we improved question, driving and the more But a economic sales that people company the customers direct over motion years exposure on the and self-serve try the The of million We've as we larger around delivers vehicle base of, their the customer It's That's be with past, terms more revenue. and the good and service it, cohort. to new $XX logos. a the are to funnel clouds in new service at adding include think several would where attractive, revenue Jason. to growth go-to-market the through said, ability cost call customer where funnel. end range self-serve of to of million has a been go-to-market you

attract we've say product that something of larger that's year So invested some still you and and over early that of of the one one very order need I'd hyperscalers. we've innings. enhancements slowdown in. the course of of in the that that's would And customer capabilities this things to the through or off learned the the

the also working opportunity And map into to feeding to expand so product that now. partner develop right the that's clearly channel. the There's capabilities our we're and road

our historically, a and a have other them just customer. in agencies very We the web of for lot much companies. developers websites building treated platform like partners we've today, But on

on differently we're self a really requirements market. might the to So come potentially platform. identify their we treat to We partner, and they didn't and otherwise the own we meet not there those and capability come because that's our have of you a and wouldn't parts of reaching but reach expand they as us them source investing requirements, great

new outside think it over growth. self-serve the several be XX-XX. of ways But sales in it we're as to -- to should great foundation to company's the ratio that the it years, be still the So channels be say, I'd -- think about get would we've of we you got We're the self-serve nascent, the very a bit of go get that's there. to of to motion been next

Jason Ader

Great.

newer you've those points be some on channels Just provide I one investors It for away think, motion is that. understand quick proof working. would as kind for taken go anecdotes that cetera, be think just some maybe everyone of on because to of follow-up you how forward would from to et and just that I helpful, just helpful that hyperscalers, customers the of

Yancey Spruill

Jason. Great. a suggestion, good you. Thank It's

Operator

of the from line Jason comes Patel question next from JPMorgan. Our

Unknown Analyst

on of a so year? some think there. Ping feedback it cases the you use do growth be And Linaro Any on ]. early [ I'm managed to for the next maybe service could tailwind cost of

Yancey Spruill

been Well, very as good, positive. the I very mentioned, feedback has

it's or streaming, is or or very productive whether aligned more services. productive platform of or data case other than on the that's and where lots use a use streaming, Kafka of data We businesses case highly lot have and which on there's a principal a other gaming of the are lot big data e-commerce that businesses

fit natural So customer it's a our for base.

are and for more because on as has as more activity. focus them And the complex simplicity as we that's giving Kafka, other script, in been customer-facing great the solutions much the have feedback enabler customers has Kafka, their others in because, to time productivity our but don't with spend very the positive built cited been it's to productivity which not a again, have it's managing feedback

a XXXX. So just be we see as last becoming we launched was we significant but through that meaningful will as material this or recently, more or ramps the absolutely quarter adoption quarter move contributor late -- it won't

Unknown Analyst

than of seems Paperspace it contribution Paperspace, on like million then the Are And second less in well. Okay. for doing half for it's this $X baking in you still year?

Yancey Spruill

it's what is in million the the in actual revenue rate run And disclosed third the -- said is September. we've think quarter. we mean, that I I -- for we said X the

extrapolate just it about that, So X. us puts

Operator

line the Mohan Wamsi of America. from comes from of question Bank next Our

Unknown Analyst

]. taking you terms Eser ARPU like Matti Wamsi. the about mix, are for the could of the if said trajectory underlying especially drivers ARPU in how the the you is the talk the growth? upsell question about thinking behalf This more on attach? the of for Was growth, [ We terms wondering of and And in

Yancey Spruill

So private a growth, kind of in that That's if design have earlier the the on we is of low development management clouds, where access -- which look set again, to the during role-based price our road a number announced year-over-year, platform. of control sorry, and capabilities in like some larger virtual said gotten a of to the the with identity that changes. term. number at them you the is relative But IM launched historical the comp you integrated we customers, but we that was more focus talked on products was that them, really customers ARPU have this certain we our scale or access appeal a our to and based map capabilities resonate year, products really and to near on this X%, year, had of difficult

big off have of to sales. of as customers' they don't enables accelerate a cloud us, to not us move also to other take earlier, mentioned so -- providers. enables they cloud to our it That workloads only the direct the to the share kind grow, continue I own as

to same need. customers you trying larger are the some longer capabilities these of you're the of poach If providers, customers,

So our their capabilities enable the able as that driving being to provide ARPU that's deliver we platform on our and scale meet better get is is on requirements. the on focus really on where customers to to continue

Unknown Analyst

what's usage trend? I And about customer follow moment? in you of there's at up, more guys if SMB improvement the the the If could the health talk could any like

Yancey Spruill

talked We earlier. this about Yes.

year in If not of the the as think as you standpoint, that our macro over that the be growing market, businesses been fast XXs. own expansion were customers see been on but XX%, that's for they through well declining that And we they we've us. get year in you a have their A were we XX% the into it look seeing expansion our down at were from stabilized. a growing customers that seen month-over-month high with what's going ago, from historically. And range,

What customers that was has that the been XX%. they still XX% causes improve. it's has and our that decline vein software, to expansion. around X appears relative pretty similar historical, were the be growth and historically, started was to so their this consistently quarters in the past stabilizing contraction were seeing were over customer of also it around base while amount because the optimizing that with stable saw the they they right to investing their in contraction. that And stabilization a year we're reducing for in the and we spend actually beginning is That And elevated now,

saw us, downturn spend spend less our So usage-based the they needs cycles when because of we have with perhaps nature the earlier we we less. and just like think renewal of don't customer to that just platform than others a

impact nature we'll see early the because early of And return business so the we and the likely saw model. of the

Operator

our Michael ] KeyBanc. the Michael? [ line question from final Turits from And of comes

Unknown Analyst

This on Michael. is Billy for

leading Just the of last business. stabilizing Anything verticals question. customer call a you'd that kind as or see different in to quick follow-up in Good some the of metrics to out notable segments?

Yancey Spruill

there's spent DigitalOcean is the thing, of comes revenue the we it's time customer of from the no No. drives diverse. lot business. and U.S. there's and assessing track single case, nice single region about There's XX% broad things that and nice base of SMB a disproportionate Actually, developer We outside the no use one so that's of our something really that trends. kind a startup vertical, amount no single of

we consistent laggards kind of again, recovery of is any and the has of that base. has part distributed and the customer stabilization across And been them. so appeal pretty see of very We see have It's don't don't very, a ahead. raced diverse been the it's kind all

Unknown Analyst

Great, thank you.

Yancey Spruill

We're a for lot quarter a excited you encouraging on Thank all very solid joining to us. of with report trends.

DigitalOcean (DOCN) 2 Nov 232023 Q3 Earnings call transcript