DigitalOcean Holdings, Inc. (DOCN): A Bull Case Theory

We came across a bullish thesis on DigitalOcean Holdings, Inc. (DOCN) on Rene Sellmann’s Substack. In this article, we will summarize the bulls’ thesis on DOCN. DigitalOcean Holdings, Inc. (DOCN)’s share was trading at $28.82 as of 27^th May. DOCN’s trailing and forward P/E were 25.50 and 15.02 respectively according to Yahoo Finance.

DigitalOcean stands out as a capital-disciplined, customer-focused cloud provider serving startups, developers, and small to mid-sized businesses underserved by hyperscalers like AWS and Azure. Its core advantage lies in offering a frictionless experience—simple pricing, rapid deployment, and intuitive UX—tailored for teams that value speed, control, and predictability. While traditionally viewed as a “starter cloud,” DigitalOcean has begun reversing customer churn by expanding platform depth and targeting higher-value accounts.

The number of customers spending over $100K annually rose 41% YoY in Q1, showing early success in its move upmarket. Metrics such as Net Dollar Retention (a proxy for monetization and satisfaction), growth in Scalers+ accounts, and free cash flow margin form the essential dashboard for tracking its operational execution, with rising GPU workloads and GenAI adoption offering long-term upside. Despite lacking the scale advantages of hyperscalers, DigitalOcean operates in a stable, cash-generative segment of cloud infrastructure where recurring revenue, modest churn, and growing capital efficiency create increasing predictability. Its niche is defensible because hyperscalers over-serve this segment with complexity, and most smaller competitors lack its support quality, developer brand, or productized experience.

The business is not without risks—particularly from low-end competition and evolving CapEx needs—but its focused approach, improving retention, and solid FCF profile position it well. It won’t become AWS, but it does not have to. By continuing to execute against its playbook—prioritizing customer value, simplicity, and operational leverage—DigitalOcean can carve out a durable, profitable space in a structurally sound and often misunderstood corner of the cloud market.

For a deeper look into another technology stock, be sure to check out our article on Microsoft Corporation (MSFT), wherein we summarized a bullish thesis by Ray Myers on Substack. Since our coverage, the stock is up 0.40%.

DigitalOcean Holdings, Inc. (DOCN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held DOCN at the end of the first quarter which was 18 in the previous quarter. While we acknowledge the risk and potential of DOCN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DOCN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.