Were analysts underestimating DigitalOcean, or is it simply overvalued now?<\/p>\n
![\"A](\"https:\/\/www.europesays.com\/ai\/wp-content\/uploads\/2026\/05\/https:\/\/media.zenfs.com\/en\/aol_the_motley_fool_392\/53886e9fafd436465fe2bfd90fe01401.jpeg\"\/)
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A smiling investor celebrating a win on the floor of a stock exchange.<\/p>\n
Image source: Getty Images.<\/p>\n
DigitalOcean continues to expand its AI product portfolio<\/p>\n
The cloud industry<\/a> is dominated by trillion-dollar giants like Amazon and Microsoft, but they mostly target large enterprises because they have the highest spending potential. This leaves the SMB cloud market wide open for providers like DigitalOcean. It captures these customers by offering affordable pricing, highly personalized support, and a simple dashboard to make deploying services easy.<\/p>\n In the first quarter, the company launched a new platform, DigitalOcean AI-Native Cloud, comprising five distinct layers. The bottom (and most important) layer is infrastructure, which includes 20 data centers fitted with the latest AI chips from suppliers like Nvidia<\/a> and Advanced Micro Devices. DigitalOcean rents the computing capacity to its SMB customers, which can use it to deploy AI<\/a> applications.<\/p>\n The other four layers work together to help SMBs turn all of that computing power into working AI software, whether they want to build data analysis tools, chatbots, or agents. The platform offers access to the latest AI foundation models from leading start-ups like OpenAI<\/a>, which can help customers accelerate their development goals.<\/p>\n DigitalOcean allows customers to start with one chip and scale up as needed, which is perfect for running small AI workloads like web-based customer-service chatbots or agents. And the company is staying true to its original cloud business model, allowing customers to pay as they go with no lock-in contracts.<\/p>\n DigitalOcean just significantly raised its revenue growth forecast<\/p>\n DigitalOcean ended the first quarter with $1.03 billion in annual run-rate revenue (ARR), a 22% increase from the year-ago period. It was the third consecutive quarter of accelerating growth, highlighting the company’s incredible momentum.<\/p>\n AI customers, specifically, accounted for $170 million of DigitalOcean’s ARR at the end of the first quarter, and that figure soared by an eye-popping 221% year over year. Simply put, products like the AI-Native Cloud are quickly becoming the growth engine for the entire company, and that’s likely to continue, as demand for computing capacity outstrips supply.<\/p>\n For that reason, DigitalOcean raised $800 million from investors in March, which will go toward building more AI data centers. As more capacity comes online, revenue growth is likely to accelerate further. In fact, management just raised its 2027 growth forecast from 30% to 50%, which is a big reason why DigitalOcean stock rocketed higher on May 5.<\/p>\n DigitalOcean stock is no longer cheap<\/p>\n Based on DigitalOcean’s trailing-12-month revenue, its stock is trading at a price-to-sales (P\/S) ratio<\/a> of 17, which is twice its long-term average of 8.1. If we assume the company grows its revenue by more than 50% in 2027, its forward P\/S ratio is around 9.2.<\/p>\n DOCN PS Ratio Chart<\/p>\n Data by YCharts<\/a>.<\/p>\n From that perspective, there probably isn’t much upside left in the tank in the short term. In my opinion, the stock would be a good buy right now if the company could maintain a similar rate of revenue growth in 2028 and beyond, but management hasn’t provided any long-term guidance just yet.<\/p>\n In light of DigitalOcean’s spectacular first-quarter report, the stock has blown past even the most bullish price targets on Wall Street, and I expect many analysts to raise their forecasts soon. However, since the stock certainly isn’t cheap, investors who buy it today need to maintain a long-term view of at least three years (but preferably more) to maximize their chances of earning a positive return. That time frame will give DigitalOcean time to grow into its valuation.<\/p>\n Should you buy stock in DigitalOcean right now?<\/p>\n Before you buy stock in DigitalOcean, consider this:<\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks<\/a> for investors to buy now\u2026 and DigitalOcean wasn\u2019t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.<\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you\u2019d have $476,034!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you\u2019d have $1,274,109!*<\/p>\n Now, it\u2019s worth noting Stock Advisor\u2019s total average return is 974% \u2014 a market-crushing outperformance compared to 206% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.<\/p>\n See the 10 stocks \u00bb<\/a><\/p>\n *Stock Advisor returns as of May 7, 2026.<\/p>\n Anthony Di Pizio<\/a> has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, DigitalOcean, Microsoft, and Nvidia. The Motley Fool has a disclosure policy<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Key Points DigitalOcean is aggressively building AI infrastructure for small and medium-sized businesses (SMBs). The company’s AI-related annualized…\n","protected":false},"author":2,"featured_media":31520,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[24,25,4206,11486,18829,3303],"class_list":{"0":"post-31519","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ai","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-customers","11":"tag-digitalocean","12":"tag-medium-sized-businesses","13":"tag-revenue-growth"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/31519","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=31519"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/31519\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/31520"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=31519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=31519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=31519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"DOCN](\"https:\/\/www.europesays.com\/ai\/wp-content\/uploads\/2026\/05\/https:\/\/media.zenfs.com\/en\/aol_the_motley_fool_392\/290661bf5424be21a484903201c144c8.jpeg\"\/)
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