DigitalOcean's AI-Native Platform Sends Stock Soaring
The cloud computing industry is dominated by Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, but DigitalOcean (DOCN) has been gaining ground with its AI-native platform.
DigitalOcean has a market value of $14 billion and has managed to capture a significant slice of the AI market. In fact, its stock has exploded higher by 275% over the last 12 months, outperforming Amazon, Microsoft, and Alphabet, which have returned an average of just 31%.
The company's AI-native platform offers affordable solutions for small and mid-sized businesses (SMBs) with a simple dashboard for easy deployment. Its expanding suite of AI services features five distinct layers, including infrastructure and an inference engine that provides access to foundation models from leading AI developers.
DigitalOcean has seen significant growth in recent quarters, with revenue increasing by 29% year-over-year during the second quarter, driven largely by its AI customers. The company ended the quarter with $1.1 billion in annual recurring revenue (ARR), with AI customers accounting for $234 million of that total.
Despite its impressive growth, DigitalOcean's stock is not cheap at present, with a price-to-sales ratio of 14.1. However, based on management's 2027 revenue guidance, the stock has a forward P/S ratio of just 7.2, suggesting it may be undervalued.