Here's Why DigitalOcean Stock Soared This Week

Core Insights - DigitalOcean has experienced a significant stock rally following a strong third-quarter report that exceeded analyst expectations, particularly due to the growth in its AI business [1][8] - The company raised its revenue outlook for 2025, indicating confidence in continued growth driven by its AI platform [5] Financial Performance - DigitalOcean's total revenue increased by 16% year over year in Q3, reaching $230 million [3] - The number of customers spending at least $100,000 annually grew by 26%, with revenue from these customers surging by 41% [3] - Revenue from customers spending at least $1 million annually grew by 72% [3] - Adjusted free cash flow rose to $85 million in Q3, up from $26 million in the same period last year [4] AI Business Growth - AI revenue more than doubled year over year, marking the fifth consecutive quarter of at least 100% growth [4] - The launch of the Gradient AI platform in July has contributed significantly to the company's success [4] Future Outlook - DigitalOcean raised its revenue forecast for 2025 to a range of $896 million to $897 million, with expectations of 18% to 20% growth in 2026 [5] - The company has accelerated its pace of product launches and innovation, which is positively impacting revenue and cash flow [6] Valuation Considerations - DigitalOcean's stock is trading at approximately 22 times forward earnings, which is considered reasonable given the company's growth trajectory and success in AI [7]