DigitalOcean Holdings, Inc.

(RTTNews) - DigitalOcean Holdings, Inc. (DOCN) closed its $625 million offering of 0.00% convertible senior notes due 2030, including a $75 million overallotment.
Net proceeds of approximately $605.6 million will fund capped call transactions and, along with cash on hand and $380 million in term loans, repurchase $1.19 billion of 2026 convertible notes for about $1.13 billion.
CFO Matt Steinfort said the financing secures repayment of 2026 maturities, strengthens the balance sheet, and minimizes future dilution. DigitalOcean also authorized a $100 million stock buyback program through July 31, 2027.
DOCN currently trades at $31.43 or 1.26% higher on the NYSE.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

DigitalOcean Raises $625 Mln In Convertible Notes, Retires 2026 Debt And Launches $100 Mln Buyback

Key Points
DigitalOcean's growth is starting to accelerate as its AI platform matures.
The stock soared after the second-quarter earnings report as AI revenue more than doubled.
It's not too late to buy the stock at a reasonable valuation.
DigitalOcean (NYSE: DOCN), a cloud computing platform that pitches itself as a simpler alternative to Amazon Web Services and Microsoft Azure, is rapidly scaling up its artificial intelligence (AI) ambitions. The company acquired AI start-up Paperspace in mid-2023 to get its foot in the door. Under CEO Paddy Srinivasan, who took over in early 2024, DigitalOcean has been building out a full-scale AI computing platform.
On top of offering virtual servers outfitted with powerful graphics processing units (GPUs), DigitalOcean's new Gradient AI platform enables customers to build AI agents without managing infrastructure. The company's AI-related revenue more than doubled year over year in the second quarter, which was one reason why the stock exploded higher. The day after that earnings report, DigitalOcean stock soared nearly 29%.
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AI is helping reaccelerate growth for DigitalOcean, and the stock looks like a solid buy, despite the higher price tag.
Moving in the right direction
DigitalOcean's total revenue rose by 14% year over year in the second quarter, a bit faster than the 13% growth the company reported for the same period last year. Under the surface, revenue is shifting toward larger customers willing to spend more on the platform. The number of Scalers+ customers, which spend at least $100,000 annually on DigitalOcean's platform, rose by 23%, while the revenue generated by those large customers surged by 35%.
These larger customers help make DigitalOcean's revenue more reliable and predictable. The company still has plenty of small customers, with 174,000 customers who spend at least $50 per month. But 24% of total revenue now comes from the roughly 500 customers spending at least $100,000 per year on the platform.
This growth in larger customers and the improvement in the net dollar retention rate in the second quarter to 99% is partly due to DigitalOcean's quicker pace in launching new products and features. The company launched more than 60 new features across its cloud computing and AI products in the second quarter, including the general availability of its Gradient AI platform. While DigitalOcean must strike a balance between keeping its platform simple and rolling out new features, the AI industry is moving so quickly that the company can't afford to sit still.
With a strong second quarter under its belt, DigitalOcean raised its outlook for the full year. Revenue is now expected to grow by 13.8% to 14.3%, and the free-cash-flow margin is now expected to be between 17% and 19%. Free cash flow had taken a hit from the company's AI infrastructure investments, but it now appears to be recovering as the AI business takes flight.
DigitalOcean's accelerating revenue growth and boosted guidance come despite a tough economic backdrop. By not having a customer base loaded with big enterprise customers, the company may be less exposed to the phenomenon of cloud customers hunting for cost savings during tough times.
A reasonable valuation
Based on DigitalOcean's outlook for 2025, the company is on track to generate around $160 million in free cash flow at the midpoint of its guidance range for the full year. With a market capitalization hovering around $3 billion, that puts the price-to-free-cash-flow ratio at just under 19.
With DigitalOcean's revenue growth accelerating, thanks in part to the company's progress building out its AI platform, that seems like a reasonable price to pay. While a volatile macroeconomic environment could negatively impact the company later this year, DigitalOcean's AI efforts look likely to drive revenue and free-cash-flow growth in the long run as companies embrace AI technology.
Should you invest $1,000 in DigitalOcean right now?
Before you buy stock in DigitalOcean, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*
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Timothy Green has positions in DigitalOcean. The Motley Fool has positions in and recommends Amazon, DigitalOcean, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This AI Stock Is Soaring, but It's Not Too Late to Buy

Key Points
The company announced it was tapping investors for a new round of capital raising.
This will take the form of a convertible notes issue.
A darling of a tech stock last week, DigitalOcean (NYSE: DOCN) was looking rather wet on Monday. On news that the company is to launch a new round of capital raising, investors eagerly traded out of the cloud computing specialist's equity to leave it with an almost 11% loss on the day. Other stocks fared much better, as the S&P 500 index only dipped by 0.3%.
An important note about notes
Before market open, DigitalOcean announced that it aims to float a $500 million issue of convertible senior notes. These securities mature on Aug. 15, 2030, if not converted, and the initial purchasers will have an option to collectively buy another $75 million aggregate principal of the notes within a period of 13 days from issue.
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As convertible securities, the notes will accrue interest that is to be paid semiannually, although the company did not specify a rate. If converted, it will swap shares of its common stock or cash, as applicable. And after Aug. 15, 2028, the notes will be redeemable, fully or partly, at the company's option at any time up to 40 trading days before that 2030 maturity date.
In the press release trumpeting the issue, the company said it intends to use its share of the proceeds -- combined with as much as $500 million from a credit facility -- to repurchase existing convertible senior notes due to mature in 2026, and for transactions related to them.
Financial impact incoming
No matter if all, some, or none of the notes are converted into shares, this issue will affect DigitalOcean's financials. If unconverted, the notes will add considerably to a debt pile that already approached $1.8 billion as of the end of June. If converted, they would at least be moderately dilutive to the outstanding share count, which currently stands at slightly over 91 million.
Should you invest $1,000 in DigitalOcean right now?
Before you buy stock in DigitalOcean, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DigitalOcean. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Why DigitalOcean Stock Dived by Almost 11% Today

Looking at options trading activity among components of the Russell 3000 index, there is noteworthy activity today in Wynn Resorts Ltd (Symbol: WYNN), where a total volume of 8,302 contracts has been traded thus far today, a contract volume which is representative of approximately 830,200 underlying shares (given that every 1 contract represents 100 underlying shares). That number works out to 41.8% of WYNN's average daily trading volume over the past month, of 2.0 million shares. Particularly high volume was seen for the $135 strike call option expiring September 19, 2025, with 1,600 contracts trading so far today, representing approximately 160,000 underlying shares of WYNN. Below is a chart showing WYNN's trailing twelve month trading history, with the $135 strike highlighted in orange:
The Trade Desk Inc (Symbol: TTD) options are showing a volume of 61,967 contracts thus far today. That number of contracts represents approximately 6.2 million underlying shares, working out to a sizeable 41.8% of TTD's average daily trading volume over the past month, of 14.8 million shares. Particularly high volume was seen for the $90 strike call option expiring August 01, 2025, with 12,675 contracts trading so far today, representing approximately 1.3 million underlying shares of TTD. Below is a chart showing TTD's trailing twelve month trading history, with the $90 strike highlighted in orange:
And DigitalOcean Holdings Inc (Symbol: DOCN) saw options trading volume of 6,360 contracts, representing approximately 636,000 underlying shares or approximately 41.2% of DOCN's average daily trading volume over the past month, of 1.5 million shares. Particularly high volume was seen for the $30 strike call option expiring November 21, 2025, with 791 contracts trading so far today, representing approximately 79,100 underlying shares of DOCN. Below is a chart showing DOCN's trailing twelve month trading history, with the $30 strike highlighted in orange:
For the various different available expirations for WYNN options, TTD options, or DOCN options, visit StockOptionsChannel.com.
Also see:
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Noteworthy Monday Option Activity: WYNN, TTD, DOCN

Key Points
CoreWeave’s transformation from a crypto miner to a cloud GPU leader is paying off.
DigitalOcean is expanding its cloud platform at a slower and steadier rate.
The hare might beat the tortoise this time.
CoreWeave (NASDAQ: CRWV) and DigitalOcean (NYSE: DOCN) both help companies process artificial (AI) tasks with their cloud-based graphics processing units (GPUs). CoreWeave, previously a cryptocurrency mining company, mainly serves larger companies. DigitalOcean splits its servers into "droplets" for smaller businesses and developers. Each should be in a good position to profit from the explosive growth of the AI market.
However, investors are clearly more bullish on CoreWeave, which went public at $40 in March but now trades at around $125. DigitalOcean trades at $29, which is nearly 40% below its initial public offering price of $47 from March 2021. Let's see which is the better cloud AI stock.
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The differences between CoreWeave and DigitalOcean
CoreWeave was once an Ethereum (CRYPTO: ETH) miner, but it abandoned that business model in 2018 and started using its GPUs to remotely process AI tasks. In 2022, it spent about $100 million to install Nvidia's (NASDAQ: NVDA) H100 GPUs in its data centers, and it used those GPUs as collateral to secure more funding to build additional data centers. It subsequently attracted investments from Nvidia, Cisco, and other tech giants. Today, CoreWeave operates 33 data centers across the U.S. and Europe -- up from just three centers at the end of 2022. Its top customers include Microsoft (NASDAQ: MSFT) and OpenAI.
DigitalOcean's cloud infrastructure platform, which provides remote storage and computing power, is similar to Amazon Web Services and Microsoft Azure. But unlike those leading cloud platforms, which mainly serve large enterprise clients, DigitalOcean carves up its cloud servers into thinner and more affordable slices for smaller businesses. In 2023, it added cloud-based GPUs to its platform via its acquisition of Paperspace. DigitalOcean has been expanding much more slowly than CoreWeave: It currently operates 15 data centers across nine geographic regions, up from 14 centers at the end of 2022.
Which company is growing faster?
From 2022 to 2024, CoreWeave's annual revenue grew at a staggering compound annual growth rate (CAGR) of 990%, from $16 million to $1.9 billion. DigitalOcean's revenue rose at a more modest (but still respectable) CAGR of 16%, from $576 million in 2022 to $781 million in 2024.
CoreWeave grew much faster than DigitalOcean for three reasons. First, it focused only on providing cloud-based GPUs for demanding AI tasks instead of a broader range of storage and computing services. DigitalOcean's acquisition of Paperspace gave it a foothold in the AI market, but its non-AI cloud services aren't growing as rapidly.
Second, CoreWeave locked in huge customers, like Microsoft and OpenAI, that could afford to quickly ramp up their spending on its cloud-based GPU services. DigitalOcean served smaller developers and small-to-medium-size businesses -- which paid less money to deploy their apps and sandboxes.
Third, CoreWeave has taken on lots of debt and racked up steep losses to buy more GPUs and open more data centers. DigitalOcean has been prioritizing its profit growth over its near-term expansion, and its net income has stayed in the black over the past two years.
Which stock has more upside potential?
From 2024 to 2027, analysts expect CoreWeave's revenue to grow at a CAGR of 106% to $16.7 billion as it turns profitable in the final year. They expect DigitalOcean's revenue to increase at a CAGR of 14% to $1.2 billion as its net income rises at a CAGR of 29% to $179 million.
CoreWeave's projected growth trajectory looks incredible, but that expansion will likely be driven by a lot of debt and secondary offerings. Yet with a market cap of $63.5 billion, it doesn't seem that pricey relative to its growth potential at 13 times this year's sales.
DigitalOcean, with a market cap of $2.7 billion, might seem a lot cheaper at 3 times this year's sales. But it's trading at that discount because it's growing at a much slower rate. Its conservative AI strategy also isn't attracting as much attention as CoreWeave's all-in expansion.
So for now, CoreWeave still looks like a better play on the cloud and AI markets than DigitalOcean. Its business strategy is risky and aggressive, but it could generate much bigger long-term returns for its investors than DigitalOcean's less ambitious approach.
Should you invest $1,000 in CoreWeave right now?
Before you buy stock in CoreWeave, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CoreWeave wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $665,092!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,050,477!*
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Cisco Systems, DigitalOcean, Ethereum, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Better Cloud AI Stock: CoreWeave vs. DigitalOcean

Shares of SoundHound AI have dropped more than 52% in 2025 as of this writing. That isn't surprising, considering the stock was trading at an extremely rich valuation at the start of the year, following a big surge in 2024.
The voice artificial intelligence (AI) solutions provider shot up a stunning 835% last year. As a result, it was trading at a whopping 90 times sales at the beginning of 2025. This expensive valuation has led investors to book their profits in SoundHound stock amid the broader stock market uncertainty caused by factors such as the tariff-fueled trade war and the conflict in the Middle East.
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The sharp decline in SoundHound stock has brought its market cap to $3.83 billion. It won't be surprising to see the stock head lower, as it is still trading at 34 times sales, which is more than 4 times the U.S. technology sector's average sales multiple. However, there are a couple of stocks trading at much more reasonable valuations and benefiting from the fast-growing demand for AI products and services in their respective niches.
We will take a closer look at those two names and examine why they could potentially overtake SoundHound's valuation in the coming year.
1. DigitalOcean Holdings
DigitalOcean's (NYSE: DOCN) on-demand cloud computing platform is used by start-ups, small businesses, and developers to build and deploy applications in the cloud, manage their databases, and store data, among other things. The company currently has a market cap of $2.54 billion, which is about 50% below that of SoundHound.
However, DigitalOcean is trading at an extremely reasonable 3.3 times sales. Importantly, the company's growth has been picking up, thanks to the fast-growing demand for AI applications in the cloud. DigitalOcean gives customers access to powerful graphics cards from the likes of Nvidia and AMD, enabling them to build generative AI applications and run other AI-related workloads, such as model training and inference, without having to invest in expensive hardware.
It has also launched a platform to help customers develop and deploy AI agents. Not surprisingly, the company has witnessed solid traction for its AI-related offerings. Its annual recurring revenue (ARR) from AI services shot up an impressive 160% year over year in the first quarter. The company's generative AI platform, released in January of this year, enables customers to build and launch AI agents and is already being used by more than 5,000 customers.
All this explains why DigitalOcean's average revenue per user increased by an impressive 14% year over year in the first quarter. As a result, the company's adjusted earnings increased by 30% year over year in the quarter, substantially outpacing the 14% increase in its revenue. The good part is that DigitalOcean is likely to sustain its healthy growth rate for a long time to come, as it is targeting a $140 billion addressable opportunity.
Moreover, the company's ability to win a bigger share of its customers' wallets is expected to drive a nice acceleration in its bottom-line growth going forward, following a flat performance in 2025. DigitalOcean is expecting $1.90 per share in earnings this year, which would be nearly flat compared to last year, owing to the capital investments the company is making to bolster its AI infrastructure to meet the increase in demand.
However, its growth is expected to pick up in the future.
So, it is easy to see why analysts expect DigitalOcean stock to jump 35% in the coming year, based on its median price target of $37.50. If SoundHound stock continues to drop due to its expensive valuation and DigitalOcean hits the 12-month price target, thanks to its AI-fueled growth, it may be able to overtake the former's market cap.
2. Ambarella
Ambarella (NASDAQ: AMBA) is another fast-growing company that's benefiting from the growing adoption of AI in applications such as security cameras, drones, automotive, and other Internet of Things (IoT) devices. Ambarella's computer vision processors are deployed in these applications, and the demand for these chips has picked up nicely, thanks to AI.
Edge AI chips produced 75% of Ambarella's revenue in the first quarter of fiscal 2026 (which ended on April 30). Its top line increased by 58% year over year to $86 million. What's more, Ambarella swung to a profit of $0.07 per share as compared to a loss of $0.26 per share in the same quarter last year. What's worth noting is that Ambarella's AI chips are not just driving solid growth in sales volumes but also having a positive impact on its margins, owing to higher average selling prices (ASPs).
Looking ahead, Ambarella estimates that its serviceable addressable market for edge AI processors could jump to almost $13 billion by 2031, growing at an annual rate of 18% over the next five years. Management, however, is confident of growing at a faster pace than the addressable market. So, Ambarella seems to be in a nice position to sustain its healthy growth rate for a long time to come.
This is also evident from an improvement in Ambarella's earnings estimates.
The potential growth Ambarella is forecasted to deliver makes the stock a no-brainer buy right now, as it is trading at less than 7 times sales. The company's market cap currently stands at $2.2 billion. However, that market cap could rise remarkably in the coming year as Ambarella's 12-month price target, according to 15 analysts covering it, points toward a 55% spike in its stock price.
Ambarella could indeed deliver such impressive gains thanks to its robust pace of growth. And if SoundHound stock continues to head lower because of the reasons discussed earlier in this article, Ambarella's stock price jump in the coming year could be enough for it to become more valuable than the voice AI solutions provider.
Should you invest $1,000 in DigitalOcean right now?
Before you buy stock in DigitalOcean, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $704,676!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $950,198!*
Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 175% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of June 23, 2025
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, DigitalOcean, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Prediction: 2 Stocks That Will Be Worth More Than SoundHound AI 1 Year From Now

In this video, I will review three quality companies whose stock is trading near their 52-week lows. Watch the short video to learn more, consider subscribing, and click the special offer link below.
*Stock prices used were from the trading day of June 12, 2025. The video was published on June 13, 2025.
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Should you invest $1,000 in Marvell Technology right now?
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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Marvell Technology wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $655,255!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $888,780!*
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See the 10 stocks »
*Stock Advisor returns as of June 9, 2025
Neil Rozenbaum has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DigitalOcean. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Buy the Dip: These 3 Stocks Are Still Near Their 52-Week Lows

Shares of DigitalOcean (NYSE: DOCN) experienced a sharp pullback in the past three months after a bright start to the year. The drop seems quite surprising considering the company delivered a couple of solid quarterly reports so far in 2025.
DigitalOcean provides on-demand, cloud-computing infrastructure to developers, small businesses, and start-ups, and the demand for the company's solutions has picked up impressively in recent quarters thanks to artificial intelligence (AI). The growing adoption of cloud-based AI services was a key reason why DigitalOcean crushed Wall Street's estimates in February. This was followed by another set of strong results for the first quarter of 2025, released on May 6.
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Still, the cloud-computing stock trades down about 40% since hitting a 52-week high in mid-February. The good part is that this steep pullback in DigitalOcean's share price is an opportunity for savvy investors to buy a top growth stock at an attractive valuation.
Let's look at the reasons why this discounted stock is a no-brainer buy right now.
DigitalOcean's growth is improving thanks to AI
DigitalOcean reported healthy revenue growth of 14% in Q1 as compared to the year-ago period. This was a 2-percentage-point improvement to the top-line growth it delivered in Q1 2024. The company's adjusted earnings increased at a faster pace of 30% year over year.
The company's management attributed the robust growth in its revenue and earnings to the rapid adoption of its AI services. DigitalOcean customers can rent powerful graphics processing units (GPUs) from the company to train and deploy AI models, perform AI inference tasks, and scale their AI projects as per their requirements. The company gives customers the flexibility to do all of this without having to invest in expensive hardware, such as GPUs that cost in the tens of thousands of dollars each.
Moreover, DigitalOcean customers save on the costs associated with managing the AI infrastructure. They can pay for the capacity they require and focus on building and deploying AI applications. Importantly, DigitalOcean has been adding more AI-focused services to its portfolio to capitalize on the adoption of this technology.
For instance, the company introduced its GenAI Platform in January 2025, offering customers "an all-in-one solution that empowers you to build and scale AI agents quickly." Backed by popular large language models (LLMs) from the likes of Anthropic, Meta Platforms, and Mistral AI, DigitalOcean saw terrific demand for its GenAI Platform.
The company points out that more than 5,000 customers use its GenAI Platform already and have built more than 8,000 AI agents. As a result, DigitalOcean's annual recurring revenue (ARR) from AI services increased by a whopping 160% year over year in Q1. The company's focus on pushing the envelope on the product-development front played a key role in driving this growth as it released 50 new features during the quarter, which was a 5x jump from the year-ago period.
Looking ahead, the demand for AI agents is expected to increase at an annual rate of 46% through 2030, while the adoption of cloud-based AI services is also expected to jump at a compound annual growth rate of 30% over the next eight years. Moreover, DigitalOcean believes that it has a total addressable market (TAM) worth a whopping $140 billion, which means that the possibility of further acceleration in its growth cannot be ruled out, considering that it has generated just over $800 million in revenue in the past year.
Its valuation means investors get a great deal on this stock
DigitalOcean's solid growth last quarter and its sunny prospects tell us that investors are getting a great deal on this AI stock right now, considering that it is trading at just 26 times earnings. The forward price-to-earnings (P/E) ratio of 15 looks even more attractive, as it points toward robust growth in its bottom line.
Investors, however, should note that DigitalOcean's earnings forecast of $1.85 to $1.95 per share for 2025 doesn't point toward any meaningful growth from 2024 levels of $1.92 per share. That's because the company ramped up capital expenses (capex) this year to shore up its AI infrastructure. DigitalOcean's capex was 31% of revenue in Q1 as compared to 24% of revenue in the year-ago period. The company's bottom line increased nicely despite that substantial increase.
This is a result of an increase in customer spending on its platform. DigitalOcean's average revenue per customer increased by 14% year over year. This figure could move higher thanks to DigitalOcean's focus on adding new AI services.
That's why it won't be surprising to see its earnings growing at a faster pace than its guidance in 2025 and pick up pace in the long run, which could lead to more stock-price upside. That's why investors looking to buy an AI stock that delivers a mix of both value and growth should consider DigitalOcean following its sharp decline this year.
Should you invest $1,000 in DigitalOcean right now?
Before you buy stock in DigitalOcean, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,263!*
Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 170% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of May 19, 2025
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DigitalOcean and Meta Platforms. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

1 Growth Stock Down 40% to Buy Hand Over Fist Right Now

Among the underlying components of the Russell 3000 index, we saw noteworthy options trading volume today in DigitalOcean Holdings Inc (Symbol: DOCN), where a total of 8,487 contracts have traded so far, representing approximately 848,700 underlying shares. That amounts to about 56.9% of DOCN's average daily trading volume over the past month of 1.5 million shares. Particularly high volume was seen for the $30 strike call option expiring May 16, 2025, with 2,166 contracts trading so far today, representing approximately 216,600 underlying shares of DOCN. Below is a chart showing DOCN's trailing twelve month trading history, with the $30 strike highlighted in orange:
Enphase Energy Inc. (Symbol: ENPH) saw options trading volume of 30,109 contracts, representing approximately 3.0 million underlying shares or approximately 54.1% of ENPH's average daily trading volume over the past month, of 5.6 million shares. Particularly high volume was seen for the $50 strike put option expiring June 20, 2025, with 9,097 contracts trading so far today, representing approximately 909,700 underlying shares of ENPH. Below is a chart showing ENPH's trailing twelve month trading history, with the $50 strike highlighted in orange:
And Mercury General Corp. (Symbol: MCY) saw options trading volume of 1,912 contracts, representing approximately 191,200 underlying shares or approximately 53.6% of MCY's average daily trading volume over the past month, of 356,515 shares. Especially high volume was seen for the $50 strike put option expiring May 16, 2025, with 1,012 contracts trading so far today, representing approximately 101,200 underlying shares of MCY. Below is a chart showing MCY's trailing twelve month trading history, with the $50 strike highlighted in orange:
For the various different available expirations for DOCN options, ENPH options, or MCY options, visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Noteworthy Tuesday Option Activity: DOCN, ENPH, MCY

The broad market sell-off this year has weighed heavily on technology stocks. While the S&P 500 is down by about 11% from its peak, the tech-heavy Nasdaq Composite index is off by about 15%, and this more pronounced pullback isn't surprising considering that investors have become more risk-averse of late.
This is one reason why artificial intelligence (AI) stocks, which had been in fine form on the market for the past couple of years, have been heading lower even as many have been reporting solid quarterly results. However, AI adoption is set to increase at a robust pace in the long run: Grand View Research projects 36% annualized growth in this space through 2030.
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As a result, companies selling AI-focused hardware and software should ideally experience healthy growth over the long run. That's why now would be a good time to take a closer look at some solid AI stocks that have dropped in 2025 to attractive valuations, but that have the potential to fly higher in the long run thanks to the massive opportunities they are sitting on.
1. Advanced Micro Devices
Shares of chip designer Advanced Micro Devices (NASDAQ: AMD) are down by close to 29% in 2025 as of this writing. As a result, AMD now trades at an attractive 19 times forward earnings. That's well below the tech-laden Nasdaq-100 index's forward earnings multiple of 24. Even better, AMD is undervalued with respect to the growth that it is expected to deliver over the next five years.
This is evident from the stock's price/earnings-to-growth ratio (PEG ratio) of just 0.35 based on its projected five-year earnings growth, according to Yahoo! Finance. The PEG ratio is a forward-looking valuation metric that's calculated by dividing a stock's price-to-earnings ratio by the estimated annual earnings growth it could deliver over various periods. Stocks with positive PEG ratios of less than 1 are generally viewed as being undervalued with respect to their projected growth.
Consensus estimates are projecting a 36% increase in AMD's earnings to $4.51 per share this year. That's expected to be followed by healthy growth over the next couple of years as well, despite recent downward revisions in those estimates due to the economic headwinds created by President Donald Trump's tariffs and trade wars.
Of course, tariffs on semiconductors, computers, and raw materials could dent AMD's sales and earnings growth, as the company will be forced to increase the prices of its offerings, absorb higher costs, or both. However, Trump has -- at least for now -- exempted semiconductors from his tariffs, and put a 90-day pause on the comprehensive tariffs he imposed on most countries in the world to allow time for negotiations.
It remains to be seen how those various international negotiations will play out, but the administration's apparent willingness to negotiate with trade partners suggests that favorable outcomes may be possible. Additionally, tech companies' heavy investments in AI infrastructure are likely to continue despite the tariff-related turmoil. This explains why AMD is expecting to report next month that its first-quarter revenue increased by 30% year over year at the midpoint of its guidance range.
The company is on track to benefit from the growing demand for AI server CPUs (central processing units) and graphics processing units (GPUs), along with the growth in AI-enabled personal computers. Meanwhile, there are other catalysts, such as an increase in the number of design wins in the embedded chip market. Also, the upcoming gaming console upgrade cycle should be a key growth driver.
In sum, there is more to AMD than just AI, which is why investors looking for growth stocks trading at attractive valuations should consider buying it hand over fist right now.
2. DigitalOcean
DigitalOcean (NYSE: DOCN) provides on-demand cloud computing infrastructure to small businesses, developers, and start-ups, and it has recently started offering AI solutions as well. In October, the company released Droplets, an AI infrastructure platform through which customers can rent its cloud platform to train and deploy large language models (LLMs).
Demand for the platform was so strong that DigitalOcean was finding it difficult to provide enough capacity. That wasn't surprising as Droplets allowed its customers to deploy AI applications without buying expensive hardware. Not surprisingly, DigitalOcean is now investing more money to bolster its AI infrastructure.
DigitalOcean customers can also rent a more powerful version of its cloud infrastructure platform through the Bare Metal GPUs solution. The company notes that Bare Metal gives customers "maximum performance and control, ideal for sustained, high-throughput workloads that demand direct access to hardware resources and customization." So customers looking to run heavier AI workloads can also turn to DigitalOcean to fulfill their requirements.
DigitalOcean is doing the right thing by investing in AI hardware so that it can rent capacity on it to customers, as the market for that is on track to grow substantially in the long run. Goldman Sachs estimates that the cloud infrastructure-as-a-service (IaaS) market could be worth a whopping $580 billion by the end of the decade.
The addition of AI tools to its offerings is helping DigitalOcean drive stronger customer spending. In its fourth-quarter earnings release, it pointed out that the "continued traction in AI drove quarterly revenue for our top 500+ customers, representing 22% of total revenue, to grow at 37% year-over-year."
The company's average revenue per customer jumped 14% year over year. DigitalOcean is set to move deeper into AI with the addition of agentic AI solutions, which will allow its clients to build AI agents with the help of powerful LLMs on its GenAI Platform. As a result, it won't be surprising to see its customers spending even more with DigitalOcean, and even more customers signing up with it.
All this helps explain why analysts expect DigitalOcean's bottom-line growth to improve.
DOCN EPS Estimates for Current Fiscal Year data by YCharts.
Finally, with DigitalOcean trading at just 13.5 times forward earnings following its recent pullback, now is a good time for investors to buy this cloud computing stock. It could jump impressively in the long run thanks to the growing demand for AI services in the cloud.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, DigitalOcean, and Goldman Sachs Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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DigitalOcean Holdings, Inc.

Price history and volume

Shares 360

Investment risk — low

Investment potential — medium

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