📊 DOCN Key Takeaways
Is DigitalOcean Holdings, Inc. (DOCN) a Good Investment?
DigitalOcean demonstrates solid revenue growth (15.5% YoY) and excellent gross margins (56.1%), reflecting strong product value in cloud services. However, weak free cash flow generation ($6.9M, 2.7% margin) relative to high leverage (1.04x D/E ratio with $919.7M debt) and poor capital efficiency (1.8% ROE, 0.6% ROA) present material concerns about debt sustainability and capital deployment effectiveness.
DigitalOcean shows solid fundamental quality through mid-teens revenue growth, nearly 60% gross margin, expanding operating profitability, and a strong 20.0% free cash flow margin. The business appears capable of generating meaningful cash relative to revenue, but weak liquidity, $1.30B of long-term debt, and negative stockholders' equity materially constrain financial flexibility. Overall, the company looks fundamentally sound on operations but balanced by a stretched balance sheet.
Why Buy DigitalOcean Holdings, Inc. Stock? DOCN Key Strengths
- Robust revenue growth at 15.5% YoY demonstrating market traction
- Exceptional gross margins of 56.1% indicating strong pricing power and product differentiation
- Substantial cash position ($741.4M) provides financial flexibility and debt management optionality
- Positive and accelerating EPS growth (+183.1% YoY) despite absolute low base
- Adequate interest coverage ratio of 6.4x supporting current debt service capability
- Revenue grew 15.5% year over year while maintaining healthy 59.9% gross margin
- Operating margin of 17.4% and free cash flow margin of 20.0% indicate strong underlying unit economics
- Operating cash flow of $309.60M and interest coverage of 17.2x suggest debt servicing is currently manageable
DOCN Stock Risks: DigitalOcean Holdings, Inc. Investment Risks
- Critically weak free cash flow generation ($6.9M) relative to $919.7M debt load implies 130+ year paydown horizon
- Elevated leverage (1.04x D/E) combined with capital-intensive operations ($40M capex annually) constrains financial flexibility
- Deteriorating profitability conversion: 56% gross margin compresses to 6% net margin, indicating high OpEx or substantial debt interest burden
- Extremely poor capital efficiency (ROE 1.8%, ROA 0.6%) suggests suboptimal deployment of $2.6B total assets
- High capital expenditure requirements (40M annually) limit FCF growth acceleration despite operating cash flow stability
- Negative stockholders' equity and liabilities exceeding assets signal an aggressive capital structure
- Current and quick ratios of 0.69x point to limited short-term liquidity cushion
- Net income quality should be monitored because earnings were flat year over year despite strong EPS growth
Key Metrics to Watch
- Free cash flow margin trend and absolute FCF generation capacity to service debt organically
- Debt-to-EBITDA ratio and debt reduction trajectory given current leverage levels
- Return on invested capital (ROIC) improvement demonstrating more efficient capital deployment
- Operating margin sustainability and operating expense leverage as revenue scales
- Capital expenditure intensity ratio and potential for OpEx efficiency gains
- Free cash flow and operating cash flow conversion
- Debt reduction progress and improvement in liquidity ratios
DigitalOcean Holdings, Inc. (DOCN) Financial Metrics & Key Ratios
💡 AI Analyst Insight
The relatively thin 2.7% FCF margin may limit capital allocation flexibility.
DOCN Profit Margin, ROE & Profitability Analysis
DOCN vs Technology Sector: How DigitalOcean Holdings, Inc. Compares
How DigitalOcean Holdings, Inc. compares to Technology sector averages
Sector benchmarks are approximate industry averages. Actual sector performance may vary.
Is DigitalOcean Holdings, Inc. Stock Overvalued? DOCN Valuation Analysis 2026
Based on fundamental analysis, DigitalOcean Holdings, Inc. shows some fundamental concerns relative to the Technology sector in 2026.
Note: This is a fundamental analysis based on SEC filings. For P/E ratio, price targets, and market-based valuation, consult financial data providers. This is not investment advice.
DigitalOcean Holdings, Inc. Balance Sheet: DOCN Debt, Cash & Liquidity
DOCN Revenue & Earnings Growth: 5-Year Financial Trend
5-Year Trend Summary: DigitalOcean Holdings, Inc.'s revenue has grown significantly by 110% over the 5-year period, indicating strong business expansion. The most recent EPS of $0.20 reflects profitable operations.
DOCN Revenue Growth, EPS Growth & YoY Performance
DOCN Quarterly Earnings & Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q1 2026 | $210.7M | $15.8M | $0.15 |
| Q3 2025 | $198.5M | $32.9M | $0.33 |
| Q2 2025 | $192.5M | $19.1M | $0.20 |
| Q1 2025 | $184.7M | $14.1M | $0.15 |
| Q3 2024 | $177.1M | $3.5M | $0.04 |
| Q2 2024 | $169.8M | $665.0K | $0.01 |
| Q1 2024 | $165.1M | $14.1M | $0.15 |
| Q3 2023 | $152.1M | $3.5M | $0.04 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
DigitalOcean Holdings, Inc. Dividends, Buybacks & Capital Allocation
DOCN SEC Filings: Latest 10-K & 10-Q Analysis
Access official SEC EDGAR filings for DigitalOcean Holdings, Inc. (CIK: 0001582961)
📋 Recent SEC Filings
❓ Frequently Asked Questions about DOCN
What is the AI rating for DOCN?
DigitalOcean Holdings, Inc. (DOCN) has a Combined AI Rating of HOLD from Claude (HOLD) and ChatGPT (HOLD) with 75% combined confidence, based on fundamental analysis of SEC EDGAR filings.
What are DOCN's key strengths?
Claude: Robust revenue growth at 15.5% YoY demonstrating market traction. Exceptional gross margins of 56.1% indicating strong pricing power and product differentiation. ChatGPT: Revenue grew 15.5% year over year while maintaining healthy 59.9% gross margin. Operating margin of 17.4% and free cash flow margin of 20.0% indicate strong underlying unit economics.
What are the risks of investing in DOCN?
Claude: Critically weak free cash flow generation ($6.9M) relative to $919.7M debt load implies 130+ year paydown horizon. Elevated leverage (1.04x D/E) combined with capital-intensive operations ($40M capex annually) constrains financial flexibility. ChatGPT: Negative stockholders' equity and liabilities exceeding assets signal an aggressive capital structure. Current and quick ratios of 0.69x point to limited short-term liquidity cushion.
What is DOCN's revenue and growth?
DigitalOcean Holdings, Inc. reported revenue of $257.9M.
Does DOCN pay dividends?
DigitalOcean Holdings, Inc. does not currently pay dividends.
Where can I find DOCN SEC filings?
Official SEC filings for DigitalOcean Holdings, Inc. (CIK: 0001582961) including 10-K, 10-Q, and 8-K reports are available on SEC EDGAR.
What is DOCN's EPS?
DigitalOcean Holdings, Inc. has a diluted EPS of $0.15.
How is the AI analysis conducted?
Two independent AI systems — Claude (Anthropic) and ChatGPT (OpenAI) — analyze SEC EDGAR filings including 10-K annual reports and 10-Q quarterly reports. Each AI evaluates financial health, profitability ratios, balance sheet strength, and growth metrics. The combined rating reflects both perspectives for balanced insights.
Is DOCN a good stock to buy right now?
Based on our AI fundamental analysis in May 2026, DigitalOcean Holdings, Inc. has a HOLD rating with 75% confidence. Review the strengths and risks sections above before making a decision. This is not investment advice.
Is DOCN stock overvalued or undervalued?
Valuation metrics for DOCN: ROE of 1.8% (sector avg: 22%), net margin of 6.1% (sector avg: 18%). Compare these metrics with sector averages to assess valuation.
Should I buy DOCN stock in 2026?
Our dual AI analysis gives DigitalOcean Holdings, Inc. a combined HOLD rating for 2026. Revenue is data pending, with profitability at or below sector average. Always conduct your own research.
What is DOCN's free cash flow?
DigitalOcean Holdings, Inc.'s operating cash flow is $46.9M, with capital expenditures of $40.0M. FCF margin is 2.7%.
How does DOCN compare to other Technology stocks?
Vs Technology sector averages: Net margin 6.1% (avg: 18%), ROE 1.8% (avg: 22%), current ratio 1.46 (avg: 2.5).