Bore Family Office
Valuation Report — DigitalOcean Holdings (DOCN) • March 11, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 11.80% • Current Price: $62.01
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
DigitalOcean Holdings (DOCN) is a cloud infrastructure provider focused exclusively on
small and medium-sized businesses (SMBs), startups, and individual developers — the segment
systematically underserved by AWS, Azure, and Google Cloud. Founded in 2011 and IPO'd in 2021,
DigitalOcean offers VMs (Droplets), managed Kubernetes (DOKS), managed databases, object
storage (Spaces), and AI/ML infrastructure (GPU Droplets) at developer-friendly simplicity
and price points.
FY2025 Pivot: DOCN accelerated its AI infrastructure
buildout, launching GPU Droplets (NVIDIA H100/H200) and AI/ML platform features. CEO Paddy
Srinivasan (hired 2023) has been executing a disciplined "land and expand" motion — average
revenue per user growing, churn declining. Revenue grew 15.5% to $901M; FCF tripled YoY to $170M.
Key Risk: $1.7B in long-term debt vs. $170M FCF means
the company carries ~10× leverage on FCF. Notes mature 2031. This is manageable at current
rates but limits financial flexibility and raises risk if growth stalls.
📊 Financial Snapshot
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|
| Revenue ($M) | $429 | $576 | $693 | $781 | $901 |
| EBITDA ($M) | $77 | $77 | $130 | $221 | $294 |
| Operating Income ($M) | $-11 | $-26 | $12 | $91 | $157 |
| Net Income ($M) | $-20 | $-28 | $19 | $84 | $259 |
| EPS (diluted) | $-0.21 | $-0.28 | $0.20 | $0.89 | $2.52 |
| Free Cash Flow ($M) | $30 | $80 | $110 | $96 | $170 |
| Annual DPS | $0.000 | $0.000 | $0.000 | $0.000 | $0.000 |
| Total Debt ($M) | $1,463 | $1,635 | $1,650 | $1,696 | $1,701 |
| Rev YoY Growth | — | +34.3% | +20.3% | +12.7% | +15.4% |
📈 DCF Scenarios
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|
| 🔴 Bear | 20.0% | 10.0% | 2.0% | 11.80% | $32 | ▼47.6% |
| 📊 Base | 28.5% | 15.0% | 2.5% | 11.80% | $64 | ▲2.8% |
| 🚀 Bull | 40.0% | 22.0% | 3.0% | 11.80% | $139 | ▲124.3% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 20.0% | Stage 2: 10.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $0.20B | $0.18B | $0.18B |
| Year 2 | Stage 1 | $0.24B | $0.20B | $0.38B |
| Year 3 | Stage 1 | $0.29B | $0.21B | $0.59B |
| Year 4 | Stage 1 | $0.35B | $0.23B | $0.81B |
| Year 5 | Stage 1 | $0.42B | $0.24B | $1.06B |
| Year 6 | Stage 2 | $0.47B | $0.24B | $1.29B |
| Year 7 | Stage 2 | $0.51B | $0.23B | $1.53B |
| Year 8 | Stage 2 | $0.56B | $0.23B | $1.76B |
| Year 9 | Stage 2 | $0.62B | $0.23B | $1.99B |
| Year 10 | Stage 2 | $0.68B | $0.22B | $2.21B |
| Terminal | — | TV=$7.1B | PV(TV)=$2.3B (51% of EV) | EV=$4.5B |
Base Scenario
Stage 1: 28.5% | Stage 2: 15.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $0.22B | $0.20B | $0.20B |
| Year 2 | Stage 1 | $0.28B | $0.22B | $0.42B |
| Year 3 | Stage 1 | $0.36B | $0.26B | $0.68B |
| Year 4 | Stage 1 | $0.46B | $0.30B | $0.97B |
| Year 5 | Stage 1 | $0.60B | $0.34B | $1.32B |
| Year 6 | Stage 2 | $0.68B | $0.35B | $1.67B |
| Year 7 | Stage 2 | $0.79B | $0.36B | $2.03B |
| Year 8 | Stage 2 | $0.91B | $0.37B | $2.40B |
| Year 9 | Stage 2 | $1.04B | $0.38B | $2.78B |
| Year 10 | Stage 2 | $1.20B | $0.39B | $3.17B |
| Terminal | — | TV=$13.2B | PV(TV)=$4.3B (58% of EV) | EV=$7.5B |
Bull Scenario
Stage 1: 40.0% | Stage 2: 22.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $0.24B | $0.21B | $0.21B |
| Year 2 | Stage 1 | $0.33B | $0.27B | $0.48B |
| Year 3 | Stage 1 | $0.47B | $0.33B | $0.81B |
| Year 4 | Stage 1 | $0.65B | $0.42B | $1.23B |
| Year 5 | Stage 1 | $0.91B | $0.52B | $1.75B |
| Year 6 | Stage 2 | $1.12B | $0.57B | $2.33B |
| Year 7 | Stage 2 | $1.36B | $0.62B | $2.95B |
| Year 8 | Stage 2 | $1.66B | $0.68B | $3.63B |
| Year 9 | Stage 2 | $2.03B | $0.74B | $4.37B |
| Year 10 | Stage 2 | $2.47B | $0.81B | $5.18B |
| Terminal | — | TV=$28.9B | PV(TV)=$9.5B (65% of EV) | EV=$14.7B |
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|
| 9.8% | $83 | $87 | $92 | $97 | $103 |
| 10.3% | $76 | $79 | $83 | $88 | $93 |
| 10.8% | $69 | $72 | $76 | $80 | $84 |
| 11.3% | $64 | $67 | $69 | $73 | $76 |
| 11.8% | $59 | $61 | $64 | $67 | $70 |
| 12.3% | $54 | $56 | $59 | $61 | $64 |
| 12.8% | $50 | $52 | $54 | $56 | $59 |
| 13.3% | $47 | $48 | $50 | $52 | $54 |
| 13.8% | $43 | $45 | $46 | $48 | $50 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | EV/Sales | P/FCF | Rev Growth | Notes |
|---|
| DigitalOcean | DOCN | 7.8x | 37x | +15% | SMB-focused cloud |
| Linode/Akamai Cloud | AKAM | 2.5x | 18x | +5% | CDN + cloud |
| Vultr (private) | — | ~5x | — | ~20% | Private competitor |
| Cloudways/Digicert | — | ~4x | — | ~15% | Managed WP |
| AWS (Amazon) | AMZN | 3.5x | — | +19% | Dominant but complex |
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|
| FY2021 | $-0.21 | — | — | — | Actual |
| FY2022 | $-0.28 | — | — | — | Actual |
| FY2023 | $0.20 | — | — | — | Actual |
| FY2024 | $0.89 | — | — | — | Actual |
| FY2025 | $2.52 | — | — | — | Actual |
| FY2026 | $0.86 | $1.08 | $2.02 | 16 | Estimate |
| FY2027 | $1.08 | $1.77 | $2.71 | 16 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|
| FY2021 | $0.4B | — | — | — | Actual |
| FY2022 | $0.6B | — | — | — | Actual |
| FY2023 | $0.7B | — | — | — | Actual |
| FY2024 | $0.8B | — | — | — | Actual |
| FY2025 | $0.9B | — | — | — | Actual |
| FY2026 | $1.1B | $1.1B | $1.2B | 16 | Estimate |
| FY2027 | $1.4B | $1.4B | $1.5B | 16 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $65.38 | Range $36–$86
| Analyst | Firm | Rating | PT | Upside |
|---|
| Timothy Horan | Oppenheimer | Buy | $85 | +37.1% |
| Patrick Walravens | Citizens | Buy | $83 | +33.8% |
| Gabriela Borges | Goldman Sachs | Strong Buy | $78 | +25.8% |
| Raimo Lenschow | Barclays | Buy | $69 | +11.3% |
| Radi Sultan | UBS | Hold | $68 | +9.7% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|
| Q4 FY2025 | $0.72 vs $0.52 | +$0.20 ✅ | $0.2B vs $0.2B | +$0.0B ✅ | Q1 above consensus; FY2026 strong |
| Q3 FY2025 | $0.53 vs $0.40 | +$0.13 ✅ | $0.2B vs $0.2B | +$0.0B ✅ | AI GPU traction building |
| Q2 FY2025 | $0.42 vs $0.32 | +$0.10 ✅ | $0.2B vs $0.2B | +$0.0B ✅ | Raised FY guidance |
| Q1 FY2025 | $0.37 vs $0.28 | +$0.09 ✅ | $0.2B vs $0.2B | +$0.0B ✅ | In-line |
(e) Confidence Band Commentary
DOCN has been a consistent beat story — beating EPS estimates by 30-40% in recent quarters. The FY2025 EPS of $2.52 vs $0.89 FY2024 reflects large tax benefits and one-time items. Normalized FY2026 consensus of $1.08 is more realistic. Goldman Sachs strong buy ($78 PT) and the stock up +7.8% on March 10 (likely Q4 FY2025 earnings beat catalyst) suggests positive momentum. Recent analyst upgrade cluster around $68–$85 is constructive.
💡 Investment Thesis
Bull Case: DigitalOcean's AI cloud buildout positions
it as the "developer-friendly" alternative to AWS/Azure for AI workloads. SMBs and startups
training small models on DOCN's H100 GPU Droplets creates a new revenue stream. FCF scales
rapidly as the GPU infrastructure generates 60%+ gross margins. At $86 bull PT, the stock
trades at ~12× FY2027 EV/EBITDA.
Bear Case: AWS Lightsail, Google Cloud's SMB tier,
and Cloudflare Workers continue commoditizing the developer cloud market. $1.7B in debt
(10× FCF coverage) becomes a serious constraint if growth disappoints. The AI GPU buildout
requires capital DOCN doesn't have organically — raising dilution risk. Bear PT of $36.
Base Thesis: DOCN's stock is up +140% from its
52-week low of $25.45 — the market is already pricing in significant recovery. At $62, the
stock trades at 37× FCF (based on FY2025 $170M FCF), which is reasonable for 24% growth
but leaves little margin of safety given the debt load. The earnings beat on March 10 is
good news but the stock is now near analyst consensus PT of $65.38. This is a HOLD — the
easy money has been made; adding here requires higher conviction than we have at current levels.
Joseph holds 303 shares @ $80.50 avg cost — currently -23% unrealized (-$5,599).
The position is underwater. Hold at current levels; key catalyst is Q1 FY2026 earnings
showing the AI GPU revenue ramp is real and sustainable.
⚖️ DCF Verdict: Hold — DigitalOcean Holdings (DOCN)
Current price: $62.01 | Analyst Avg PT: $65.38
| Tier | Price | Action |
|---|
| Tier 1 — Starter | ≤$59 | Begin position |
| Tier 2 — Add | ≤$48 | Add on weakness |
| Tier 3 — Full | ≤$34 | Full allocation |
| Sell Alert | ≥$118 | Above fair value — consider trimming |
📂 Current Position Summary
| Metric | Value |
|---|
| Shares Held | 303 |
| Average Cost Basis | $80.50 |
| Current Market Value | $18,789 |
| Unrealized P&L | $-5,602 (-23.0%) |
| Annual DPS | — (not provided) |
| Annual Dividend Income | — (DPS missing) |
| Current Yield (at price) | — |
| Yield on Cost | — |
| vs Target (~$200K) | $18,789 / $200,000 (9%) |
Bore Family Office • Analysis generated by Lurch • Not investment advice.
