What Happened?
Shares of cloud computing provider DigitalOcean (NYSE: DOCN) fell 14.5% in the afternoon session after the company reported weak first quarter 2025 results which included significantly missed EPS guidance for next quarter and full-year revenue guidance merely in line with expectations. On the other hand, DigitalOcean beat analysts' EBITDA expectations this quarter and net revenue retention grew. Still, this was a mixed quarter.
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What The Market Is Telling Us
DigitalOcean’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. But moves this big are rare even for DigitalOcean and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 12 days ago when the stock gained 5.9% on the news that stocks extended their rebound, led by strong gains in the technology sector, as renewed optimism surrounding U.S.–China trade negotiations lifted investor sentiment.
Contributing to the bullish tone was a standout earnings report from enterprise software leader ServiceNow, which topped Wall Street's expectations on RPO, profit and earnings. More importantly, the company's remaining performance obligations (RPO), a key forward-looking metric for future revenue, gave investors confidence that enterprise customers were not pulling back spending amidst uncertain macro.
This optimism was further reinforced by solid results from Texas Instruments and Lam Research. Their performance was especially encouraging for semiconductor stocks, which had been under pressure due to their exposure to global trade tensions. These earnings results suggested that, despite macroeconomic uncertainties, demand in key tech verticals remained resilient.
DigitalOcean is down 17.5% since the beginning of the year, and at $28.26 per share, it is trading 39.5% below its 52-week high of $46.69 from February 2025. Investors who bought $1,000 worth of DigitalOcean’s shares at the IPO in March 2021 would now be looking at an investment worth $664.94.
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