DOCN · DigitalOcean Holdings
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $64
Note written ·
Price against the kill line
34.9% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $64.00, on record since 10 November 2026. The shares are down 36.2% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $64, which would extend the post-report decline to a new low well under the $70.70 close of 5 November 2026. Fourth-quarter 2026 revenue below the $348 million guidance floor would also break the operating case.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 3 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 321
- Revenue, change on a year (%)
- +39.9
- Gross margin (%)
- 50.1
- Operating margin (%)
- 10.3
- Free cash flow, four quarters ($M)
- 244
- Net cash, cash less debt ($M)
- 205
- Price to earnings (×)
- 297.3
- Enterprise value to sales (×)
- 9.1
All filed numbers
What DigitalOcean Holdings reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 321 | +39.9 | 50.1 | 10.3 |
| first filed | 281 | +28.6 | 55.0 | 10.4 |
| first filed | 258 | +22.4 | 56.1 | 14.2 |
| first filed | 242 | +18.3 | 58.7 | 16.0 |
| first filed | 230 | +15.7 | 59.6 | 19.6 |
| first filed | 219 | +13.6 | 59.9 | 16.3 |
| Pre-tax income ($M) | −36.4 |
| Net income ($M) four quarters: 34.3 | −42.6 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +8.7 |
| Operating cash flow ($M) | 375 |
| Capital spending ($M) | 131 |
| Free cash flow ($M) | 244 |
| Cash and short-term investments ($M) | 666 |
| Debt ($M) long-term debt | 462 |
| Net cash, cash less debt ($M) | 205 |
| Deferred revenue ($M) +513.8% on a year | 52.7 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 140 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 1,417 |
| Market value ($M) | 10,186 |
| Enterprise value, market value plus net debt ($M) | 9,981 |
| Enterprise value to sales (×) | 9.1 |
| Enterprise value to operating income (×) | 72.5 |
| Price to earnings (×) | 297.3 |
| Price to book value (×) | 7.2 |
| Free-cash-flow yield (%) | 2.4 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 9.2% of shares outstanding sold short, 4.3 days of average trading to cover, −0.6% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $3.7M |
| 12 monthsfrom | $0 | $573.8M |
The thesis
DigitalOcean's AI cloud business is growing faster than the company guided, and the shares are more likely than not to beat the S&P 500 over the next three months, but a $1 billion at-the-market stock program limits how far the price can run. The fourth-quarter report, expected around February 2027, settles whether revenue growth outruns the shares the company issues.
The company reported on 3 November 2026 that third-quarter revenue was $321 million, up 40% year over year, against its own guidance of $304–$307 million. Adjusted EBITDA margin was 45% and non-GAAP diluted earnings per share were $0.45 (Form 8-K). It raised full-year 2026 revenue guidance to $1.208–$1.211 billion from $1.170–$1.180 billion and guided fourth-quarter revenue to $348–$351 million, up 44% to 45%.
The shares closed at $84.02 on 4 November 2026, fell to $70.70 on 5 November 2026 and closed at $87.15 on 11 November 2026. They rose 9.6% on 11 November 2026 as CoreWeave's third-quarter results, which beat Wall Street estimates, set off a relief rally across AI cloud providers (StockStory, 11 November 2026). The last close is 34.1% below the close of 13 August 2026 and sits below both the 50-day average of $114.7 and the 200-day average of $112.6.
Bullish and bearish views on DigitalOcean Holdings, Inc.
The bull case on DigitalOcean Holdings, Inc. (DOCN), in brief: growth accelerated again. The bear case: the share program adds supply.
Bull case
- Growth accelerated again. Third-quarter revenue of $321 million rose 40%, against 29% in the second quarter, and total annual run-rate revenue (ARR) reached $1,285 million (Form 8-K, 3 November 2026).
- AI customer revenue keeps compounding. AI customer ARR, a company-defined measure, rose to $376 million, up 288%, from $234 million at the end of June (Form 8-K, 3 November 2026).
- Guidance rose across the board. Full-year non-GAAP earnings per share guidance moved to $1.60–$1.62 from $1.35–$1.40. MarketBeat reported on 10 November 2026 that third-quarter earnings of $0.45 per share compared with an estimate of $0.32.
- Cash generation is strong. Adjusted free cash flow was $130 million at a 41% margin in the third quarter, with $23.5 million of capital spending on property and equipment (Form 8-K, 3 November 2026).
- Analyst targets sit far above the price. MarketBeat's consensus target is $141.06 as of 10 November 2026. Goldman Sachs (Buy) set $156, Canaccord Genuity (Buy) $180, Citigroup (Buy) $160 and Barclays (Overweight) $140 after the report.
- Liquidity is ample. Cash and equivalents were $666 million and marketable securities $179 million at 30 September 2026 (Form 8-K).
Bear case
- The share program adds supply. On 2 November 2026 the company signed an agreement with eight banks, led by Goldman Sachs, J.P. Morgan and Morgan Stanley, to sell up to $1.0 billion of common stock at market prices. It sold about $800 million gross of stock in an upsized offering in March 2026 (Business Wire, 25 March 2026).
- Contracted revenue fell. Remaining performance obligations, revenue contracted but not yet recognized, were $800 million at 30 September 2026 against $894 million in the 4 August 2026 results (Form 8-K filings).
- Margin guidance steps down. Fourth-quarter adjusted EBITDA margin is guided to 42% to 43% after 45% in the third quarter (Form 8-K, 3 November 2026).
- Financing obligations are large. Finance leases and equipment financing were about $924 million and debt about $462 million at 30 September 2026, alongside the $725 million equipment facility announced on 10 September 2026 (Form 8-K).
- Analysts cut targets after the beat. UBS lowered its target to $100 with a Neutral rating on 4 November 2026. Citigroup cut from $190 to $160, Barclays from $161 to $140 and Canaccord from $200 to $180 on 4 November 2026 (MarketBeat, 10 November 2026).
- Insiders and a large holder have sold. The chief executive sold 11,394 shares at $140.00 on 21 September 2026 under a Rule 10b5-1 plan (SEC Form 4). An Access Industries affiliate held 21.66 million shares after a May 2026 block sale (IBTimes, 7 August 2026).
Price setup
The last close is $87.15 (11 November 2026). It is above the $84.02 close of 4 November 2026 and 23% above the post-report low close of $70.70 on 5 November 2026, so the rebound has recovered the whole post-report drop. The 52-week high is $187.50, an intraday level from 17 June 2026, and the last close is 53.5% below it. The 52-week closing low is $43.18 on 20 November 2025.
The 50-day average of $114.7 and the 200-day average of $112.6 both sit well above the price. The three-month change is −34.1%. The gap to those averages marks the ground the shares have to recover before the post-June decline is reversed.
The close of 11 November 2026 came on a sector-wide move led by CoreWeave's results. A rebound that depends on that news leaves the shares exposed if AI cloud names fall again. No earnings date falls inside the next 30 days.
Catalysts ahead
- ~February 2027 (est.): Fourth-quarter and full-year 2026 report. Tests the $348–$351 million revenue guide and the 42% to 43% adjusted EBITDA margin, which settle whether growth outruns share issuance.
What would change the view
A daily close below $64, which would extend the post-report decline to a new low well under the $70.70 close of 5 November 2026. Fourth-quarter 2026 revenue below the $348 million guidance floor would also break the operating case.
The risks this note tracks, each with what would confirm it:
- Issuance under the $1 billion at-the-market program keeps absorbing demand for the shares. Confirmed by: filings showing material share sales under the program, or the fourth-quarter diluted share count exceeding the 128–129 million guided.
- Contracted revenue is not growing as fast as reported revenue. Confirmed by: remaining performance obligations staying below the $894 million of 4 August 2026 at the fourth-quarter report, after falling to $800 million at 30 September 2026.
- Margins compress as the AI mix and equipment financing rise. Confirmed by: fourth-quarter adjusted EBITDA margin at or below the 42% low end of guidance, versus 45% in the third quarter.
- The rebound fades if AI cloud shares resume falling, since the 11 November 2026 gain followed CoreWeave's results. Confirmed by: CoreWeave and Nebius making new lows while DigitalOcean closes below $70.70, its 5 November 2026 close.
- Large-holder and insider selling adds supply. Confirmed by: new SEC Form 4 or Form 144 filings from insiders or the Access Industries affiliate.
What it trades with
DigitalOcean trades with debt-financed AI cloud names such as CoreWeave and Nebius. Selloffs in those shares on 8 October 2026 and 16 October 2026 coincided with declines in DigitalOcean (24/7 Wall St. and Benzinga). On 11 November 2026 CoreWeave reported third-quarter revenue of $3,661 million and raised its year-end annualized revenue run-rate guidance to $20–21 billion, and DigitalOcean rose about 9.6% the same session (StockStory).
AI customer ARR of $376 million ties a growing share of revenue to a small number of large AI customers, unlike the older base of developers and small businesses. The company joined the Russell 1000 index on 30 June 2026.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $321 million, up 40% year over year, against guidance of $304–$307 million; adjusted EBITDA margin was 45% and non-GAAP diluted EPS was $0.45. Third-quarter 2026 results release, Form 8-K · as of
- AI customer annual run-rate revenue rose to $376 million, up 288%, from $234 million at the second quarter; total ARR was $1,285 million, up 40%. Third-quarter 2026 results release, Form 8-K · as of
- Full-year 2026 revenue guidance rose to $1.208–$1.211 billion from $1.170–$1.180 billion; fourth-quarter revenue guidance is $348–$351 million with adjusted EBITDA margin of 42% to 43%. Third-quarter 2026 results release, Form 8-K · as of
- Remaining performance obligations were $800 million at 30 September 2026, against $894 million in the 4 August results. Form 8-K, third-quarter and second-quarter 2026 releases · as of
- Cash and equivalents were $666 million and marketable securities $179 million at 30 September 2026; debt was about $462 million and finance leases plus equipment financing about $924 million. Third-quarter 2026 results release, Form 8-K · as of
- DigitalOcean signed an equity distribution agreement for up to $1.0 billion of common stock with eight banks led by Goldman Sachs, J.P. Morgan and Morgan Stanley. Company-news headlines; web coverage of the third-quarter filing · as of
- MarketBeat lists a consensus target of $141.06 after the report; Citigroup cut to $160, Barclays to $140 and Canaccord to $180 on 4 November 2026. MarketBeat, 10 November 2026 · as of
- CoreWeave's third-quarter results beat estimates and set off a relief rally in AI cloud shares; DigitalOcean closed up 9.6% at $87.15. StockStory, 11 November 2026 · as of
Sources
- DigitalOcean Holdings, Inc. - Form 8-K - FY2026 · sec.gov
- Why is DigitalOcean stock rocketing higher today · stockstory.org ·
- DigitalOcean (NYSE:DOCN) Shares Climb 7.1% - Here's What Happened · marketbeat.com ·
- MarketBeat ·
- DigitalOcean Announces Pricing of Upsized Public Offering of Common Stock · businesswire.com ·
Related · shared themes
CBRS
Cerebras Systems
Cerebras Systems is modestly more likely to beat the S&P 500 over three months after guiding fourth-quarter core revenue to $310–330…
CRWV
CoreWeave
CoreWeave's third-quarter beat and 26% higher profit guide on 10 November 2026 give its shares a modestly better-than-even case against the…
BRUN
Boost Run
Boost Run's shares are more likely to lag the S&P 500 over the next three months: third-quarter 2026 revenue missed, a $13 million-a-month…
IREN
IREN
IREN Limited's shares look more likely to lag the S&P 500, because its AI cloud ramp is behind its own $4 billion operating revenue-rate…