Cloud computing platforms give companies entry to the instruments they should thrive within the digital age, from easy knowledge storage to advanced software program improvement options. However during the last couple of years, cloud suppliers have additionally began providing new services and products to assist companies develop and deploy synthetic intelligence (AI).
The cloud trade is dominated by trillion-dollar expertise giants like Amazon and Microsoft, however one other firm referred to as DigitalOcean(NYSE: DOCN) — which is valued at simply $5.7 billion — is making an actual splash. It completely serves small and mid-sized companies (SMBs), offering not solely cloud providers, however an increasing portfolio of AI providers, too.
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DigitalOcean’s AI income doubled in every of its final 5 reported quarters, and on Feb. 24, the corporate will launch its working outcomes for the fourth quarter of 2025 (ended Dec. 31). Its inventory is already up 27% in 2026, and this is why I believe the upcoming report will drive even additional positive factors.
Picture supply: Getty Photographs.
The cloud trade’s largest suppliers usually deal with clients with the best spending potential, leaving SMBs feeling considerably uncared for. DigitalOcean, then again, gives them extremely personalised service, clear and clear pricing, and a easy dashboard that makes deploying cloud providers straightforward. These options are excellent for start-ups and small enterprises with restricted monetary and technical assets.
DigitalOcean is making use of the identical technique to its rising portfolio of AI providers, making it inexpensive for even the smallest companies to profit from this revolutionary expertise. It operates knowledge facilities fitted with superior chips from suppliers like Nvidia and Superior Micro Units, and it permits clients to begin with only one chip and scale up as wanted. Whereas some bigger cloud suppliers additionally provide fractional capability, DigitalOcean claims to be a whopping 75% cheaper.
DigitalOcean additionally constructed an AI platform referred to as Gradient, the place SMBs can entry the most recent massive language fashions (LLMs) from third events like OpenAI, which they will use to speed up AI software program improvement. Plus, Gradient helps SMBs create and deploy AI brokers, which could possibly be a significant development space sooner or later.
In response to DigitalOcean’s newest annual “Currents” survey, 53% of SMBs which have deployed AI brokers to this point skilled tangible time financial savings, and 44% stated utilizing brokers unlocked completely new enterprise capabilities. Over one-third of SMBs that have not deployed AI brokers but plan to begin doing so in 2026, and DigitalOcean might be there to assist them on their journey.
DigitalOcean generated $659 million in whole income through the first three quarters of 2025 (ended Sept. 30), which was a 14.5% year-over-year improve. It marked an acceleration from the 12.4% development the corporate produced within the first three quarters of 2024, and loads of that momentum got here from its budding AI enterprise.
DigitalOcean’s AI income has doubled yr over yr in every of the final 5 reported quarters, and administration’s steerage suggests it doubled but once more within the fourth quarter. The corporate hasn’t disclosed precisely how a lot AI income it generates, however at these development charges, it will not be lengthy earlier than it represents a big a part of the general enterprise.
DigitalOcean managed to increase its AI product portfolio and obtain accelerated income development whereas lowering its working bills through the first three quarters of 2025, which is extraordinarily spectacular. Consequently, with more cash coming in and fewer cash going out, the corporate’s working earnings doubled to $118.2 million for the interval.
Though DigitalOcean inventory soared by 41% in 2025 and by an additional 27% within the early levels of 2026, it nonetheless trades at a lovely price-to-sales (P/S) ratio of seven.2, which is beneath its common of 8.1 for the reason that firm went public in 2021.
Plus, primarily based on DigitalOcean’s trailing-12-month typically accepted accounting rules (GAAP) earnings of $2.50 per share during the last 4 reported quarters, its inventory is buying and selling at a price-to-earnings (P/E) ratio of 24.9, making it far cheaper than the Nasdaq-100 expertise index, which trades at a P/E ratio of 31.5. In different phrases, DigitalOcean is attractively valued relative to lots of the bigger firms within the cloud and AI industries.
This units the stage for additional upside in DigitalOcean inventory from right here, and the corporate’s upcoming fourth-quarter earnings report on Feb. 24 could possibly be the spark that ignites the rally. If its AI income doubles but once more as anticipated, and administration places ahead one other spherical of bullish ahead steerage, I believe buyers will pounce on this inventory and drive its valuation a lot greater.
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Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Units, Amazon, DigitalOcean, Microsoft, and Nvidia. The Motley Idiot has a disclosure coverage.
