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DigitalOcean Holdings NYSE:DOCN Stock Report

Last Price


Market Cap







05 Oct, 2022


Company Financials +
DOCN fundamental analysis
Snowflake Score
Future Growth6/6
Past Performance0/6
Financial Health3/6

DOCN Stock Overview

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally.

DigitalOcean Holdings Competitors

Price History & Performance

Summary of all time highs, changes and price drops for DigitalOcean Holdings
Historical stock prices
Current Share PriceUS$40.00
52 Week HighUS$133.40
52 Week LowUS$30.05
1 Month Change4.14%
3 Month Change-12.15%
1 Year Change-51.45%
3 Year Changen/a
5 Year Changen/a
Change since IPO-5.88%

Recent News & Updates

Sep 28

DigitalOcean: Good Business, But The Valuation Adds Too Much Risk

Summary DigitalOcean operates in the cloud market specifically targeting small and medium business, which is an interesting model that is allowing the company to grow very fast. Early signs of scale and operational leverage are extremely promising. The stock, however, is valued for perfect execution and that adds too much risk. DigitalOcean (DOCN) has quickly shown during its tenure in the public market that it is a serious contender in the generational trend of cloud computing. Its business model is particularly interesting as it tackles the issue from a niche point of view, specifically targeting small and medium businesses (SMBs) that have been left behind by the cloud hyperscalers. Recent performance demonstrates how the business is growing very fast while also achieving consistent profitability. However, as you would expect the market is therefore assigning exuberant valuations to the stock that adds too much risk at current levels. Let's dive deep into the details of this great business. DigitalOcean goes after a massive market The thesis around DigitalOcean business model is an ever-growing need for cloud capabilities not only from enterprise customers, but also from SMBs. The evolution of the cloud embodied by Amazon Web Services (AMZN), Microsoft's Azure (MSFT) and Google Cloud (GOOG) was built around the needs of big, global firms. Their offerings are too complicated and too expensive for the simple needs of startups and SMBs, and that's the niche that DigitalOcean strives to fill. DOCN Earnings Presentation Q2 2022 The platform is self-serve but DigitalOcean offers extensive educational material online to help developers navigate the company's offering, as well as direct support no matter the customer size. The company generates its revenue in multiple areas around the world as the slide below shows. At the same time, the company is not able to effectively measure the impact of currency fluctuations on its revenue as they bill all their customers in USD. This choice however hardly means that there is no impact from an unusually strong dollar, but rather that the impact is more subtle as it might deter new customers to get on board or force existing customers to spend less due to the DigitalOcean being more expensive now in the customers' local currency. DOCN Earnings Presentation Q2 2022 Despite these headwinds, the company grew revenue 29% YoY in the latest quarter and is still projecting 30+% revenue growth for the future Q3 2022. At the same time management prudently trimmed unnecessary expenses and achieved 17% Non-GAAP operating margin. An impressive improvement of gross margins from 58% to 65% was achieved thanks to lower spending in hardware as well as exercising some pressure on datacenters operators in order to achieve better rates, which is a sign that DigitalOcean is increasingly becoming a strategic partner and therefore gaining some pricing advantage. These do not appear as one-time events but rather structural efficiencies that should allow the company to maintain these kinds of gross margins or even improve them if DigitalOcean will scale even more. DOCN Earnings Presentation Q2 2022 The company has successfully initiated a price increase in July 2022 and has experienced no impact to customer acquisition, as well as much lower churn that initially accounted for based on internal models. That is definitely a testament for DigitalOcean's resilience and how crucially important it is for its customers. Nevertheless, management is seeing some slowdown in spending from existing customers in Europe and Asia due to macro headwinds: Looking under the hood, we see the dollar churn in these regions remain stable, but it is the expansion rate of our customers that has slowed. So customers are steady and still growing nicely on our platform, but adjusting their spend level somewhat as they are cautious in managing their businesses as well. And even with these trends, ARPU is still growing greater than 20%. Overall the company still managed to maintain 112% net dollar retention rate, slightly below 113% a year ago but still healthy considering that DigitalOcean targets only SMBs which are most likely to go out of business compared to enterprise customers. Therefore, any business that targets SMBs will naturally show lower net dollar retention rates than others. On a free cash flow basis, the company is showing first signs of operational leverage which is very intriguing from an investment point of view. From June 2020 to June 2022, the quarterly CapEx was pretty much stable in a range of $20 to $30 million, while in the same period cash from operations grew from about $15 million to the most recent figure of $45 million, a constant growth that is fueling consistent free cash flow. If the company is able to maintain CapEx/Revenue stable, it should lead to massive growth of free cash flow which can be then reinvested in the business or used for possible acquisitions. Valuation adds too much risk at current levels There is a lot to like about DOCN business; however, the company is currently trading at levels that imply perfect execution from the management and that is the main risk in investing today in the company's stock.

Sep 08

DigitalOcean: Is It Time To Buy The Dip?

Summary DigitalOcean is a solid company in the small business cloud computing market. The business is expanding its margins. It is finally generating positive free cash flow. A high-quality customer acquisition model drives down sales and marketing costs. But the business is trading at a very high valuation. There are some questionable uses of the company's cash. Investment Thesis DigitalOcean (DOCN) has a high quality offering in the small business cloud computing market. The company has strong growth and a high quality self service business model. But the company's growth is slowing. I'm also concerned about high stock-based compensation and an unusual amount of buybacks. I'm not buying for these reasons, even though I'm bullish on the company's core business. Top Line Growth Remains Strong DigitalOcean has continued to grow its top line at a solid rate. The company grew its revenue by almost 30% year over year. The company is continuing to grow even in an unfavorable environment. The business seems well on its way to achieving its target of $1 billion in revenue by 2024. DigitalOcean Q2 2022 Earnings Presentation The company has also hit a turning point in its profitability. The company expanded its margins significantly. During the last quarter, gross margins increased from 58% to 65% year over year. The company's non-GAAP operating margin almost doubled. Most importantly, the business has started to become meaningfully free cash flow positive. The business's rate of growth has slowed year over year. Management attributes this to a slowdown in Europe and Asia. Additionally, the company has a significant number of blockchain customers. These customers have higher churn levels due to unfavorable crypto market conditions. Focus on Small Businesses What sets DigitalOcean apart from its competitors is its focus on small users. Many other cloud companies focus heavily on recruiting enterprise clients. DigitalOcean specifically targets individual developers, startups, and small businesses. The company has lower revenues per user. This means it can't spend a lot acquiring individual customers. Because of this, the business has focused on a self serve acquisition model. The company uses its ecosystem and content marketing to bring in new customers. Its community education website generates approximately 3.5 million monthly visitors. During the last quarter, the company acquired JournalDev, another developer education website. This should add another 9 to 10 million monthly visitors. This customer acquisition engine is important to the company's strategy. The business brings in individual developers and startups at their earliest stages. DigitalOcean benefits as customers build and scale out their products. As clients' ventures succeed, they spend more on infrastructure and boost DigitalOcean's ARPU. DigitalOcean Q4 2021 Earnings Presentation These let the company run a very efficient sales and marketing operation. During the last quarter, the company spent less than 14% of revenue on marketing. Management described this efficiency on their last earnings call. Let's look at the payback period for customer acquisition. Using Q1 2022 non-GAAP sales and marketing expense of $15.7 million and net new ARR in Q2 of $20.5 million combined with improving gross margins to 65% of revenue, we are paying back our customer acquisition costs in less than six months. And that's happening while we are ramping spend to build our sales capabilities. This efficiency is paramount in our ability to sustain our revenue growth targets and drive margins higher over the course of not just this year, but for years to come. This customer acquisition model is impressive. But this type of strategy can also be unpredictable. Unlike traditional sales, it can be difficult to scale up these growth channels. I think this is why the company has recently put together an outside sales force. They can directly target later stage customers. This is a more scalable channel, and should help the company further boost its ARPU. Growth from direct sales channels almost doubled sequentially during the last quarter. Expanding ARPU and Valuable Customers DigitalOcean's customer growth hasn't been especially impressive. The business only reported middle single digit increases in 2020 and 2021. During the last quarter, management stopped reporting total users entirely. But the company has shown that it can consistently expand its average revenue per user. At the end of 2019, the company generated $40.16 per user. Since then, the company's ARPU has jumped almost 80% to $71.76. The business has a healthy net dollar retention rate of above 110%. DigitalOcean Q2 2022 Earnings Presentation Users spending more than $50 per month have increased significantly. Customers in this cohort expanded by 16% year over year. Growth from this segment has outpaced total user growth for some time. The company is taking steps to further boost this revenue. It increased prices across infrastructure offerings at the beginning of the third quarter. This should further boost the company's ARPU and its margins. Not An Enticing Valuation DigitalOcean's fundamentals are solid. But its shares are trading at an expensive valuation. The company has guided for non-GAAP earnings per share of up to $0.75 this year. That gives the company a forward P/E of 54 times and a forward P/S of 8.5 times. That's expensive, and I'd need the business to be very strong for me to consider buying a company with this profile. DigitalOcean Q2 2022 Earnings Presentation Unfortunately, there are some more valuation issues here. I think the company's non-GAAP metrics make some questionable adjustments. Management's adjusted earnings metrics exclude stock-based compensation. During the last quarter, the company paid out $28.2 million in shares. That's up by over 130% year over year. At the current run rate, the company is set to pay out $113 million in stock-based compensation, or 20% of management's revenue guidance. This alone would more than offset any profit the company would otherwise make.

Aug 23

DigitalOcean to acquire Cloudways

DigitalOcean Holdings (NYSE:DOCN) has entered into an agreement to acquire Cloudways, a managed cloud hosting and software as a service provider for SMBs. The acquisition will simplify workflows for small to medium-sized businesses that are looking for easier ways to build and scale their digital businesses. The transaction accelerates revenue growth, increases high spend customers by 18% and is neutral to operating profit and free cash flow margins. Together, DigitalOcean and Cloudways will serve over 124,000 customers paying over $50/month, representing ~84% of the pro forma company’s total revenue.

Shareholder Returns


Return vs Industry: DOCN underperformed the US IT industry which returned -33.9% over the past year.

Return vs Market: DOCN underperformed the US Market which returned -18.2% over the past year.

Price Volatility

Is DOCN's price volatile compared to industry and market?
DOCN volatility
DOCN Average Weekly Movement11.1%
IT Industry Average Movement8.0%
Market Average Movement6.9%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: DOCN is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 11% a week.

Volatility Over Time: DOCN's weekly volatility (11%) has been stable over the past year, but is still higher than 75% of US stocks.

About the Company

2012786Yancey Spruill

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. Its platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and medium size businesses. The company offers infrastructure solutions across compute, storage, and networking, as well as enables developers to extend the native capabilities of its cloud with fully managed application, container, and database offerings.

DigitalOcean Holdings Fundamentals Summary

How do DigitalOcean Holdings's earnings and revenue compare to its market cap?
DOCN fundamental statistics
Market CapUS$3.88b
Earnings (TTM)-US$38.29m
Revenue (TTM)US$492.30m


P/S Ratio


P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
DOCN income statement (TTM)
Cost of RevenueUS$181.91m
Gross ProfitUS$310.39m
Other ExpensesUS$348.68m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date


Earnings per share (EPS)-0.40
Gross Margin63.05%
Net Profit Margin-7.78%
Debt/Equity Ratio3,038.0%

How did DOCN perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.


Is DOCN undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score


Valuation Score 2/6

  • Price-To-Sales vs Peers

  • Price-To-Sales vs Industry

  • Price-To-Sales vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for DOCN?

Other financial metrics that can be useful for relative valuation.

DOCN key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue8.5x
Enterprise Value/EBITDA84.2x
PEG Ration/a

Price to Sales Ratio vs Peers

How does DOCN's PS Ratio compare to its peers?

DOCN PS Ratio vs Peers
The above table shows the PS ratio for DOCN vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPSEstimated GrowthMarket Cap
Peer Average4.1x
GDS GDS Holdings
SQSP Squarespace
CD Chindata Group Holdings
DOCN DigitalOcean Holdings

Price-To-Sales vs Peers: DOCN is expensive based on its Price-To-Sales Ratio (7.9x) compared to the peer average (4.1x).

Price to Earnings Ratio vs Industry

How does DOCN's PE Ratio compare vs other companies in the US IT Industry?

Price-To-Sales vs Industry: DOCN is expensive based on its Price-To-Sales Ratio (7.9x) compared to the US IT industry average (2.5x)

Price to Sales Ratio vs Fair Ratio

What is DOCN's PS Ratio compared to its Fair PS Ratio? This is the expected PS Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

DOCN PS Ratio vs Fair Ratio.
Fair Ratio
Current PS Ratio7.9x
Fair PS Ratio7.8x

Price-To-Sales vs Fair Ratio: DOCN is expensive based on its Price-To-Sales Ratio (7.9x) compared to the estimated Fair Price-To-Sales Ratio (7.8x).

Share Price vs Fair Value

What is the Fair Price of DOCN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: DOCN ($40) is trading below our estimate of fair value ($56.65)

Significantly Below Fair Value: DOCN is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.

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Future Growth

How is DigitalOcean Holdings forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

Future Growth Score


Future Growth Score 6/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: DOCN is forecast to become profitable over the next 3 years, which is considered faster growth than the savings rate (1.9%).

Earnings vs Market: DOCN is forecast to become profitable over the next 3 years, which is considered above average market growth.

High Growth Earnings: DOCN is expected to become profitable in the next 3 years.

Revenue vs Market: DOCN's revenue (23.3% per year) is forecast to grow faster than the US market (7.6% per year).

High Growth Revenue: DOCN's revenue (23.3% per year) is forecast to grow faster than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: DOCN's Return on Equity is forecast to be very high in 3 years time (77.1%).

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Past Performance

How has DigitalOcean Holdings performed over the past 5 years?

Past Performance Score


Past Performance Score 0/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: DOCN is currently unprofitable.

Growing Profit Margin: DOCN is currently unprofitable.

Past Earnings Growth Analysis

Earnings Trend: DOCN is unprofitable, but has reduced losses over the past 5 years at a rate of 8.4% per year.

Accelerating Growth: Unable to compare DOCN's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: DOCN is unprofitable, making it difficult to compare its past year earnings growth to the IT industry (19.2%).

Return on Equity

High ROE: DOCN has a negative Return on Equity (-79.32%), as it is currently unprofitable.

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Financial Health

How is DigitalOcean Holdings's financial position?

Financial Health Score


Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Stable Cash Runway

  • Forecast Cash Runway

Financial Position Analysis

Short Term Liabilities: DOCN's short term assets ($1.2B) exceed its short term liabilities ($74.2M).

Long Term Liabilities: DOCN's short term assets ($1.2B) do not cover its long term liabilities ($1.5B).

Debt to Equity History and Analysis

Debt Level: DOCN's net debt to equity ratio (622.2%) is considered high.

Reducing Debt: Insufficient data to determine if DOCN's debt to equity ratio has reduced over the past 5 years.

Balance Sheet

Cash Runway Analysis

For companies that have on average been loss making in the past we assess whether they have at least 1 year of cash runway.

Stable Cash Runway: Whilst unprofitable DOCN has sufficient cash runway for more than 3 years if it maintains its current positive free cash flow level.

Forecast Cash Runway: DOCN is unprofitable but has sufficient cash runway for more than 3 years, due to free cash flow being positive and growing by 73% per year.

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What is DigitalOcean Holdings's current dividend yield, its reliability and sustainability?

Dividend Score


Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

DigitalOcean Holdings Dividend Yield vs Market
How does DigitalOcean Holdings dividend yield compare to the market?
SegmentDividend Yield
Company (DigitalOcean Holdings)n/a
Market Bottom 25% (US)1.6%
Market Top 25% (US)4.5%
Industry Average (IT)1.6%
Analyst forecast in 3 Years (DigitalOcean Holdings)0%

Notable Dividend: Unable to evaluate DOCN's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate DOCN's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if DOCN's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if DOCN's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as DOCN has not reported any payouts.

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How experienced are the management team and are they aligned to shareholders interests?


Average management tenure


Yancey Spruill (54 yo)





Mr. Yancey L. Spruill is Chief Executive Officer and Director at Digitalocean Holdings, Inc. since August 2019. He has been Chief Executive Officer and Director at DigitalOcean, Inc. and DigitalOcean Holdi...

CEO Compensation Analysis

Yancey Spruill's Compensation vs DigitalOcean Holdings Earnings
How has Yancey Spruill's remuneration changed compared to DigitalOcean Holdings's earnings?
DateTotal Comp.SalaryCompany Earnings
Jun 30 2022n/an/a


Mar 31 2022n/an/a


Dec 31 2021US$83mUS$503k


Sep 30 2021n/an/a


Jun 30 2021n/an/a


Mar 31 2021n/an/a


Dec 31 2020US$1mUS$450k


Compensation vs Market: Yancey's total compensation ($USD82.54M) is above average for companies of similar size in the US market ($USD6.80M).

Compensation vs Earnings: Yancey's compensation has increased whilst the company is unprofitable.

Leadership Team

Experienced Management: DOCN's management team is considered experienced (2.7 years average tenure).

Board Members

Experienced Board: DOCN's board of directors are not considered experienced ( 1.9 years average tenure), which suggests a new board.


Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

What is the ownership structure of DOCN?
Owner TypeNumber of SharesOwnership Percentage
General Public2,238,5202.3%
VC/PE Firms7,404,4827.6%
Individual Insiders16,602,22417.1%
Private Companies25,865,44926.7%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Top Shareholders

Top 25 shareholders own 81.82% of the company
OwnershipNameSharesCurrent ValueChange %Portfolio %
Access Industries, Inc.
25,865,449$1.0b0%no data
Moisey Uretsky
8,073,078$322.9m0%no data
IA Ventures
Benya Uretsky
6,515,621$260.6m0%no data
BlackRock, Inc.
5,084,325$203.4m23.6%no data
The Vanguard Group, Inc.
5,065,298$202.6m11.79%no data
First Trust Advisors LP
AllianceBernstein L.P.
Columbia Management Investment Advisers, LLC
J.P. Morgan Asset Management, Inc.
State Street Global Advisors, Inc.
1,227,221$49.1m40.3%no data
BNY Mellon Asset Management
Allspring Global Investments, LLC
Mirae Asset Global Investments Co., Ltd
Principal Global Investors, LLC
Financiere De l'Echiquier
Victory Capital Management Inc.
Norges Bank Investment Management
803,558$32.1m0%no data
Northern Trust Global Investments
Driehaus Capital Management LLC
Geode Capital Management, LLC
752,600$30.1m34.15%no data
Two Sigma Advisers, LP
Wellington Management Group LLP
594,851$23.8m13.16%no data
Granite Investment Partners, LLC
Marc Andreessen
547,453$21.9m0%no data

Company Information

DigitalOcean Holdings, Inc.'s employee growth, exchange listings and data sources

Key Information

  • Name: DigitalOcean Holdings, Inc.
  • Ticker: DOCN
  • Exchange: NYSE
  • Founded: 2012
  • Industry: Internet Services and Infrastructure
  • Sector: Software
  • Implied Market Cap: US$3.877b
  • Shares outstanding: 96.93m
  • Website:

Number of Employees


  • DigitalOcean Holdings, Inc.
  • 101 6th Avenue
  • New York
  • New York
  • 10013
  • United States


TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
DOCNNYSE (New York Stock Exchange)YesCommon StockUSUSDMar 2021
0SUDB (Deutsche Boerse AG)YesCommon StockDEEURMar 2021

Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/10/05 00:00
End of Day Share Price2022/10/05 00:00
Annual Earnings2021/12/31

Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.