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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on DOCN

DigitalOcean Holdings, Inc.'s recent performance was driven by the promising Gradient AI Platform and expanding AI cloud market opportunities. The company's Q3 2025 earnings call highlighted accelerated momentum, with revenue increasing 16% year-over-year and the strongest incremental organic ARR in its history. A well-executed AI strategy could be the catalyst for recovery and long-term growth. With shares near long-term lows, the upside potential is considerable. Rated a Buy, DOCN shows improving profitability, rising margins, and raised FY2025 revenue guidance.

1.c. Company Highlights

2. DigitalOcean's Q3 2025 Earnings: A Strong Performance

DigitalOcean reported a robust Q3 2025, with revenue reaching $230 million, up 16% year-over-year. The company's gross profit was $137 million, with a gross margin of 60%. Adjusted EBITDA was $100 million, a 15% increase year-over-year. Non-GAAP diluted net income per share was $0.54, beating estimates. Adjusted free cash flow was $85 million or 37% of revenue, up significantly from the prior year. The actual EPS came out at $0.33, beating estimates of $0.31.

Publication Date: Nov -09

📋 Highlights
  • Outperformed Q3 Guidance:: Revenue grew 16% YoY to $230M, with $44M incremental organic ARR (highest in company history), driving ARR to $919M.
  • Strong Free Cash Flow Margins:: 37% adjusted free cash flow margin ($85M) in Q3, with trailing 12-month margins at 21% (vs. prior year).
  • AI-Native Customer Growth:: Revenue from AI-native customers rose 41% YoY, now 26% of total revenue, with 8-figure contracts accelerating.
  • Accelerated 2027 Growth Target:: 18-20% revenue growth, previously 2027, now projected for 2026 due to early 2026 GPU and data center capacity expansion.
  • Enterprise Customer Expansion:: $1M+ customers grew 72% YoY, while net dollar retention held steady at 99% despite small customer churn.

Growth Drivers

The primary drivers behind DigitalOcean's accelerating top-line growth are increasing momentum with AI-native customers, material traction with their highest spend digital native enterprise customers, and continued strength in revenue from new customers. Revenue from customers with annualized run rate revenue greater than $100,000 grew 41% year-over-year, representing 26% of overall revenue. The company's unified Gradient AI agentic cloud is gaining traction with larger, well-funded AI-native companies.

Investment and Guidance

DigitalOcean raised their full-year 2025 guidance on both revenue and margin and now expect to achieve their 18% to 20% 2027 revenue growth target in 2026, a full year earlier than previously projected. They have committed investments in additional data centers and GPU capacity that will come online over the course of 2026, enabling them to comfortably deliver 18% to 20% growth in 2026. Analysts estimate next year's revenue growth at 18.8%.

Valuation

With a P/E Ratio of 17.96 and an EV/EBITDA of 18.08, the market is pricing in a certain level of growth for DigitalOcean. The P/S Ratio is 5.24, indicating a premium valuation relative to revenue. The Free Cash Flow Yield is 6.11%, suggesting that the company's cash generation is attractive. However, the ROE is -152.99%, indicating that the company's profitability is still a concern. Overall, the valuation metrics suggest that the market is expecting strong growth from DigitalOcean, but also highlight some concerns around profitability.

3. NewsRoom

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DigitalOcean Holdings, Inc. (DOCN) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

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DigitalOcean Holdings, Inc. $DOCN Shares Sold by Cetera Investment Advisers

Dec -02

Source: defenseworld.net

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DigitalOcean to Participate in UBS Global Technology and AI Conference 2025

Dec -01

Source: businesswire.com

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Ensign Peak Advisors Inc Trims Position in DigitalOcean Holdings, Inc. $DOCN

Dec -01

Source: defenseworld.net

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DigitalOcean (DOCN) CEO on Cloud Growth, Expanding A.I. Capabilities

Nov -25

Source: youtube.com

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DigitalOcean: Could This Cloud Platform Quietly Enable a Decade of AI Startups?

Nov -14

Source: fool.com

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2026 Is Coming: 1 Magnificent Artificial Intelligence (AI) Stock to Buy as Part of Your New Year's Resolution

Nov -11

Source: fool.com

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DigitalOcean's Tide Has Turned: Get Ready to Ride the Wave

Nov -07

Source: marketbeat.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.00%)

6. Segments

Cloud Computing Platform

Expected Growth: 13%

DigitalOcean's 13% growth in Cloud Computing Platform is driven by increasing adoption of cloud infrastructure among SMBs, expansion into new markets, and growing demand for scalable and affordable cloud solutions. Additionally, the company's focus on simplicity, ease of use, and customer support has contributed to its growth, as well as its competitive pricing strategy and strategic partnerships.

7. Detailed Products

Droplets

Virtual private servers that provide scalable computing resources for a variety of use cases, including web development, data analytics, and more.

Kubernetes

A managed container orchestration service that automates the deployment, scaling, and management of containerized applications.

Object Storage

A scalable and durable storage solution for storing and serving large amounts of unstructured data, such as images, videos, and files.

Block Storage

A high-performance storage solution for applications that require low-latency and high-throughput storage, such as databases and file systems.

Load Balancers

A scalable and highly available load balancing solution that distributes traffic across multiple instances or regions.

Firewalls

A network security solution that provides inbound and outbound traffic filtering, ensuring secure access to resources and applications.

VPC

A virtual private cloud solution that provides isolated and secure networking for applications and resources.

Marketplace

A platform that provides pre-configured and optimized 1-click applications, including popular open-source software and frameworks.

API

A programmatic interface for automating and integrating DigitalOcean services and resources.

8. DigitalOcean Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

DigitalOcean Holdings, Inc. faces moderate threat from substitutes due to the presence of alternative cloud computing services from established players like AWS, Microsoft Azure, and Google Cloud Platform.

Bargaining Power Of Customers

DigitalOcean Holdings, Inc. has a large customer base, but individual customers do not have significant bargaining power due to the company's competitive pricing and flexible pricing plans.

Bargaining Power Of Suppliers

DigitalOcean Holdings, Inc. has a diversified supplier base, and no single supplier has significant bargaining power over the company.

Threat Of New Entrants

The cloud computing market is highly competitive, and new entrants can easily enter the market, posing a significant threat to DigitalOcean Holdings, Inc.'s market share.

Intensity Of Rivalry

The cloud computing market is highly competitive, with established players like AWS, Microsoft Azure, and Google Cloud Platform, leading to a high intensity of rivalry for DigitalOcean Holdings, Inc.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 123.38%
Debt Cost 3.95%
Equity Weight -23.38%
Equity Cost 13.10%
WACC 1.81%
Leverage -527.74%

11. Quality Control: DigitalOcean Holdings, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Toast

A-Score: 4.6/10

Value: 0.9

Growth: 9.1

Quality: 6.4

Yield: 0.0

Momentum: 7.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Robinhood Markets

A-Score: 4.5/10

Value: 0.3

Growth: 7.2

Quality: 7.0

Yield: 0.0

Momentum: 10.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Tenable

A-Score: 4.3/10

Value: 5.7

Growth: 7.7

Quality: 4.6

Yield: 0.0

Momentum: 1.0

Volatility: 6.7

1-Year Total Return ->

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Stock-Card
Affirm

A-Score: 3.8/10

Value: 0.7

Growth: 9.1

Quality: 3.1

Yield: 0.0

Momentum: 8.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
DigitalOcean

A-Score: 3.8/10

Value: 3.8

Growth: 9.2

Quality: 5.3

Yield: 0.0

Momentum: 2.5

Volatility: 2.0

1-Year Total Return ->

View Full Report
Stock-Card
HashiCorp

A-Score: 3.8/10

Value: 4.2

Growth: 4.4

Quality: 3.6

Yield: 0.0

Momentum: 5.5

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

46.25$

Current Price

46.25$

Potential

0.00%

Expected Cash-Flows