$DOCN

Summary

The analyst is bullish on DigitalOcean (DOCN), highlighting its strong Q2 performance, software advantage, and growing managed services revenue as reasons to favor it over neocloud competitors.

Reasoning

DOCN runs a full five-layer stack on GPUs, creating a platform that retains customers better than neocloud companies that only rent chips. DOCN's RPO and contract life have grown significantly, and AI ARR is primarily from managed services, which are stickier. Despite margin pressure from capex, the platform's potential to collect more value per token is a key advantage.

While the neocloud trade gets torched, $DOCN went the other way and ripped 10% today on record preliminary Q2 numbers. $DOCN DigitalOcean doesn't just rent you the raw GPUs, it runs a full five-layer stack on top of them, infrastructure, core cloud, inference, data, and managed agents inside one platform, then steers customers up into the higher layers. CEO Paddy Srinivasan said they "continue to extend our software advantage and further separate ourselves from bare-metal GPU rental companies." A neocloud like $CRWV or $NBIS rents you the chip and leaves the wiring to you, so a customer who needs more than compute has nowhere to go but out. $DOCN keeps them. RPO crossed $800M, up more than 10x year over year, and average contract life stretched from 1.6 years to over 3. AI ARR now comes primarily from managed services, not bare-metal rental, the layers a renter can't easily walk away from. Bit salty they dropped this today, not gonna lie. Had the full breakdown queued up. $DOCN has committed to over $1.9B in data center obligations, and gross margin already slipped from 61% to 56% as capex ran ahead of revenue. That only reverses when the new capacity fills. If it fills, a platform where every agent consumes the whole stack instead of one rented layer collects a far bigger toll on each token. Full deep dive breaking down the whole thesis is in the comments and pinned on my Substack in bio. $DOCN $CRWV $NBIS

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