DigitalOcean Holdings (DOCN) AI Stock Analysis

• Market Cap: $2.57B
• Dividend Yield: N/A
• Average Volume (3M): 1.56M
• Price to Earnings (P/E): 32.5
• Beta (1Y): 1.86
• Revenue Growth: 13.21%
• EPS Growth: 109.61%
• Country: US
• Employees: 1,210
• Sector: Technology
• Sector Strength: 65
• Industry: Software - Infrastructure
• EPS (TTM): 0.56
• Shares Outstanding: 91,148,445
• 10 Day Avg. Volume: 1,628,133
• 30 Day Avg. Volume: 1,560,332
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.86
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 10.30
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $38.42
• Price Target Upside: 34.24% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 14

DigitalOcean Holdings' overall stock score reflects strong revenue growth and operational efficiency, offset by significant financial instability due to negative equity. Technical analysis indicates bearish momentum, while valuation suggests potential overvaluation. Strategic initiatives and AI focus offer positive long-term prospects, though financial management remains critical.

Positive Factors

Enterprise Deals

New enterprise-level traction is demonstrated by a recently signed multi-year commitment worth over $20 million.

Revenue Growth

DOCN reported F1Q25 revenue of $210.7 million, showing a 14% increase year-over-year, with earnings exceeding expectations.

Negative Factors

Free Cash Flow Pressure

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

Market Conditions

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 focuses on simplifying cloud computing for developers, startups, and small to medium-sized businesses. The company's platform offers a range of cloud services, including computing, storage, and networking options, enabling customers to deploy, manage, and scale applications efficiently. DigitalOcean's user-friendly interface and cost-effective solutions cater to developers looking for an easy-to-use cloud environment that supports innovation and growth.

How the Company Makes Money

DigitalOcean Holdings generates revenue primarily through its Infrastructure as a Service (IaaS) offerings. The company charges customers for the use of its cloud computing resources, which include virtual machines known as Droplets, block storage, object storage, and Kubernetes-based orchestration solutions. Customers pay based on the resources they consume, often on a pay-as-you-go basis, though subscription options are also available for predictable workloads. Additionally, DigitalOcean offers managed databases and developer support services, which contribute to its revenue streams. Partnerships with various software and application development companies enhance the platform's ecosystem, attracting more users and expanding service offerings, further boosting revenue.

DigitalOcean Holdings Financial Statement Overview

Summary

DigitalOcean Holdings demonstrates strong revenue growth and operational efficiency, with improving profit margins and cash flows. However, the negative equity poses a significant financial risk. Cash generation is robust, but careful management of investments and liabilities is essential.

Income Statement

DigitalOcean Holdings has shown strong revenue growth, with a significant increase from $318.38 million in 2020 to $780.62 million in 2024. The gross profit margin has been robust, consistently above 50%, indicating efficient cost management. However, the net profit margin has been volatile, although it turned positive in recent years, reaching 10.82% in 2024. The EBIT and EBITDA margins have improved, reflecting enhanced operational efficiency.

Balance Sheet

The balance sheet shows a concerning negative stockholders' equity, at -$202.96 million in 2024, which could indicate financial instability. The debt-to-equity ratio is not meaningful due to negative equity. Despite this, the company has maintained liquidity with cash and short-term investments of $428.45 million in 2024. The return on equity is negative due to the negative equity, which presents a risk.

Cash Flow

DigitalOcean Holdings has demonstrated strong operating cash flow growth, reaching $282.73 million in 2024. The free cash flow has also improved significantly, showing a positive trend. The operating cash flow to net income ratio is favorable, indicating good cash generation relative to earnings. However, the heavy investment in capital expenditures and fluctuating investing cash flows pose potential risks.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
780.62M	692.88M	576.32M	428.56M	318.38M
	Gross Profit
465.94M	408.92M	364.39M	257.97M	172.85M
	EBIT
91.01M	11.90M	-15.60M	-11.02M	-28.79M
	EBITDA
91.01M	153.59M	86.74M	73.92M	46.22M
	Net Income Common Stockholders
84.49M	19.41M	-24.28M	-19.50M	-43.57M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
428.45M	411.77M	864.23M	1.71B	100.31M
	Total Assets
1.64B	1.46B	1.82B	2.10B	430.25M
	Total Debt
1.70B	1.66B	1.64B	1.46B	259.68M
	Net Debt
1.27B	1.34B	1.50B	-250.71M	159.37M
	Total Liabilities
1.84B	1.77B	1.76B	1.52B	502.35M
	Stockholders Equity
-202.96M	-313.70M	51.09M	578.20M	-72.09M
Cash Flow		Free Cash Flow
96.20M	110.13M	74.94M	24.02M	-57.55M
	Operating Cash Flow
282.73M	234.94M	195.15M	133.11M	58.12M
	Investing Cash Flow
-94.81M	401.15M	-1.15B	-113.61M	-115.49M
	Financing Cash Flow
-76.45M	-468.90M	-610.36M	1.59B	124.03M

DigitalOcean Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 28.62
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DOCN, the sentiment is Negative. The current price of 28.62 is below the 20-day moving average (MA) of 29.29, below the 50-day MA of 33.59, and below the 200-day MA of 37.17, indicating a bearish trend. The MACD of -0.69 indicates Negative momentum. The RSI at 42.52 is Neutral, neither overbought nor oversold. The STOCH value of 37.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DOCN.

DigitalOcean Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ATEN	73 Outperform	$1.26B	24.89	24.36%	1.41%	4.90%	9.91%
AVPT	67 Neutral	$3.44B	―	-12.13%	―	21.58%	-32.72%
VRNS	64 Neutral	$4.81B	―	-22.21%	―	13.34%	13.71%
DAVA	61 Neutral	$1.11B	157.07	0.89%	―	2.06%	-91.82%
TENB	60 Neutral	$3.74B	―	-12.09%	―	11.79%	35.35%
Sector *	60 Neutral	$10.77B	10.41	-6.71%	2.99%	7.69%	-13.12%
DOCN	59 Neutral	$2.57B	32.49	-41.63%	―	13.21%	109.61%

DigitalOcean Holdings Corporate Events

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.

Spark’s Take on DOCN Stock

According to Spark, TipRanks’ AI Analyst, DOCN is a Neutral.

DigitalOcean Holdings shows strong revenue growth and strategic advancements, particularly in AI/ML, supporting a positive earnings outlook. However, financial risks from negative equity and technical indicators suggest potential downside risks. The valuation is relatively high, and the exit of a board member adds slight uncertainty. Overall, the stock has a balanced outlook with notable strengths and risks.

To see Spark’s full report on DOCN stock, click here.

DigitalOcean Board Member Christopher Merritt to Step Down

On March 26, 2025, Christopher Merritt, a member of the Board of Directors of DigitalOcean Holdings, Inc., announced his decision not to stand for reelection at the company’s 2025 Annual Meeting of Stockholders. His decision was not due to any disagreements with the company, and he will continue to serve on the Board until the Annual Meeting.

DigitalOcean Board Member Amy Butte Steps Down

On February 21, 2025, Amy Butte announced she will not seek reelection to DigitalOcean’s Board of Directors at the 2025 Annual Meeting, having contributed to the company’s transition to a public entity since 2018. DigitalOcean reported strong financial results for Q4 and fiscal year 2024, with a 13% increase in revenue year-over-year and a significant rise in net income. The company released numerous new products, focusing on AI and cloud solutions, and demonstrated growth in its customer base, particularly among higher-spend clients. These developments underscore DigitalOcean’s strategic progress and its leading position in the cloud industry.