Since the start of the year, shares in DigitalOcean Holdings (DOCN), the developer-friendly cloud platform provider, have climbed by 41.77%. But with AI cloud capacity providers getting all the attention, is the company prepared to benefit from the AI boom?
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DigitalOcean enables small and medium-sized businesses (SMBs) and individual developers to manage their applications in the cloud. As a cloud infrastructure provider, DigitalOcean operates data centers worldwide and offers products such as Droplets, a virtual machine/virtual private server, and Kubernetes, an open-source system for app management.
The cloud hosting company also provides services such as fully hosted and managed database clusters and an object storage service.
DigitalOcean Positions for AI Race
In July 2023, DigitalOcean acquired Paperspace, a cloud and AI infrastructure startup, for $111 million to enable its clients to develop, test, and deploy AI applications more easily.
This came amid intense rivalry from major cloud providers such as Amazon Web Services (AMZN), Microsoft’s (MSFT) Azure, and Alphabet’s (GOOGL) Google Cloud Platform. These hyperscalers are offering incentives to startups and SMBs to opt for their services.
DigitalOcean Doubles AI Revenue
While bearish analysts have argued that DigitalOcean’s newer AI offerings, including the managed AI platform Gradient AI, are still too nascent to materially lift overall growth, bullish observers have highlighted that the company has recently more than doubled its direct AI revenue from a year ago.
In Q3 2025, the Colorado-based company grew its revenue by 16% from a year ago to $230 million. It also secured about 30 megawatts of incremental data center capacity to fuel its growth next year and beyond.
Morgan Stanley analyst Josh Baer, who recently reaffirmed his $56 price target on DOCN, pointed to the speedy growth in DigitalOcean’s AI and machine learning capacity as one of the key factors behind his decision.
Is DOCN a Buy, Sell, or Hold?
Across Wall Street, DigitalOcean’s shares enjoy a Strong Buy consensus rating from analysts. This is based on nine Buys and three Holds issued by 12 analysts over the past three months.
Moreover, the average DOCN price target of $54.50 implies about 13% upside from the current trading levels.
