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Bank of America double upgrades this cloud stock, thinks it could prove a big AI beneficiary
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6 months agoon
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Bank of America believes that DigitalOcean is poised to benefit from rising artificial intelligence inferencing demand. Analyst Wamsi Mohan double upgraded the cloud service provider to a buy rating from underperform. He also hiked his price target to $60 per share from $34. Shares of DigitalOcean have already surged 35% this year. Mohan’s new forecast implies potential, 12-month upside of a little more than 30%. DOCN YTD mountain DOCN YTD chart As a catalyst, Mohan pointed to strong demand, estimating that the company’s preliminary revenue guidance for 2026 is approaching growth of 20%. DigitalOcean has also shared improved visibility and conviction in demand through the signing of “multiple 8-figure deals,” he wrote. “CEO Srinivasan noted very strong growth and improved visibility as reasons to drive incremental expansion of capacity,” the analyst said. “The company secured around 30MW of incremental data center capacity that will largely ramp in 1H26 (existing power footprint close to 43MW).” Mohan also applauded the company’s strong EBITDA growth, derived from its operating leverage, as well as accelerating annual recurring revenue due to sustained growth from groups of high usage customers. He highlighted that DigitalOcean is working on rapidly expanding its capacity to support growth over the next two years. “The company has been innovating on their broader cloud computing offering adding at every layer from Infrastructure (new GPU types, network file storage etc.) to Platform (agent templates, improved data integrations etc.) to Agents (CoPilot offerings, application design agents etc),” he added. “We expect continued scaling of offerings that should drive new customers and ramp higher spend from existing customers.”
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