DigitalOcean Holdings (DOCN) AI Stock Analysis

• Market Cap: $2.80B
• Dividend Yield: N/A
• Average Volume (3M): 3.01M
• Price to Earnings (P/E): 24.2
• Beta (1Y): 1.87
• Revenue Growth: 13.29%
• EPS Growth: 79.98%
• Country: US
• Employees: 1,210
• Sector: Technology
• Sector Strength: 85
• Industry: Software - Infrastructure
• EPS (TTM): 0.59
• Shares Outstanding: 91,037,500
• 10 Day Avg. Volume: 3,135,159
• 30 Day Avg. Volume: 3,007,468
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.52
• Enterprise Value/Revenue: 5.10
• Enterprise Value/Gross Profit: 8.55
• Enterprise Value/Ebitda: 15.26
• 1Y Price Target: $43.29
• Price Target Upside: 40.64% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 9

• Rating: 70 Outperform
• Price Target: $33.00 ▲(7.21% Upside)

DigitalOcean's strong earnings call and positive corporate events are significant strengths, highlighting robust revenue growth and strategic financial management. However, financial risks from high leverage and negative equity, along with moderate valuation, temper the overall score.

Positive Factors

Customer Acquisition

Strong new customer acquisition, healthy migration activity, and increased demand for AI/ML workloads contributed to a sharp uptick in incremental ARR of $32 million, the highest level since the fourth quarter of fiscal 2022.

Earnings

DigitalOcean reported solid beats across major metrics in the second quarter and raised full-year guidance across the board.

Revenue Growth

The core cloud business appears stable to improving, while strong traction in AI/ML workloads is beginning to deliver meaningful incremental growth.

Negative Factors

Debt Management

The impact of refinancing, including a 6% term loan, affects Free Cash Flow visibility and could pressure the stock.

Free Cash Flow

Free Cash Flow miss raises caution about the company's ability to meet growth targets and manage investments effectively.

Small to Medium-Sized Business Market

Analyst remains concerned about a weak small to medium-sized business market and potential pressure on free cash flow due to increased capital expenditures and AI investments.

DigitalOcean Holdings Business Overview & Revenue Model

Company Description

DigitalOcean Holdings, Inc. is a cloud infrastructure provider that offers a comprehensive suite of cloud services aimed primarily at developers, startups, and small to medium-sized businesses. The company provides scalable computing, storage, and networking solutions, enabling its users to deploy and manage applications quickly and efficiently. DigitalOcean's core products include Droplets (virtual machines), Spaces (object storage), Kubernetes (container orchestration), and Databases (managed database services), emphasizing simplicity and cost-effectiveness.

How the Company Makes Money

DigitalOcean generates revenue primarily through a subscription-based model where customers pay for the cloud infrastructure services they use. The company's key revenue streams include virtual machines (Droplets), managed databases, and other cloud services such as object storage and networking. Customers select from various pricing plans based on their specific computing and storage needs, with pricing determined by factors like the number of virtual machines or the amount of storage utilized. Additionally, DigitalOcean benefits from partnerships and integrations within the developer and open-source community, enhancing its platform's value proposition and driving user adoption.

DigitalOcean Holdings Financial Statement Overview

Summary

DigitalOcean Holdings shows strong revenue growth and profitability, with impressive cash flow generation. However, the balance sheet's high leverage and negative equity pose financial risks. The company should focus on improving its capital structure to enhance financial stability.

Income Statement

DigitalOcean Holdings has demonstrated consistent revenue growth, with a TTM revenue increase of 3.25%. The company maintains a strong gross profit margin of approximately 59.67% and a net profit margin of 15.18% in the TTM, indicating effective cost management and profitability. However, the EBIT margin has slightly decreased, suggesting potential operational cost challenges.

Balance Sheet

The balance sheet reveals a high debt-to-equity ratio due to negative stockholders' equity, posing a significant financial risk. The negative return on equity indicates that the company is not generating profit from shareholders' investments. Despite these challenges, the equity ratio is improving, showing a gradual increase in asset financing through equity.

Cash Flow

The cash flow statement is strong, with a significant free cash flow growth rate of 163.08% in the TTM, indicating robust cash generation capabilities. The operating cash flow to net income ratio of 1.34 suggests efficient conversion of net income into cash. However, the high free cash flow to net income ratio highlights reliance on cash flow for profitability.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	832.81M	780.62M	692.88M	576.32M	428.56M	318.38M
Gross Profit	496.91M	465.94M	408.92M	364.39M	257.97M	172.85M
EBITDA	278.41M	236.86M	153.59M	86.74M	73.92M	46.22M
Net Income	126.45M	84.49M	19.41M	-24.28M	-19.50M	-43.57M
Balance Sheet
Total Assets	1.72B	1.64B	1.46B	1.82B	2.10B	430.25M
Cash, Cash Equivalents and Short-Term Investments	387.75M	428.45M	411.77M	864.23M	1.71B	100.31M
Total Debt	1.76B	1.70B	1.66B	1.64B	1.46B	259.68M
Total Liabilities	1.90B	1.84B	1.77B	1.76B	1.52B	502.35M
Stockholders Equity	-175.22M	-202.96M	-313.70M	51.09M	578.20M	-72.09M
Cash Flow
Free Cash Flow	93.88M	96.20M	110.13M	74.94M	24.02M	-57.55M
Operating Cash Flow	301.23M	282.73M	234.94M	195.15M	133.11M	58.12M
Investing Cash Flow	-207.31M	-94.81M	401.15M	-1.15B	-113.61M	-115.49M
Financing Cash Flow	-149.13M	-76.45M	-468.90M	-610.36M	1.59B	124.03M

DigitalOcean Holdings Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 30.78
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DOCN, the sentiment is Positive. The current price of 30.78 is below the 20-day moving average (MA) of 31.04, above the 50-day MA of 29.55, and below the 200-day MA of 33.89, indicating a neutral trend. The MACD of 0.48 indicates Positive momentum. The RSI at 56.40 is Neutral, neither overbought nor oversold. The STOCH value of 70.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DOCN.

DigitalOcean Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ATEN	74 Outperform	$1.24B	25.18	24.39%	1.39%	11.04%	18.70%
VRNS	72 Outperform	$6.43B	―	-25.73%	―	14.29%	-14.42%
DOCN	70 Outperform	$2.80B	24.18	-41.63%	―	13.29%	79.98%
DAVA	64 Neutral	$804.01M	34.91	2.85%	―	7.58%	-57.13%
TENB	63 Neutral	$3.58B	―	-12.60%	―	11.41%	33.76%
AVPT	62 Neutral	$3.26B	―	-2.60%	―	24.41%	40.20%
Sector *	61 Neutral	$35.62B	8.22	-10.94%	1.88%	8.86%	-10.36%

DigitalOcean Holdings Corporate Events

DigitalOcean Holdings Completes $625M Convertible Notes Offering

On August 14, 2025, DigitalOcean Holdings, Inc. completed a private offering of $625 million in 0.00% Convertible Senior Notes due 2030, including an additional $75 million from initial purchasers. The proceeds are intended for capped call transactions to mitigate stock dilution and repurchase existing 2026 notes. The company also initiated a $100 million stock repurchase program, set to expire in 2027, to optimize market conditions and shareholder value.

DigitalOcean Holdings Annual Meeting Highlights Key Decisions

DigitalOcean Holdings recently held its Annual Meeting where stockholders voted on several key proposals. Padmanabhan Srinivasan was elected as a Class I director until 2028. The selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025, was ratified. Additionally, stockholders approved the compensation of the company’s named executive officers and an amendment to the Certificate of Incorporation to limit the liability of certain officers as permitted by Delaware law.