DigitalOcean (DOCN): Assessing Valuation After Paperspace Deal and Rapid Growth in Direct AI Revenue
DigitalOcean Holdings (DOCN) is back in focus after its Paperspace acquisition, a deal aimed squarely at beefing up AI infrastructure just as the company more than doubled its direct AI revenue and locked in extra data center capacity.
See our latest analysis for DigitalOcean Holdings.
That AI push seems to be resonating, with the 90 day share price return of 45.42 percent and a 1 year total shareholder return of 29.85 percent signalling that momentum is building rather than fading.
If you are weighing DigitalOcean against other cloud names riding the AI wave, it could be a good moment to explore high growth tech and AI stocks for fresh ideas for your watchlist.
With shares up sharply and trading only modestly below analyst targets, investors now face a key question: Is DigitalOcean still undervalued relative to its AI growth potential, or is the market already pricing in the next leg higher?
Most Popular Narrative Narrative: 6.8% Undervalued
With DigitalOcean closing at $49.72 versus a narrative fair value of about $53.33, the prevailing view frames the stock as modestly mispriced in its favor.
The proliferation of easy to consume AI platform services (Gradient AI Platform and Agents) lowers barriers for SaaS providers and software developers to integrate AI, which is likely to drive higher customer acquisition, cross sell, and upsell activity across the product ecosystem. This is expected to positively affect ARPU and long term revenue stability.
Want to see what powers this upgrade from niche cloud player to durable AI platform? The narrative leans on compounding revenue, steady margins, and a bold future earnings multiple. Curious how those moving parts combine into that fair value line? The full breakdown is where the numbers start to get interesting.
Result: Fair Value of $53.33 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, growing hyperscaler competition and heavy AI infrastructure spending could squeeze margins and stall revenue momentum if customer adoption or pricing power weakens.
Find out about the key risks to this DigitalOcean Holdings narrative.
Build Your Own DigitalOcean Holdings Narrative
If you see the story differently or want to dig into the numbers yourself, you can build a custom view in just minutes using Do it your way.
A great starting point for your DigitalOcean Holdings research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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