Why DigitalOcean Stock Is Up 16% This Week
DigitalOcean is making significant moves in the AI space, and early results show promising growth.
stock of Digital Ocean (DOCN 2.88%)The streamlined cloud computing provider is up 16% this week as of 1 p.m. ET on Friday, according to data from S&P Global Market Intelligence. Since reporting earnings on Aug. 8, DigitalOcean shares have risen 29%.
The company beat expectations in its second-quarter earnings, and several new trends in artificial intelligence (AI) showed that the market continues to price the company higher.
DigitalOcean: AI for small businesses too
DigitalOcean’s cloud computing solutions are designed with small and medium-sized enterprises (SMEs) in mind. These customers make up the majority of the company’s customer base. They flock to DigitalOcean over hyperscalers because of its simplicity, affordability, premium support, and reliability.
The company’s services are ideal for small to midsize businesses (including hands-off managed hosting solutions), but they are not a stripped-down version of what its larger competitors offer.
In fact, the company is investing heavily in cutting-edge technologies amid the AI revolution. It acquired Paperspace, a cloud platform for building and scaling AI applications, for $111 million in 2023. DigitalOcean has built its own AI capabilities, developing 24 new features in Q2, doubling its new products over the previous six months.
The company hired Bratin Saha as its new Chief Product and Technology Officer in June. Saha was previously Vice President and General Manager of AI and Machine Learning (ML) at Amazon Web Services. Combining Saha’s AI and ML expertise with the recent acquisition of DigitalOcean, the company saw its AI-related annual recurring revenue surge by more than 200% in Q2.
CloudZero, a company specializing in cost-effective cloud software, estimates that only 44% of small and midsize businesses currently use cloud infrastructure or hosting, so DigitalOcean has a lot of room for growth going forward.
