DigitalOcean (DOCN) shares soar 13% on disclosure of AI-native cloud-strategy

Core Highlights

AI revenue structure is biased towards high-end services

Infrastructure expansion and new product launches

Digital Ocean's share price rose 12.6% to US$126.67 after a strategy presentation at Goldman Sachs Communacopia + technology conference

DigitalOcean (DOCN)'s share price rose sharply on Tuesday. The closing increase was 12.6%, closing at US$126.67. The rise follows CEO Paddy Srinivasan's strategy presentation at Goldman Sachs's Communacopia + technology conference.

The company revealed that its native AI cloud platform focuses on inference operations rather than training workloads. Currently, reasoning services account for approximately 85% of AI-related revenue and have higher profit margins. DigitalOcean acquired an additional 20 megawatts of capacity and launched Spot Instances that instantly reach full capacity. The company raised its exit growth forecast for 2024 to more than 35%, and set its annual growth target for 2027 to more than 50%.

DigitalOcean Holdings, Inc. (DOCN)'s share price experienced a significant rebound on Tuesday, climbing 12.6% to close at $126.67, thanks to CEO Paddy Srinivasan's strategy speech at the Jinsheng Communacopia + Technology Conference. Year-to-date, the stock has gained a staggering 160%, but it is still about 30% below the 52-week high of $181.29 set in June 2026.

Management's core argument is concise and to the point: the company is transforming into an AI-native cloud platform for autonomous agents rather than human operators. Srinivasan elaborated on this vision: "The first-generation cloud infrastructure primarily supports applications created, deployed and managed by people. Today, we are building cloud infrastructure that supports agent-generated applications."

The strategy focuses on reasoning operations rather than model training, and management believes reasoning represents a more sustainable and profitable long-term opportunity.

The composition of AI revenue is biased towards high-end services

Currently, approximately 85% of DOCN's artificial intelligence revenue comes from inference-related services, including Token savings, reserved instances and bidding instances. Bare metal AI solutions account for the remaining 15%.

The company's core cloud business maintains a gross profit margin of close to 70%, which is the most profitable sector. Management pointed out that due to market dynamics and proprietary software advantages, GPU list prices have increased by approximately 30%.

CFO Matt Biilmann emphasized that the company's competitive advantage stems from its flexible contract terms, allowing it to adopt a more flexible pricing strategy than its industry peers. "In the Token economy, key issues have shifted from supply and demand indicators such as the number of GPUs to Token delivery capabilities and quality standards."

This token-based service was launched about 120 days before the conference and has now attracted 6,000 to 7,000 customers.

Infrastructure expansion and new product launches

In terms of infrastructure, DigitalOcean launched three additional data centers this year, with each center completed ahead of the expected schedule. Since the last guidance statement, the company has obtained 20 megawatts of additional capacity.

Recently launched bidding instances reach maximum capacity within minutes of release. In addition, the company released Agent Harness and Open Harness Runtime, allowing customers to integrate solutions such as Hermes, Codex and OpenClaw into their workflows.

The platform's sandbox infrastructure can instantiate an agent in a few hundred milliseconds and perform a restart in less than 100 milliseconds-much faster than the typical multi-minute time frame of traditional virtual machine environments.

In terms of sales leadership, DigitalOcean appointed Kevin, who previously worked at Vercel, as chief revenue officer.

Management has raised its 2024 exit revenue growth forecast to more than 35%, and raised its 2027 annual growth target to more than 50%, with more details to be announced when the November financial report is released.

The company reports that H100 prices continue to rise, including recent weekend gains, while noting that new generation GPU technology provides higher Token output per megawatt of energy consumed.

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