Key Takeaways
- DigitalOcean shares fell 19% in the week ended Nov. 6, despite 40% third-quarter revenue growth and a raised outlook.
- A $1 billion stock program and a post-midterm selloff in AI data center stocks did the damage.
- Goldman Sachs cut its target to $156 but kept its Buy rating.
- The stock looks attractive if fourth-quarter revenue grows by the 44%-45% management guided, with dilution the main risk.
DigitalOcean (DOCN) posted what management called its fifth straight quarter of faster growth on Nov. 3 and raised its outlook again. The stock still fell 19% in the week ended Nov. 6.
Growth sped up again
Third-quarter revenue grew 40% to $321 million, ahead of the roughly $307 million analysts expected. Management now guides to 44%-45% growth in the fourth quarter and 60% or more for 2027.
The consensus calls for 2027 revenue of $1.92 billion, 60% above this year’s expected $1.20 billion.
The Street balked at a $1 billion stock program
The same day, DigitalOcean filed to sell up to $1 billion of stock through an at-the-market program, which lets a company sell shares gradually at market prices. At Friday’s $72.48 close, that’s about 14 million shares, roughly 11% of the 128 million to 129 million diluted shares it guides to for the fourth quarter. At least six firms cut their targets within a day.
The share count had already risen to 105 million diluted shares in 2025, from 94.5 million a year earlier. In the third quarter, DigitalOcean also issued new shares to buy back about $472 million of convertible notes due 2030.
The election hit every data center stock
Then came the midterms. Democrats won both chambers of Congress and several key governor’s races, and investors ran from AI buildout stocks on fears of tougher scrutiny of data center construction. The Nasdaq Composite fell 5.5% on Thursday, Nov. 5, its worst day since April 2025, and DigitalOcean lost 15.85% that day. GPU clouds CoreWeave and Nebius fell 15% and 16%, respectively, over the week.
DigitalOcean’s three 2026 data centers all came online on or ahead of schedule, so a slowdown would mainly threaten later capacity, such as the 20 megawatts it has secured for 2028.
TIKR tracks 17 analysts on DigitalOcean. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on DigitalOcean, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See DigitalOcean’s Analyst Ratings
Goldman is betting the guide holds
Goldman Sachs cut its target to $156 from $178 late on Wednesday, Nov. 4, and kept its Buy rating. That’s 115% above Friday’s close and not far from the $165 consensus target from 17 analysts.
After the drop, DigitalOcean trades at 45x forward earnings, roughly in line with its five-year average.
At current estimates, $156 would mean roughly 97x forward earnings, so Goldman needs those estimates to keep rising fast.
At 45x, DigitalOcean looks attractive if it hits its guide, and Goldman’s $156 is the best case. Watch fourth-quarter results, which the company plans to report in February: revenue against the $348 million to $351 million guide, and how much stock it has sold by then.
So what is DigitalOcean stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
