<div id="readability-page-1"><div> <h2>Key Points</h2><ul><li>DigitalOcean is aggressively building AI infrastructure for small and medium-sized businesses (SMBs).</li><li>The company's AI-related annualized revenue surged 221% in Q1 2026, sparking explosive upside in the stock. </li><li>Its stock is no longer cheap, but there could be upside ahead if revenue growth continues to accelerate. </li><li>10 stocks we like better than DigitalOcean ›</li></ul>DigitalOcean (NYSE: DOCN) is a cloud computing company that provides hundreds of services to small and medium-sized businesses (SMBs), enabling them to thrive in the digital age. The company is investing aggressively in artificial intelligence (AI) infrastructure to help its customers deploy this revolutionary technology in a simple and cost-effective way.On May 5, DigitalOcean released its first-quarter 2026 operating results. The report was so strong that its stock blasted higher by 40%, to close at $152.77 on the day. According to The Wall Street Journal, even the most bullish analyst on Wall Street had predicted the stock would reach just $121 over the next 12 months.Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an &#34;Indispensable Monopoly&#34; providing the critical technology Nvidia and Intel both need. Continue »Were analysts underestimating DigitalOcean, or is it simply overvalued now?<img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg2ODgxNS9hLXNtaWxpbmctaW52ZXN0b3ItY2VsZWJyYXRpbmctYS13aW4tb24tdGhlLWZsb29yLW9mLXRoZS1zdG9jay1leGNoYW5nZS5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="369" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg2ODgxNS9hLXNtaWxpbmctaW52ZXN0b3ItY2VsZWJyYXRpbmctYS13aW4tb24tdGhlLWZsb29yLW9mLXRoZS1zdG9jay1leGNoYW5nZS5qcGcmdz03MDA"/>Image source: Getty Images. <h2>DigitalOcean continues to expand its AI product portfolio</h2>The cloud industry is dominated by trillion-dollar giants like Amazon and Microsoft, but they mostly target large enterprises because they have the highest spending potential. This leaves the SMB cloud market wide open for providers like DigitalOcean. It captures these customers by offering affordable pricing, highly personalized support, and a simple dashboard to make deploying services easy.In the first quarter, the company launched a new platform, DigitalOcean AI-Native Cloud, comprising five distinct layers. The bottom (and most important) layer is infrastructure, which includes 20 data centers fitted with the latest AI chips from suppliers like Nvidia and Advanced Micro Devices. DigitalOcean rents the computing capacity to its SMB customers, which can use it to deploy AI applications.The other four layers work together to help SMBs turn all of that computing power into working AI software, whether they want to build data analysis tools, chatbots, or agents. The platform offers access to the latest AI foundation models from leading start-ups like OpenAI, which can help customers accelerate their development goals.DigitalOcean allows customers to start with one chip and scale up as needed, which is perfect for running small AI workloads like web-based customer-service chatbots or agents. And the company is staying true to its original cloud business model, allowing customers to pay as they go with no lock-in contracts.<h2>DigitalOcean just significantly raised its revenue growth forecast</h2>DigitalOcean ended the first quarter with $1.03 billion in annual run-rate revenue (ARR), a 22% increase from the year-ago period. It was the third consecutive quarter of accelerating growth, highlighting the company's incredible momentum.AI customers, specifically, accounted for $170 million of DigitalOcean's ARR at the end of the first quarter, and that figure soared by an eye-popping 221% year over year. Simply put, products like the AI-Native Cloud are quickly becoming the growth engine for the entire company, and that's likely to continue, as demand for computing capacity outstrips supply.For that reason, DigitalOcean raised $800 million from investors in March, which will go toward building more AI data centers. As more capacity comes online, revenue growth is likely to accelerate further. In fact, management just raised its 2027 growth forecast from 30% to 50%, which is a big reason why DigitalOcean stock rocketed higher on May 5.<h2>DigitalOcean stock is no longer cheap</h2>Based on DigitalOcean's trailing-12-month revenue, its stock is trading at a price-to-sales (P/S) ratio of 17, which is twice its long-term average of 8.1. If we assume the company grows its revenue by more than 50% in 2027, its forward P/S ratio is around 9.2.<img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vbWVkaWEueWNoYXJ0cy5jb20vY2hhcnRzLzZjMmQzMDBkMWEwNjYxNGU0YTkwNzdlYzY4NmIxYWEyLnBuZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="428" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vbWVkaWEueWNoYXJ0cy5jb20vY2hhcnRzLzZjMmQzMDBkMWEwNjYxNGU0YTkwNzdlYzY4NmIxYWEyLnBuZyZ3PTcwMA"/>Data by YCharts.From that perspective, there probably isn't much upside left in the tank in the short term. In my opinion, the stock would be a good buy right now if the company could maintain a similar rate of revenue growth in 2028 and beyond, but management hasn't provided any long-term guidance just yet.In light of DigitalOcean's spectacular first-quarter report, the stock has blown past even the most bullish price targets on Wall Street, and I expect many analysts to raise their forecasts soon. However, since the stock certainly isn't cheap, investors who buy it today need to maintain a long-term view of at least three years (but preferably more) to maximize their chances of earning a positive return. That time frame will give DigitalOcean time to grow into its valuation.<h2>Should you buy stock in DigitalOcean right now?</h2> 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 $476,034!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,274,109!* Now, it’s worth noting Stock Advisor’s total average return is 974% — a market-crushing outperformance compared to 206% for the S&amp;P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 7, 2026. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, DigitalOcean, Microsoft, 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. </div></div>

DOCN

CLOU

IDGT

DTCR

DigitalOcean's stock surged 40% after reporting a 221% increase in AI-related revenue for Q1 2026, reaching an annual run-rate revenue of $1.03 billion. The company is aggressively investing in AI infrastructure for small and medium-sized businesses, launching the DigitalOcean AI-Native Cloud platform. Despite the stock's high price-to-sales ratio of 17, analysts expect further growth as demand for AI computing capacity rises. Investors are advised to adopt a long-term perspective, as the stock may not be cheap in the short term but could offer potential returns if growth continues.

nasdaq

Digitalocean

Global X Cloud Computing ETF

iShares US Digital Infrastructure and Real Estate ETF

Global X Data Center & Dgtl Infrs ETF

Amazon

Microsoft

NVIDIA

Intel

OpenAI

NVIDIA Corporation

Here's Why This Artificial Intelligence (AI) Stock Just Exploded Past Wall Street's Most Bullish Price Target