DigitalOcean-1 Incredibly Cheap Cloud Computing Stock to Buy Before It Soars Higher

Core Viewpoint - DigitalOcean's recent quarterly results have positively impacted its stock price, indicating potential for continued growth due to a lucrative addressable market [1][2]. Financial Performance - DigitalOcean reported a 13% year-over-year revenue increase to $192 million for Q2 2024, surpassing the consensus estimate of$ 188.6 million [3]. - Adjusted earnings rose 9% year-over-year to $0.48 per share, exceeding the consensus estimate of$ 0.39 per share [3]. Guidance and Future Outlook - The company raised its full-year revenue guidance to a range of $770 million to$ 775 million for 2024, indicating a potential revenue increase of just over 11% [4]. - Adjusted earnings guidance for 2024 was also raised to $1.65 per share, reflecting a 4% increase from 2023 levels [4]. Market Potential - DigitalOcean estimates that cloud spending by small businesses could grow from$ 114 billion in 2023 to $213 billion by 2027, representing a compound annual growth rate of 23% [6]. - The company has increased its customer base to 638,000, up from 616,000 year-over-year, with average revenue per user rising 9% to$ 99.45 [7]. Annual Revenue Run Rate - DigitalOcean's annual revenue run rate (ARR) reached $781 million, a 15% increase from the previous year, indicating stronger growth potential [7][8]. AI Market Growth - ARR from AI-related cloud offerings surged 200% year-over-year, highlighting a significant growth driver as demand for AI solutions is expected to grow at an annual rate of 31% [9][10]. Valuation - DigitalOcean is currently trading at 4.3 times sales and a forward earnings multiple of just under 20, making it relatively cheap compared to the U.S. technology sector's average price-to-earnings ratio of 42 [11].