Results: DigitalOcean Holdings, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Last week, you might have seen that DigitalOcean Holdings, Inc. (NYSE:DOCN) released its quarterly result to the market. The early response was not positive, with shares down 7.4% to US$28.62 in the past week. Revenues were US$211m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.39, an impressive 126% ahead of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Following the latest results, DigitalOcean Holdings' 14 analysts are now forecasting revenues of US$882.2m in 2025. This would be a notable 9.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to sink 13% to US$1.03 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$882.9m and earnings per share (EPS) of US$0.87 in 2025. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

Check out our latest analysis for DigitalOcean Holdings

The consensus price target fell 9.2% to US$38.00, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic DigitalOcean Holdings analyst has a price target of US$55.00 per share, while the most pessimistic values it at US$31.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that DigitalOcean Holdings' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 13% growth on an annualised basis. This is compared to a historical growth rate of 17% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 9.7% per year. So it's pretty clear that, while DigitalOcean Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around DigitalOcean Holdings' earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of DigitalOcean Holdings' future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple DigitalOcean Holdings analysts - going out to 2027, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for DigitalOcean Holdings you should know about.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.