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what it is
DigitalOcean rents simple cloud tools to startups and developers who want less AWS headache and a smaller bill.
how it gets paid
Last year Digitalocean made $901M in revenue. Infrastructure-as-a-Service was the main engine at $531M, or 59% of sales.
why it's growing
Revenue grew 15.5% last year. The key number was 60% gross margin because gross margin means revenue left after direct delivery costs.
what just happened
DigitalOcean's latest quarter showed $242 million in revenue with a 60% gross margin, and that was enough to keep the growth story alive.
At a glance
B balance sheet — gets the job done, barely
22.5x trailing p/e — priced about right
6.9% return on capital — nothing to write home about
$0.89 fy2024 eps est
~$901M FY revenue (reported here)
xvary composite: 55/100 — below average
What they do
DigitalOcean rents simple cloud tools to startups and developers who want less AWS headache and a smaller bill.
DigitalOcean wins by making cloud infrastructure feel usable for smaller teams. You get one platform for virtual machines, databases, Kubernetes, hosting, and AI tools, and that simplicity helped push annual revenue to $901 million, up 15.5% vs. prior year. The quiet part: it is not trying to beat AWS at everything, just at being easier and cheaper for the customer who hates hiring a cloud architect.
How they make money
$901M
annual revenue · their business grew +15.5% last year
Infrastructure-as-a-Service
$531M
Platform-as-a-Service
$207M
Software-as-a-Service
$99M
AI/ML tools
$64M
The products that matter
virtual servers
Compute (Droplets)
~70% of revenue base
This is the workhorse behind most of the company’s $901M in 2025 revenue. If customer growth or pricing slips here, the rest of the model feels it immediately.
core engine
object and block storage
Storage (Spaces & Volumes)
60.3% company gross margin
Storage is part of why the company still keeps 60.3% gross margin across the platform. It is less glamorous than AI talk and more important than most investors admit.
margin support
platform services
Managed Databases & Kubernetes
2026 guide needs more of this
Management’s $1.075B–$1.105B 2026 revenue target does not get easier on raw compute alone. Higher-value services have to do some of the lifting if this stays a growth story instead of a cheap-infrastructure story.
upsell layer
Key numbers
$1.5B
long-term debt
That debt load matters because it sits against a roughly $6 billion market cap, so balance-sheet mistakes get expensive fast.
17.4%
operating margin
Operating margin means profit after running the business, before interest and taxes, so what: the core model is profitable.
6.9%
return on capital
Return on capital means how efficiently management turns invested money into profit, so what: 6.9% is decent, not elite.
22.5x
trailing p/e
P/E means price divided by earnings, so what: you are paying a growth-stock multiple for a company with leverage.
Financial health
B
strength
- balance sheet grade B — adequate — nothing special
- risk rank 2 — safer than 80% of stocks
- price stability 10 / 100
- long-term debt $1.5B (19% of capital)
B — functional but not a standout on the balance sheet.
Total return vs. market
Return history isn't available for DOCN right now.
source: institutional data · return history unavailable
What just happened
beat estimates
DigitalOcean's latest quarter showed $242 million in revenue with a 60% gross margin, and that was enough to keep the growth story alive.
The quarter beat expectations, with Yahoo Finance showing actual EPS of $1.51. Company-reported Q4 2025 revenue was $242 million, up 18% vs. prior year, and management raised its 2026 and 2027 revenue outlook after stronger top-customer growth and AI traction.
$242M
revenue
$1.51
eps
60.0%
gross margin
the number that mattered
The key number was 60% gross margin because gross margin means revenue left after direct delivery costs, so what: DigitalOcean is still selling cloud capacity without turning it into a commodity.
source: company earnings report, 2026
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What could go wrong
Your #1 risk is hyperscaler pricing pressure on small-business cloud workloads.
med
AWS, Azure, and Google can afford a price war DOCN cannot
DigitalOcean wins on simplicity and focus, not scale. That is fine until the giants decide your customer segment matters. With roughly 70% of revenue still tied to infrastructure, pricing pressure would hit the middle of the story, not the edges.
If that happens, the pressure lands on the core of a $901M revenue base.
med
31MW of new capacity has to meet real demand
Management wants to lean into AI inference and bring three new facilities online in 2026. That can work. It can also turn into expensive optimism if the customer base talks about AI faster than it buys AI.
A weak ramp would pressure returns right when investors are paying for the $1.075B–$1.105B guide.
med
The balance sheet is workable, not carefree
Long-term debt sits at $1.5B, or 19% of capital. The $800M credit facility helps manage the 2026 convertible maturity, but it does not make leverage disappear.
If growth cools while debt stays sticky, the equity story gets smaller fast.
med
The chart is telling you this is not a bunker stock
Price stability is 10 / 100, and the shares traded between $25 and $70 over the last 52 weeks. Even if the business keeps improving, the stock can still move like a rumor with a ticker.
You can be right on the company and still dislike the path the stock takes to get there.
Most of the revenue base still lives in core infrastructure, so a pricing squeeze would hit the heart of a $901M business while the company adds 31MW of capacity and carries $1.5B of long-term debt.
source: institutional data · regulatory filings · risk analysis
Pay attention to
guide
The $1.09B midpoint matters more than the quarter
The 2026 revenue guide ranges from $1.075B to $1.105B. If management starts walking that down, the growth premium goes with it.
calendar
Q1 2026 earnings on may 12, 2026
Management guided to $249M–$250M in revenue for the quarter. That is your first real check on whether the raised full-year story is holding.
debt
The 2026 convert is managed, not forgotten
The $800M credit facility bought flexibility. You still want clean refinancing language, because balance-sheet stress and growth stories rarely mix well.
capacity
31MW of new capacity will test the AI pitch
Three facilities are expected to come online in 2026. If utilization ramps, the story gets better. If it lags, you are looking at expensive empty ambition.
Analyst rankings
risk profile
above average
risk rank 2 — safer than roughly 80% of stocks.
chart momentum
below average
momentum rank 4 — analysts see underperformance risk in the near term.
source: institutional data
Institutional activity
institutional ownership data for DOCN is being compiled.
source: institutional data
Price targets
3-5 year target range
n/a
n/a
$55
current price
n/a
target midpoint · n/a from current
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