Summary
DigitalOcean opened fiscal 2022 with first quarter revenue of $127.3 million, up 36% from the prior-year quarter. Gross profit rose to $80.6 million from $54.1 million, and gross margin expanded to 63.3% from 57.8%. Management described the quarter as a good start to the year despite an uncertain macro environment, and pointed to broadening product offerings and go-to-market investment as the priorities. Revenue was split 38% North America, 29% Europe, 23% Asia and 10% from the rest of the world.
The GAAP bottom line moved the other way. Loss from operations was $13.1 million, a swing from income from operations of $3.3 million in the prior-year quarter, and operating margin fell to negative 10.3% from 3.5%. Net loss widened to $18.1 million from $3.3 million, and diluted loss per share widened to $0.17 from $0.07. Research and development, sales and marketing and general and administrative expenses all grew faster than revenue, driven by higher personnel costs and stock-based compensation. Sales and marketing expense was 15% of revenue, up from 11% a year earlier. Stock-based compensation is the main bridge to the non-GAAP view. Non-GAAP income from operations was $13.6 million, an 11% non-GAAP operating margin, and non-GAAP diluted net income per share was $0.07. Adjusted gross profit was $103.3 million, or 81% of revenue.
Operating metrics held up. Net dollar retention was 117%, up from 107% in the first quarter of 2021. Total customers grew 6% to 623,000, while customers spending more than $50 per month grew 20% to 102,000. That larger cohort drove 43% year-over-year revenue growth, carried a net dollar retention rate of 118%, and represented 84% of total revenue. The top 25 customers made up approximately 11% of revenue, so there is no material customer concentration. The company also acquired CSS Tricks, a learning site with 6,500 articles and more than 3 million monthly unique visitors.
Cash generation improved. Operating cash flow was $30.3 million, up 53% from $19.8 million a year earlier. Capital expenditures were $23.0 million, up 2.6%. Free cash flow, a non-GAAP measure, was $5.0 million, a 4% free cash flow margin. Deferred revenue was $5.2 million, up 6.7% from $4.9 million. Cash, cash equivalents and marketable securities totaled $1.6 billion as of March 31, 2022. The company repurchased 2.6 million shares for $150.0 million and increased its revolving credit facility to $250 million, which it had not drawn on as of March 31, 2022.
Guidance for the second quarter of 2022 calls for a non-GAAP operating margin of 10% to 11% and non-GAAP diluted net income per share of $0.09 to $0.10. For the full year 2022, management expects a non-GAAP operating margin of 13% to 15%, free cash flow of 8% to 10% of revenue, and non-GAAP diluted net income per share of $0.70 to $0.71. The Russia-Ukraine conflict is the clearest near-term risk. Customers with business activities in Russia, Belarus and Ukraine accounted for roughly 3.5% of total revenue in the quarter, and sanctions have already affected payment collection. The company also lists its history of operating losses, competition, security breaches, and general market and economic conditions among its risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $127.3M | $119.7M | +6.4% | $93.7M | +35.9% |
| Gross profit | $80.6M | $75.3M | +7.1% | $54.1M | +48.9% |
| Gross margin | 63.3% | 62.9% | +0.4 pp | 57.8% | +5.5 pp |
| Research & development | $37.2M | $36.2M | +2.8% | $22.4M | +66.2% |
| Sales & marketing | $19.0M | $15.3M | +24.2% | $10.4M | +82.7% |
| General & administrative | $37.4M | $33.8M | +10.6% | $18.0M | +107.5% |
| Total operating expenses | $93.7M | $85.4M | +9.7% | $50.9M | +84.2% |
| Operating income (loss) | -$13.1M | -$10.1M | -29.6% | $3.3M | -503.8% |
| Operating margin | -10.3% | -8.5% | -1.8 pp | 3.5% | -13.8 pp |
| Net income (loss) | -$18.1M | -$12.1M | -49.5% | -$3.3M | -442.8% |
| Net margin | -14.2% | -10.1% | -4.1 pp | -3.6% | -10.7 pp |
| Diluted EPS | -$0.17 | -$0.13 | -$0.04 | -$0.07 | -$0.10 |
| Customers | 623,000 | 609,000 | +2.3% | 585,000 | +6.5% |
| Net retention rate | 117.0% | — | — | — | — |
Risks
The Risk Factors and MD&A highlight the Russia-Ukraine conflict: sanctions and the removal of certain Russian banks from SWIFT have impacted the company's ability to receive payments involving parties in Russia, and revenue from customers with business activities in Russia, Belarus and Ukraine was approximately 3.5% of total revenue for the three months ended March 31, 2022. Further sanctions could continue to impact revenue from certain customers.
Risk Factors emphasize that unfavorable global economic conditions or reduced IT spending could disproportionately affect outsourced and cloud-based solutions like DigitalOcean's, delay purchasing decisions, lengthen sales cycles, reduce usage and increase churn, especially among the individual developers, early stage start-ups and SMBs that make up a large portion of its customer base.
The filing adds that political uncertainty and military actions involving Russia, Ukraine and surrounding regions may heighten the risk of cyber-attacks, computer malware, viruses, supply chain attacks, social engineering including spear phishing and ransomware, and general hacking that could materially disrupt the company's systems and operations.
SaaS KPIs
All quarters →Net Dollar Retention Rate
Average Revenue Per Customer (ARPU)
Annual Run-Rate Revenue (ARR)
Adjusted Gross Margin
Total customers
Non-GAAP Operating Margin
Adjusted Gross Profit
Customers paying more than $50 per month
Free Cash Flow Margin
Summary, forecast, risks and KPIs are extracted from DigitalOcean Holdings, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.