DigitalOcean Holdings Inc. today posted first-quarter results that topped the consensus estimate, but its shares nevertheless ended the trading session down more than 13%.

The selloff may have been related to the company’s guidance. At the midpoint, DigitalOcean’s sales and profit projections for the next quarter fell short of analyst expectations.

NYSE-listed DigitalOcean operates a public cloud platform powered by a network of 17 data centers. When it launched in 2012, the company focused on providing relatively simple, low-cost compute and storage options to developers. Since 2018, DigitalOcean has significantly expanded its feature set by adding more advanced offerings such as managed databases.

The cloud provider’s revenue grew 14% year-over-year in the first quarter, to $211 million. Analysts had expected about $2 million less. DigitalOcean credited the growth to multiple factors, most notably increased demand from artificial intelligence developers and large customers.

The company says that annual recurring revenue from its AI offerings jumped more than 160% in the three months ended March 31. According to DigitalOcean, about 5,000 customers are currently using its platform to run more than 8,000 AI agents.

To support the growth of its AI business, the company introduced new graphics card servers in the first quarter. Each machine features eight of Nvidia Corp.’s H200 graphics cards. A few weeks later, DigitalOcean added instances powered by Advanced Micro Devices Inc.’s competing Instinct MI300X chip.

During the first quarter, revenue from large customers also grew faster than the cloud provider’s overall sales. According to DigitalOcean, the number of organizations that spend at least $100,000 on its platform annually grew 27% year-over-year. Those customers now account for nearly a quarter of DigitalOcean’s revenue.

The company released several platform enhancements in the first quarter to better address the requirements of large customers. DigitalOcean boosted the usage cap of DOKS, its managed Kubernetes service, to 1,000 nodes per cluster. The company also increased the maximum amount of data that customers can keep in their MySQL and PostgreSQL environments.

“The strong execution of our strategy, with product innovation and go-to-market efforts focused on digital native enterprises, drove revenue from $100K+ ARR customers up 41% year over year and to 23% of total revenue,” said DigitalOcean Chief Executive Paddy Srinivasan.

DigitalOcean’s revenue growth in the quarter had a positive effect on its profitability. Adjusted earnings before interest, taxes, depreciation and amortization reached $86 million after rising 16% year-over-year. That translates into adjusted earnings of 56 cents per share, well above the 45 cents projected by the consensus estimate.

DigitalOcean doesn’t expect its second quarter results to deliver similar surprises. The company anticipates earnings of 42 to 47 cents per share on up to $217.5 million in revenue. Analysts had projected 47 cents per share and sales of $217.1 million. For the full fiscal year, DigitalOcean is forecasting total revenues of up to $890 million.

Photo: DigitalOcean