BofA double-upgrades DigitalOcean, says ’AI inferencing demand creates tailwinds’

Investing.com -- Bank of America upgraded shares of DigitalOcean (NYSE: DOCN) to Buy from Underperform, citing accelerating revenue growth, strong demand from artificial intelligence workloads, and improving visibility into large customer deals.

“We are upgrading shares of DigitalOcean (DO) from Underperform to Buy,” analyst Wamsi Mohan wrote, pointing to “preliminary revenue guide for 2026 approaching 20% growth” and “improved visibility and conviction in demand, including signing multiple 8-figure deals (new for DO).”

BofA raised its price target for the stock to $60 from $34.

The analyst stated that the company is “expanding capacity rapidly that will support growth into 2026/2027,” while “operating leverage should drive strong EBITDA growth.”

They added that “FCF margins in the mid to high teens [are] better than peers ramping infrastructure capacity,” with sustained growth expected “from high usage customer cohorts driving ARR acceleration.”

Mohan also cited comments from Chief Executive Yancey Srinivasan, who noted “very strong growth and improved visibility” as reasons for expanding capacity.

The firm noted that DigitalOcean has secured about “30MW of incremental data center capacity that will largely ramp in 1H26,” compared with an existing footprint near 43MW.

On the AI opportunity, BofA said DigitalOcean “has been innovating on their broader cloud computing offering,” including new GPU types, network file storage, agent templates, and CoPilot offerings.

These advancements, it believes, should “drive new customers and ramp higher spend from existing customers.”

BofA raised its revenue growth expectations to 20% year-over-year for fiscal 2026 and said its higher valuation reflects “a better capture of DO’s capacity ramp” and improving profitability prospects.

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