The Information's TITV
00:15:41 · Akash Pasricha, Yueqi Yang
[00:15:41] S0: It sounds like when parents set up little small $1,000 or 100 trading funds for their kids, they're like, Here, play with this, see what you can do with it, and if you lose it all, it's fine. It's $100 Okay, so last question for you, Yueqi. As you have studied the smaller banks and then the trading firms as well, and you're seeing where the tides are going, do you think that the bigger banks will come around to these agents in the next couple months, in 2027, at all? Are they just outright saying no? Because, I mean, the other question is, what do the customers want? Are they actually asking for this? Because if they're not, then maybe it doesn't really matter. [00:16:21] S2: Yeah, I think this is a hard question for the banks because technologically, they need to figure out how to exactly block all these agents. And sometimes they're just unable to do so if your agent has unlimited access to your mailbox, to your text messages, etcetera. And that's what prompted these banks to update their terms of uses to say that you as a customer own responsibility for actions taken by our agents. And then I think on the other hand, we haven't really heard much from banking regulators about what guidance or expectations they have in terms of banks allowing agents to access bank account. So that's another factor that will influence the decision by banks.
00:16:21 · Yueqi Yang, Akash Pasricha, Paddy Srinivasan
[00:16:21] S2: Yeah, I think this is a hard question for the banks because technologically, they need to figure out how to exactly block all these agents. And sometimes they're just unable to do so if your agent has unlimited access to your mailbox, to your text messages, etcetera. And that's what prompted these banks to update their terms of uses to say that you as a customer own responsibility for actions taken by our agents. And then I think on the other hand, we haven't really heard much from banking regulators about what guidance or expectations they have in terms of banks allowing agents to access bank account. So that's another factor that will influence the decision by banks. [00:17:08] S0: Great. Well, Yueqi, I want to thank you for coming on. That is Yueqi Yang, our crypto reporter, here at The Information. Our next segment is with our partner, DigitalOcean. The Democrats' midterm victories are putting fresh attention on the future of data center development. DigitalOcean is a neo cloud with several data center projects planned for next year. The company also reported quarterly results this week. Here to discuss it all is Paddy Srinivasan, CEO of DigitalOcean. Paddy, welcome back to the show. It's great to have you here. [00:17:40] S3: Thank you, Akash. Wonderful to be here.
00:17:40 · Paddy Srinivasan, Akash Pasricha
[00:17:40] S3: Thank you, Akash. Wonderful to be here. [00:17:42] S0: So Paddy, I want to start with the big picture here. I mean, look, Neo Cloud stocks, they've gotten hit pretty hard over the last couple of weeks. You first had the debt concerns, you had the election, you reported earnings and the earnings were... Admittedly, they were quite strong, but if you look at the stock price for the company in the last week, it's down about 17%. So look, I'm sure you're meeting with tons of investors right now. What is the message that you are sharing with them right now on the ground?
00:18:11 · Paddy Srinivasan
[00:18:11] S3: Yeah. It is interesting. We had our best quarter in over ten years, and it's interesting to be bucketized in this concept of neo clouds. We are not neo, but we are a real cloud. And we have been doing this for a while. We've been public for five years. And the the differentiation on on our platform is that we are very different from a customer segmentation or target customer perspective. We don't have the the usual concentration of neo clouds. We have 680,000 paying customers, and no customer is bigger than high single digits in terms of concentration for us. So that's very different. Number two is we don't just sell GPUs. We sell a whole cloud platform. We sell a platform for agents to execute. We, of course, have a very robust leading token factory, and we have a core cloud platform with databases and data services and storage and the whole breadth of rich cloud platforms. And the third thing is we're doing this in the public market. We just guided to 60% plus growth for next year at our scale at a billion plus while being profitable, operating income profitable and cash flow positive. So we're doing it in a very, very different way. And as I said on the earnings call, we are different by design.
00:19:36 · Akash Pasricha
[00:19:36] S0: Right. So, I want to drill into that 60% forecast you guys gave because it's almost double the growth rate that you guided to for this current fiscal year. Look, And these types of growth rates for these cloud firms that are coming up, we've seen these extraordinary growth rates, but you also have a software business as well. And so as you look at that 60% growth rate, how much of it is coming from the cloud side of the business, and how much of it is coming from the software growth?
00:20:07 · Paddy Srinivasan
[00:20:07] S3: Yeah. It really is interesting question. It is becoming increasingly hard, Akash, to distinguish between just AI and cloud. And let me explain what I mean by that. For a very new neo cloud, there's only one vector of growth, which is you add more GPU capacity, and you rent that GPU capacity with a markup. So that is one business model in today's AI world. And the market is starting to question that business model because the cost of borrowing to put this gear on the ground is growing by the week, with interest rates being at the levels that they are in. And number two is there's a huge pushback on data center projects, at least in this country. Right? We are very different in the sense that we have two sides of the equation. We have P times Q is our total yield on the megawatts we energize. Q, of course, is real capacity, but P is the price and the yield we can get on the capacity we are bringing online. Since we are a software enabled infrastructure platform, we have multiple ways of monetizing the hardware that we buy and energize. So we have a rich software platform. We are already at $18,000,000 per megawatt for our entire fleet, which is significantly more than the other providers. And I'm talking about the entire fleet, not just one customer or one data center. So that's a very, very important distinction for us because we monetize software and not just raw hardware.