DigitalOcean raises its 2027 growth target to 60% and files to sell $1 billion of new shares the same day
DigitalOcean raised its 2027 growth target to 60%+ the same morning it opened a $1 billion share program, and its 10-Q shows leases, not debt, now fund the AI build. Analysts cut five price targets into the beat, yet the Street average still sits near double the market price.
Richard Tang · 3 min read
DigitalOcean+5.36% — DigitalOcean, up 5.36 percent as of its last quote raised its 2027 growth target to 60% or more and filed the paperwork to sell up to $1 billion of new shares the same morning 12. Both documents matter, and the stock's fall from $89.79 on Nov 2 to $84.02 at the Nov 4 close shows the market weighing the second against the first 25. The growth figures and the at-the-market program (ATM) came out of the same-day documents, and the lease arithmetic in the 10-Q explains why both belong in the same story 12.
The bull case is real 1. DigitalOcean (DOCN), the AI-native cloud run by CEO Paddy Srinivasan and CFO Matt Steinfort, reported Q3 revenue of $321 million, a fifth straight quarter of acceleration, and lifted its 2027 growth outlook, adding over $0.5 billion at the midpoint to projected revenue 1. The core argument is yield per megawatt: $18 million of annual recurring revenue (ARR) on average across the fleet, built on short-term consumption pricing rather than the multi-year bare-metal contracts of neoclouds, the bare-metal AI rental providers like CoreWeave+6.50% — CoreWeave, up 6.50 percent today 1.
That pricing captures upside while capacity is scarce, which is exactly what Goldman Sachs+0.15% — Goldman Sachs, up 0.15 percent today analyst Gabriela Borges pressed on: management offered no sensitivity to what happens when spot prices normalize 1.
Growth has accelerated five straight quarters as gross margin falls
Growth accelerated five straight quarters to 39.9% while gross margin fell to 50.1%
- Revenue growth, year over year
- Gross margin
Data
| Revenue growth, year over year | Gross margin | |
|---|---|---|
| Q2 '24 | 13.3% | 59.3% |
| Q3 '24 | 12.1% | 58.7% |
| Q4 '24 | 13.3% | 61.5% |
| Q1 '25 | 14.1% | 61.4% |
| Q2 '25 | 13.6% | 59.9% |
| Q3 '25 | 15.7% | 59.6% |
| Q4 '25 | 18.3% | 58.7% |
| Q1 '26 | 22.4% | 56.1% |
| Q2 '26 | 28.6% | 55% |
| Q3 '26 | 39.9% | 50.1% |
The leases explain the equity
The 10-Q filed the same morning shows why the ATM is open 2. Finance-lease and equipment-financing liabilities jumped from $130.5 million at the end of 2025 to $923.6 million by September, while convertibles and the term loan fell from $1.32 billion to $465.5 million 2.
Behind that sit $2.96 billion of signed data-center leases not yet started, running an average of 11.1 years, so payments stretch past 2037 2. We flagged the MUFG equipment facility and its September 2030 repayment in September when it stood at $725 million; what is new since Oct 6 is its expansion to $785 million 2. Equity fills the gap between machines paid off by 2030 and buildings leased beyond it 2. The full ATM means about 11.1 million new shares, roughly 9.4% of the 117.9 million outstanding (Rackline's estimate) 2.
DigitalOcean swapped $850M of debt for leases in nine months
Debt fell from $1.32B to $465M in nine months while lease obligations nearly doubled
- Dec 31, 2025
- Sept 30, 2026
Data
| Dec 31, 2025 | Sept 30, 2026 | |
|---|---|---|
| Convertible notes and term loan | 1,317.3M | 465.5M |
| Finance leases and equipment financing | 130.5M | 923.6M |
| Operating leases | 274.9M | 666.6M |
The Street split the verdict
Five analysts cut price targets into the beat 345. Canaccord Genuity kept its Buy and cut its target to $180 from $200; Stifel went to $130 from $160; UBS trimmed to $100 and kept its Neutral rating 345. The Street average still sits at $168, roughly double the $84.02 Nov 4 close 5. A market that halves its price on the funding while doubling the stock on the average target is pricing the dilution, not the demand.
Analysts cut targets into the beat, and still average $168
Even after cuts, the average target sits near double the market price
Data
| Price target ($) | |
|---|---|
| Canaccord (Buy) | 180 |
| Street average | 168 |
| Stifel | 130 |
| UBS (Neutral) | 100 |
| Nov 4 close | 84.02 |
What decides it
The builders turning inference capacity into software yield deserve the reward, and DigitalOcean is executing the gap between GPU supply and customer demand better than bare-metal peers: demand "well in excess of supply," most AI revenue attached to core cloud, record net new ARR 1. The risk is not solvency, with about $1.2 billion of liquidity and 2027 "covered" by management's count 1.
It is that short-term pricing and falling gross margin meet a loosening supply market before the 75 megawatts of 2027 capacity arrives 1. Watch two things: whether the colocation partners deliver that capacity on schedule through the year, and whether spot GPU rates hold while it does 1.
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