Why DigitalOcean Shares Are Up 16% This Week

Actions of DigitalOcean (Doc 2.99%)a provider of streamlined cloud computing, was up 16% this week as of 1 p.m. ET Friday, according to data from S&P Global Market Intelligence. Since reporting earnings on August 8, DigitalOcean shares are up 29%.

The company completely beat expectations with its second-quarter earnings and highlighted a number of developments in the artificial intelligence (AI) space that have the market continuing to push the company’s price higher.

DigitalOcean: AI for SMEs too

DigitalOcean’s cloud computing solutions are designed with small and medium-sized businesses (SMBs) in mind. These customers represent the vast majority of the company’s customer base. They turn to DigitalOcean over hyperscalers because of the simplicity, affordability, premium support and reliability it offers.

The company’s services are ideal for SMBs (including a hands-off managed hosting solution), but they’re not a watered-down version of what their mega-peers offer.

In fact, the company is investing heavily in cutting-edge technologies amid the AI ​​revolution. Acquired Paperspace, a cloud platform for building and scaling AI applications, for $111 million in 2023. Bringing its AI capabilities in-house, DigitalOcean developed 24 new features in the second quarter, doubling its new product additions from the last six months.

The company added Bratin Saha as its new chief product and technology officer in June. Saha previously served as vice president and general manager of AI and machine learning (ML) at Amazon Web Services. By combining Saha’s AI and ML expertise with the recent acquisition by DigitalOcean, the company saw AI recurring annual revenue grow by over 200% in the second quarter.

CloudZero, a cost-effective cloud software specialist, estimates that only 44% of SMBs currently use cloud infrastructure or hosting, so DigitalOcean still has plenty of growth ahead of it.