DigitalOcean Holdings (DOCN) Stock Forecast & Price Target

DigitalOcean Holdings is benefiting from a powerful mix of scarce AI infrastructure supply, a usage-based customer base, and a platform that can pass through pricing faster than peers tied to long-dated enterprise contracts. Its AI customer ARR grew 212% y/y to $234M, revenue from customers spending more than $1M annually rose 214% y/y to $259M, and RPO expanded from $243M to $894M in 2Q26, signaling both stronger demand and improving visibility. The company’s simplicity, managed inference tools, and broader software stack are also increasing customer retention and margin potential, while a strengthened balance sheet with $767M in cash supports capacity expansion without forcing distressed financing.

DigitalOcean Holdings is facing a fragile setup where recent AI-driven demand may be less durable than it appears, with limited visibility into customer concentration, committed versus consumption-based workloads, and a fraction of peers’ RPO leaving growth vulnerable to demand and pricing shifts. Its expansion into larger AI customers and GPU capacity is compressing near-term free cash flow margins and gross margin, which fell to 60% in FY25 and 55% in 2Q26, while adjusted EBITDA margin is guided at 38.5%-39.5% in FY26 amid startup costs and depreciation. The bearish case is reinforced by intensifying hyperscaler competition, potential commoditization of inference, dependence on third-party models, and the risk that customers migrate as the company moves upmarket and the GPU scarcity premium fades.