DigitalOcean's AI-Powered Growth: Why This Stock Could Still Double

DigitalOcean Surges on Strong Q4 Results DigitalOcean (NYSE: DOCN) has maintained a strong bullish trend in 2025, with its stock continuing to rise following the release of impressive fourth-quarter 2024 earnings. Shares jumped nearly 10% on February 25 after the company outperformed Wall Street’s earnings and revenue expectations while also delivering promising forward guidance.

The cloud computing provider, which focuses on serving startups, developers, and small businesses, reported a 13% year-over-year revenue increase to $781 million. Meanwhile, adjusted earnings per share (EPS) grew by 21% to $1.92. Looking ahead, DigitalOcean projects a similar revenue growth trajectory in 2025, though earnings are expected to remain flat as the company ramps up AI-related investments.

AI Infrastructure Driving Demand A key driver of DigitalOcean’s recent success has been its expansion into artificial intelligence (AI) services. The company launched its AI infrastructure deployment platform, Droplets, in October 2024. This platform provides developers with access to high-performance GPUs, such as Nvidia’s H100, enabling them to train large language models (LLMs) and build AI applications without significant upfront hardware costs.

The immediate success of Droplets led to capacity shortages, highlighting the strong demand for DigitalOcean’s AI offerings. In response, the company is expanding its GPU capacity and building a new data center in Atlanta. This facility, expected to come online in the current quarter, will not only increase AI and cloud service capacity but also improve cost efficiency as part of DigitalOcean’s long-term optimization strategy.

Market Expansion and Revenue Growth Potential The market for cloud-based AI services is set for rapid expansion, with projections indicating more than a sixfold increase between 2023 and 2030, according to Fortune Business Insights. DigitalOcean estimates that its total addressable market for infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) will grow at a compound annual rate of 22% through 2028, reaching $251 billion.

DigitalOcean is already capitalizing on this growth. The company has consistently increased its average revenue per user (ARPU), which saw a 14% year-over-year increase in the most recent quarter. Additionally, high-value customers—those generating over $100,000 in annual revenue—grew by 37% year over year. This trend suggests that DigitalOcean is not only attracting new users but also deepening engagement with existing customers, reinforcing its competitive position in the cloud computing market.

Why DigitalOcean Stock Could Double Despite anticipated flat earnings in 2025, analysts project double-digit earnings growth for DigitalOcean over the next few years. Given the company’s expanding AI-focused offerings and increasing customer spending, it has the potential to exceed these estimates.

Currently, DigitalOcean trades at just 22 times forward earnings, presenting an attractive valuation compared to broader tech sector benchmarks. If its earnings reach $2.60 per share within the next two years and the stock trades at a price-to-earnings multiple of 34—aligning with the Nasdaq-100 average—the stock price could climb to approximately $88. This represents more than double its current value.

Conclusion: A High-Potential AI Investment With strong AI-driven demand, expanding infrastructure, and a rapidly growing market opportunity, DigitalOcean is well-positioned for sustained growth. Investors looking to capitalize on the cloud-based AI boom may find DigitalOcean an appealing long-term investment, particularly at its current valuation. Given its strategic AI investments and market expansion, the stock has the potential to double in the coming years, making it a compelling option for growth-focused investors.