DigitalOcean (DOCN): Assessing Valuation Following Launch of Expanded AI Ecosystem and Partner Program

DigitalOcean Holdings (DOCN) has drawn attention after unveiling major new AI initiatives at its Deploy London conference. The company announced an expanded AI Ecosystem and introduced an AI Partner Program designed to support startups and technology providers.

See our latest analysis for DigitalOcean Holdings.

While DigitalOcean’s momentum around new AI offerings is grabbing headlines, the 1-year total shareholder return actually sits just below flat. This hints that the market remains cautious even as strategic partnerships and product launches stack up. Still, with strong recurring news flow and a supportive sector backdrop, investor sentiment may be poised for a shift if these innovations begin to show material growth impact.

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Yet with shares still trading at a modest discount to analyst targets and recent revenue growth outpacing gains in the stock price, key questions remain for investors. Is there real upside still to capture, or is the market already factoring in DigitalOcean’s full AI potential?

Most Popular Narrative: 6.9% Undervalued

Compared to its last close of $38.71, the most widely followed narrative values DigitalOcean Holdings at $41.60, putting its fair value notably above the current market price according to analyst assumptions. This sets the tone for a debate on the future path for the stock, focusing on growth catalysts that could close this gap.

The proliferation of easy-to-consume AI platform services (Gradient AI Platform & Agents) lowers barriers for SaaS providers and software developers to integrate AI, likely to drive higher customer acquisition, cross-sell, and upsell activity across the product ecosystem, positively affecting ARPU and long-term revenue stability.

Read the complete narrative.

What’s really driving this valuation? The hidden ingredients include bullish projections for revenue growth, profit expansion, and a future earnings multiple that could reset market expectations. The full narrative reveals the financial and operational bets behind these numbers. Are they realistic? Only the detail will tell.

Result: Fair Value of $41.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intense competition from hyperscale cloud providers and the challenges of scaling new AI services could quickly undermine DigitalOcean’s projected growth trajectory.

Find out about the key risks to this DigitalOcean Holdings narrative.

Another View: DCF Model Tells a Different Story

While analyst targets suggest DigitalOcean Holdings is undervalued, our SWS DCF model estimates a fair value of $33.28, which is actually below the market price of $38.71. This approach takes a stricter look at future cash flows. Is optimism around growth already priced in?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out DigitalOcean Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own DigitalOcean Holdings Narrative

If you think your perspective differs or you prefer hands-on research, you can craft your own DigitalOcean Holdings narrative in just a few minutes: Do it your way

A great starting point for your DigitalOcean Holdings research is our analysis highlighting 4 key rewards and 3 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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