Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: At your recent deploy conference, you talked about several customers that were disappointed with their experience at the Hyperscalers and ended up migrating to DigitalOcean's platform. Can you expand on that and touch on what types of customers you're targeting and what types of workloads? A: Paddy Srinivasan, CEO: We highlighted customers looking for alternatives due to the complexity and cost of running workloads on Hyperscalers. Our migration program offers a scalable platform that's simpler and more cost-effective. We're targeting tech-native companies with globally distributed, bandwidth-intensive workloads that require elasticity. Our core value proposition is simplicity, scalability, and approachability.
Q: On the EBITDA guidance, you initially guided for 36% to 38% but ended at 42%. Can you explain the main drivers of this outperformance and how we should view the 2025 guidance? A: Matt Steinfort, CFO: We built in some cushion for R&D to accelerate the product roadmap, but we managed resources efficiently, focusing on top initiatives. The wide guidance reflects potential variability in expenses. We're committed to improving gross margins and operating efficiencies, but we may adjust spending to accelerate revenue-driving product capabilities.
Q: Can you provide insights on how much ARR you're able to capture per dollar of GPU-related CapEx and the gross margin profile of the AI services business? A: Matt Steinfort, CFO: GenAI capabilities have higher margins than infrastructure layers and drive significant pull-through revenue in cloud services. The gross margins on core GPU services are not spectacular due to high costs, but we expect improvements as we leverage infrastructure for inferencing and focus on higher-margin platform services.
Q: Can you give more details on the size of the AIML ARR base and its composition? Is it mainly from the Scaler Plus cohort? A: Matt Steinfort, CFO: We don't disclose specific AI ARR as it's intermingled with other revenue streams. The AI customer base includes many smaller customers from our PaperSpace acquisition. While there's a healthy chunk of AI revenue from Scalers Plus, it's not the majority.
Q: How should we think about the behaviors of the Scaler Plus versus non-plus in terms of upsell and cross-sell? Why isn't the non-plus cohort growing faster? A: Matt Steinfort, CFO: The focus on Scalers Plus addresses past challenges with large customers. We've improved product offerings to meet their needs, leading to better retention and growth. The non-plus cohort hasn't grown as fast due to prioritizing larger customers first, but we're working on scalable go-to-market strategies to address this.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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