The firm increased its price forecast to $200 from $107 in a Wednesday note.<\/p>\n
The update follows management’s decision to raise fiscal 2026 revenue guidance to 25%-27% growth. Analyst Wamsi Mohan now expects fiscal 2027 revenue to surge above 50% year-over-year.<\/p>\n
Expanding Capacity To Meet AI Demand<\/p>\n
DigitalOcean is aggressively scaling its physical infrastructure. Management announced an additional 60 megawatt (MW) of capacity expansions. This brings the total committed capacity to approximately 135MW.<\/p>\n
Mohan said the shift toward more central processing unit (CPU) infrastructure in an inference- and agentic-driven environment could drive upside to the previously guided $13 million annual recurring revenue (ARR) per megawatt.<\/p>\n
The firm noted that higher inferencing workloads should drive meaningful long-term revenue and free cash flow growth.<\/p>\n
Focus On Agentic AI And High-Value Tiers<\/p>\n
The analyst highlighted the company\u2019s evolution into an \u201cAgentic AI beneficiary.\u201d DigitalOcean recently signed Cursor as a customer, signaling a shift toward orchestration and agent-driven demand.<\/p>\n
Customer metrics reinforce the shift, with DigitalOcean expanding its $1 million-plus ARR cohort by 179%, now accounting for 18% of total ARR. Meanwhile, the $500,000-plus cohort grew 132%.<\/p>\n
Investment Costs and Margin Pressure<\/p>\n
The growth comes with significant upfront costs. DigitalOcean will incur $100 million in non-recurring charges in fiscal 2026. These funds will outfit data centers with liquid cooling for next-generation servers.<\/p>\n
The report noted that free cash flow margins could come under incremental pressure, but added that finance leases better align the timing of investments with revenue generation.<\/p>\n
The company aims to keep leverage below 4 times net debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) while sustaining EBITDA margins of around 40%.<\/p>\n
Revised Valuation And Estimates<\/p>\n
BofA updated its fiscal 2026 earnings per share estimate to $1.29, up from $1.11. The new $200 price forecast is based on 37 times calendar 2028 estimated enterprise value to adjusted free cash flow.<\/p>\n
DOCN Stock Price Activity: DigitalOcean Holdings shares were up 0.23% at $153.12 at the time of publication on Wednesday. The stock is trading near its 52-week high of $153.47,\u00a0according to Benzinga Pro data<\/a>.<\/p>\n Image via Shutterstock<\/p>\n This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.<\/p>\n