DigitalOcean Holdings (DOCN) AI Stock Analysis

• Market Cap: $2.34B
• Dividend Yield: N/A
• Average Volume (3M): 1.55M
• Price to Earnings (P/E): 23.6
• Beta (1Y): 1.91
• Revenue Growth: 13.21%
• EPS Growth: 109.61%
• Country: US
• Employees: 1,210
• Sector: Technology
• Sector Strength: 92
• Industry: Software - Infrastructure
• EPS (TTM): 0.59
• Shares Outstanding: 91,033,530
• 10 Day Avg. Volume: 1,749,811
• 30 Day Avg. Volume: 1,548,211
• PEG Ratio: 0.12
• Price to Book (P/B): -15.38
• Price to Sales (P/S): 4.00
• P/FCF Ratio: 32.45
• Enterprise Value/Market Cap: 2.05
• Enterprise Value/Revenue: 5.76
• Enterprise Value/Gross Profit: 9.66
• Enterprise Value/Ebitda: 20.28
• 1Y Price Target: $39.78
• Price Target Upside: 47.28% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 11

• Rating: 67 Neutral
• Price Target: $31.00 ▲(14.77% Upside)

DigitalOcean's overall score is driven by strong earnings call performance, strategic financial moves, and solid revenue growth. These positives are tempered by financial stability concerns due to negative equity and high leverage, as well as a neutral technical outlook.

Positive Factors

Contract Growth

Management noted a significant increase in RPO, driven by multiyear committed contracts from larger digital-native enterprises.

Customer Growth

Strong new customer acquisition and increased demand for AI/ML workloads drove a sharp increase in incremental ARR of $32 million.

Financial Performance

DigitalOcean reported solid beats across major metrics and raised full-year guidance, boosting investor confidence.

Negative Factors

Free Cash Flow

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

Funding Concerns

Uncertainties regarding funding methods for growth capital raise concerns about the need for additional investments.

Refinancing Impact

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

DigitalOcean Holdings Business Overview & Revenue Model

Company Description

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. Its platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and medium size businesses. The company offers infrastructure solutions across compute, storage, and networking, as well as enables developers to extend the native capabilities of its cloud with fully managed application, container, and database offerings. Its users include software engineers, researchers, data scientists, system administrators, students, and hobbyists. The company's customers use its platform in various industry verticals and for a range of use cases, such as web and mobile applications, website hosting, e-commerce, media and gaming, personal web projects, managed services, and others. DigitalOcean Holdings, Inc. was incorporated in 2012 and is headquartered in New York, New York.

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 exhibits strong revenue growth and improved profitability, with healthy gross margins and operational efficiencies. However, the negative stockholders' equity and high leverage pose significant financial stability risks. Cash flow is robust but capital expenditures could strain future flexibility.

Income Statement

DigitalOcean Holdings has shown a strong revenue growth trajectory, with revenue increasing from $318M in 2020 to $806M in TTM (Trailing-Twelve-Months) 2025. Gross profit margin is healthy at 60% in TTM, and both EBIT and EBITDA margins have improved significantly, indicating operational efficiency. The net profit margin also increased to 13.5% in TTM, reflecting profitability enhancements. However, growth rates have started to moderate compared to earlier periods.

Balance Sheet

The balance sheet reflects a negative stockholders' equity position of -$210M in TTM, raising concerns about financial stability. The debt-to-equity ratio is not calculable due to negative equity, indicating high leverage. Despite a high total debt level, the company has managed to maintain cash and short-term investments, but the negative equity ratio of -12.8% is a significant risk factor.

Cash Flow

Operating cash flow is robust at $280M in TTM, supporting healthy free cash flow of $73.9M. The operating cash flow to net income ratio is strong, suggesting good cash conversion. However, free cash flow growth has slowed, and capital expenditures remain substantial, potentially impacting future cash flow flexibility.

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	236.58M	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	194.29M	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: 27.01
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• 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 27.01 is below the 20-day moving average (MA) of 28.83, below the 50-day MA of 28.57, and below the 200-day MA of 34.62, indicating a bullish trend. The MACD of 0.18 indicates Negative momentum. The RSI at 70.89 is Negative, neither overbought nor oversold. The STOCH value of 44.72 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
VRNS	72 Outperform	$6.13B	―	-25.73%	―	14.29%	-14.42%
ATEN	70 Neutral	$1.28B	26.66	24.36%	1.35%	4.90%	9.91%
DOCN	67 Neutral	$2.34B	23.57	-41.63%	―	13.21%	109.61%
DAVA	64 Neutral	$704.84M	30.60	2.85%	―	7.58%	-57.13%
AVPT	63 Neutral	$3.80B	―	-8.39%	―	21.70%	-67.95%
Sector *	61 Neutral	€6.72B	13.68	3.39%	2.07%	2.67%	-33.74%
TENB	61 Neutral	$3.73B	―	-12.60%	―	11.41%	33.76%

DigitalOcean Holdings Corporate Events

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.

The most recent analyst rating on (DOCN) stock is a Buy with a $41.00 price target. To see the full list of analyst forecasts on DigitalOcean Holdings stock, see the DOCN Stock Forecast page.

DigitalOcean Enters New $500M Credit Agreement

On May 5, 2025, DigitalOcean Holdings, Inc. entered into a new credit agreement, replacing its previous 2022 facility, which includes a $500 million senior secured delayed draw term loan and a $300 million revolving credit facility. The term loan proceeds are designated for repurchasing existing Convertible Notes, while the revolving facility supports general corporate purposes. This financial move is part of DigitalOcean’s strategy to strengthen its financial position and support its growth initiatives. In the first quarter of 2025, DigitalOcean reported a 14% increase in revenue year-over-year, reaching $211 million, and a significant 170% rise in net income. The company also launched over 50 new products and features, highlighting its focus on innovation and expanding its market presence.