Buffett Brain · Research note
Score updated 27 Oct 2026 · analysis from 29 Jul 2026
DOCN· Technology
DigitalOcean Holdings
DigitalOcean's high valuation and inconsistent profitability overshadow its potential in the cloud computing space.
Buffett fit
Weak fit
Owner
42
Durability
39
Management
72
Price
0
Score updated 27 Oct 2026 · analysis from 29 Jul 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned DigitalOcean outright, the next decade would involve navigating a highly competitive landscape with significant capital requirements.
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The 10-year test reveals risks, particularly the lack of profitability over the last five years, with one year of significant loss.
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DigitalOcean's share count has decreased at a CAGR of -3.89%, indicating some commitment to , but the buyback yield of 2.06% is not substantial enough to create significant shareholder value.
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With an yield of only 1.1%, the price is far from fair.
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- The full reasoning behind all four pillars
- The 5-year price target and the return it implies
- What would change the call
- Graham, Lynch and Greenblatt on the same stock
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
5- 1Revenue of $901.43M indicates a substantial customer base in the cloud computing sector.
- 2Net margin of 25% is strong relative to many competitors in the technology space.
- 3 grew by 76.45% year over year, indicating potential for cash generation.
- 4Share count has declined at a CAGR of -3.89%, showing some commitment to returning value to shareholders.
Concerns
5- 1 of 57.8 indicates an inflated valuation compared to earnings, which is unsustainable.
- 2 of 6.49% is significantly below the 15% benchmark, indicating weak returns on invested capital.
- 3The company has not been consistently profitable over the last five years, with at least one loss year.
- 4 of 58.5% is below the sector top-quintile cutoff of 60.9%, indicating competitive pressures.
Price history
$99.53+2.0%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
DigitalOcean provides a cloud computing platform catering primarily to developers and small to medium-sized businesses. Its offerings include on-demand infrastructure solutions for compute, storage, and networking, generating $901.43M in revenue. Despite high growth potential, the company has struggled to maintain consistent profitability, with a net income margin of 25%. The unit economics are challenging given the competitive landscape.
What other investors would say
The same company, judged by three other documented playbooks.
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