DigitalOcean (NYSE: DOCN)’s stock plummeted just shy of 25% today on news that it was cutting its future revenue projections.

Previously, DO had estimated its 2023 revenues would come in between $700M-$720M, but now they are expecting something more like $680-685M.  That may not sound like a big delta, but the point is that this is no longer a story of explosive tech growth.

DO has acquired both Cloudways and PaperSpace recently, and has struggled to maintain cost discipline.  While its 2023Q1 revenues increased 30% year-over-year, expenses shot up 52% in the same comparison.

So the story is:

• Went public with a tech growth story
• Made a couple big acquisitions, hoping to boost growth but with all the usual uncertainties about synergies.  These kind of acquisitions can’t help but underscore that its original growth story can’t continue forever.
• Has increasing costs and therefore shrinking margins
• And now a dip in expected revenue…

Yeah, that’ll definitely cause investors to head for the exit toot de suite.

Remember that DigitalOcean has only been public for two years.  It’s been quite a ride.  Debuting at $47/share, in March 2021, it steadily climbed to a dizzing $129/share in November 2021.  By January 2022 it had given up all of those gains and today trades for $35/share, a drop of 73% off its highs.

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raindog308

Dread Lord of LowEnd Content at LowEndBox

I'm raindog308, techno polymath and long-time LowEndTalk community Administrator. My technical interests include all things Unix, perl, python, golang, shell scripting, vintage operating systems such as MVS, and relational database systems such as Oracle, PostgreSQL, and MySQL.

I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.

I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308

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