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Analyzing DigitalOcean’s Financials

Tags: , , , , , Date/Time: August 9, 2021 @ 2:09 pm, by raindog308

DigitalOcean LogoUnlike most hosting companies, DigitalOcean (NYSE: DOCN) is a publicly-traded company and hence must file quarterly audited financial reports. While there are other big hosting companies that must file (e.g., Amazon, Microsoft, Google), their hosting is mixed in with their other products. DO is a “pure play” and it’s interesting to look at their financials.

As of this quarter, they are not profitable. DO recorded revenue of $103.8m and a loss of $2.2m. Even if we look only at operations (not including interest, taxes, etc.) DO is losing money on its day-to-day operations.

DO has about $37m in accounts receivable, and I imagine much of that is very short-term (things like waiting to be paid by VISA, etc.) Interestingly, they have a “doubtful accounts” reserve of $3m, which seems surprisingly high for a company that is primarily in the month-to-month business. But I suppose they get burned like all hosting companies sometimes, and they perhaps extend credit to larger customers.

DO has 243m worth of property and equipment, presumably all of its datacenters.

They break out their expenses as follows. Here’s what happens to each dollar you spend at DO:

  • About 40 cents goes to cost of operations, such as paying people, electricity, etc.
  • 27 cents pays for R&D, which in DO’s case is chiefly software development.
  • 12 cents pays for sales, which is probably a mix of advertising, promotions, salespeople to call on larger accounts, etc.
  • 24 cents goes to “general and administrative” which is everything from the CEO’s salary to payroll costs to janitors to accountants

And yes, that adds up to more than a dollar, because they’re losing money.

DigitalOcean Dollar

I'm Andrew, techno polymath and long-time LowEndTalk community Moderator. My technical interests include all things Unix, perl, python, shell scripting, and relational database systems. I enjoy writing technical articles here on LowEndBox to help people get more out of their VPSes.

2 Comments

  1. umggc:

    “They break out their revenue as follows. ” I suppose you mean “spending”?

    August 9, 2021 @ 10:29 pm | Reply

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