Shares of cloud infrastructure provider DigitalOcean (NYSE: DOCN) tanked more than 24% following the company's second-quarter earnings call. Investors were reacting to news that it would have to restate previously reported earnings results, and that wasn't all. Management also had to walk back its total revenue outlook for the year.

It seems the market started hammering the stock before digging into recent disclosures to see just how damaging they might be. Let's look under the hood to see whether this stock could be a smart buy on the dip.

While preparing second-quarter results, DigitalOcean noticed errors in accounting for income tax expenses related to capitalized research expenditures. As a result, it will restate earnings from the first quarter, and that's not all. The issue goes back to 2022, so the independent accounting firm that audited last year's results will revise its statements and issue an adverse opinion regarding internal controls.

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Source Fool.com