DigitalOcean posts strong AI-driven growth but shares reflect limited near-term upside, moved to Hold.

DigitalOcean Holdings reported a 29% revenue increase and 212% growth in AI customer ARR in Q2, driven by rapid AI adoption. Despite record incremental ARR of $93 million, cash flow conversion is slow due to high capital expenditure. The company secured a $725 million debt facility, indicating lender confidence and supporting expansion, but this raises leverage and cash flow risks. The analyst rates the stock as Hold with a $119 target, citing limited near-term upside unless backlog conversion improves or price drops to $95–$105.