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It's the one stock you thought you never have to worry about.
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Eliza Lasky,
Weiss Advocate
DigitalOcean's AI Surge: The Cloud Underdog Swims Upstream
Submitted by Jeffrey Neal Johnson. Published: 2/25/2026.
Key Points
- DigitalOcean is successfully pivoting its business model to capture the growing demand for artificial intelligence inference capabilities.
- The company recently delivered accelerating revenue growth while maintaining a highly profitable business model with strong margins.
- Larger enterprise customers are rapidly increasing their spending on the platform and demonstrating high retention rates for the business.
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For the past two years, the artificial intelligence (AI) boom felt like an exclusive party. If a company wasn't part of the Magnificent Seven, Wall Street barely paid attention. Trillion-dollar giants dominated the headlines, leaving smaller technology infrastructure companies on the sidelines. That narrative shifted on Feb. 24, 2026. DigitalOcean's (NYSE: DOCN) fourth-quarter earnings results provided concrete evidence that the AI spending wave has reached the mid-cap sector.
DigitalOcean's stock jumped after the report, trading as much as 11% higher intraday before closing with a gain of over 6% at $63. The catalyst was more than an earnings beat: the company reported revenue of $242 million, above analyst expectations.
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While the stock move was welcome for shareholders, the real story was the raised financial outlook and the validation of a strategic pivot. The takeaway is clear: DigitalOcean has moved beyond being a niche web hosting service for hobbyists. By rebranding as the Agentic Inference Cloud, the company is capturing the application layer of the AI economy, helping developers and small-to-medium businesses (SMBs) run powerful AI models without the complexity or cost of enterprise systems.
From GPU Farm to Sticky Platform
The most important data point from the earnings report is the growth of DigitalOcean's AI capabilities. In the past, skeptics worried that Amazon's (NASDAQ: AMZN) AWS or Microsoft's (NASDAQ: MSFT) Azure would crush smaller clouds. DigitalOcean has answered those doubts with hard numbers.
The company reported that its AI-specific Annual Run-Rate Revenue (ARR) reached $120 million in the fourth quarter, a year-over-year increase of 150%. But the story is about more than top-line growth; it also signals an improvement in the quality of the business.
- Moving Up-Market: Revenue from customers spending over $1 million annually grew 123%. Customers spending over $100,000 annually increased 58%.
- Zero Churn: Within this top-tier cohort, the company recorded 0% churn during the quarter — not a single large customer left the platform.
- Expansion: Net Dollar Retention (NDR) ticked up to 101%, an important indicator that existing customers are once again expanding their spending.
Crucially, this revenue appears to be high quality. Some companies act like GPU farms, renting out raw hardware for short-term projects; that revenue tends to be volatile. By contrast, about 70% of DigitalOcean's AI revenue comes from platform services — storage, networking, inference engines — rather than bare-metal hardware alone. That suggests customers are building long-term software applications on DigitalOcean's infrastructure, making the revenue stickier and more recurring.
David vs. Goliath: Using Simplicity as a Moat
To understand the bullish case for DigitalOcean, investors should distinguish between the two phases of AI work: Training and Inference.
The massive tech giants (hyperscalers) are waging an expensive battle to train foundational models like OpenAI's ChatGPT or Alphabet's (NASDAQ: GOOGL) Gemini. Training requires supercomputers, billions of dollars, and months of compute time. DigitalOcean wisely avoids that fight.
Instead, DigitalOcean is concentrating on inference.
- Training is like building a race car engine. It is hard, costly, and performed by relatively few players.
- Inference is driving the car to the grocery store. It is the practical use of a model to perform work.
The market for running these models (inference) is much broader in volume and practical application than the market for building them. For a small business or a startup developer, major enterprise clouds can be complex, opaque, and expensive. DigitalOcean's long-standing advantage is simplicity: the company enables developers to deploy autonomous AI agents in minutes rather than days.
DigitalOcean is also protecting its supply chain. On Feb. 19, the company announced a partnership with Advanced Micro Devices (NASDAQ: AMD) to deploy Instinct MI350X GPUs. By diversifying hardware beyond NVIDIA (NASDAQ: NVDA), DigitalOcean aims to achieve two objectives:
- Cost Efficiency: Offer better price-performance to cost-conscious SMBs.
- Supply Security: Reduce exposure to NVIDIA supply constraints.
Spending Money to Make Money
The fourth quarter also marked a financial milestone: DigitalOcean crossed $1 billion in annualized monthly run-rate revenue in December 2025. That helps shift the company from a speculative name to a serious infrastructure provider.
But markets focus on the future. In a growth-hungry environment, DigitalOcean's guidance delivered what investors wanted: acceleration.
- 2025 Actual: Revenue grew 15% for the full year.
- Q4 2025: Growth accelerated to 18%.
- 2026 Guidance: Management forecasts continued acceleration to roughly 21%.
- 2027 Target: The company sees a path to approximately 30% growth.
Unlike many speculative AI names that burn cash to chase growth, DigitalOcean remains profitable. For full-year 2025, the company reported GAAP net income of $259 million, a 29% margin. Adjusted EBITDA margins were about 42%.
Management did guide to slightly lower free cash flow margins in 2026 — a range of 15-17%. While lower cash flow can be a warning sign, here it appears to be a deliberate investment: the company is increasing capital expenditures to build new data centers because demand currently exceeds supply. In short, they are spending to capture guaranteed growth rather than burning cash on customer acquisition that may not stick.
Why DigitalOcean Matters in 2026
DigitalOcean presents a compelling risk-to-reward profile in the current technology landscape. With a market capitalization of roughly $5.8 billion, it offers exposure to the practical application layer of artificial intelligence without the valuation premiums attached to the Magnificent Seven.
The stock also carries relatively high short interest — about 10.7%. As the company continues to prove its thesis and accelerate revenue, some short sellers may be forced to cover, which could add upward pressure on the share price.
DigitalOcean has evolved from a simple web hosting provider to a meaningful infrastructure player in the AI economy. With accelerating revenue, confirmed AI traction, and a foundation of profitability, the small fish is demonstrating it can swim upstream. The data suggest that while the giants fight for the sky, DigitalOcean is winning on the ground.
Viking Therapeutics: The High-Stakes Weight Loss Contender
Submitted by Jeffrey Neal Johnson. Published: 2/26/2026.
Key Points
- The company has achieved significant clinical milestones by advancing both injectable and oral formulations of its lead weight loss candidate into late-stage trials.
- Strategic moves, including a major manufacturing agreement and the hiring of a seasoned commercial executive, demonstrate a strong commitment to future market readiness.
- Wall Street analysts project substantial upside for the stock as the company capitalizes on the immense demand for effective new treatments in the obesity sector.
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The pharmaceutical industry is in the midst of a historic gold rush around obesity treatments. While giants such as Novo Nordisk (NYSE: NVO) and Eli Lilly (NYSE: LLY) dominate headlines and pharmacy shelves, the market is hungry for a third player to disrupt the status quo. Supply shortages and high prices have opened a large opportunity for agile competitors, and Viking Therapeutics (NASDAQ: VKTX) has emerged as the most advanced clinical-stage challenger.
Trading around $34 as of late February, Viking represents a distinct alternative for investors. It is not a stable, dividend-paying giant—it's a high-beta growth play. That means the stock has higher volatility than the broader sector, but also higher upside potential. Viking sits at a crossroads, balancing the appeal of a possible buyout premium against the operational risks of challenging the world's largest drugmakers.
The Weapon of Choice: Speed and Differentiation
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Viking's lead asset is VK2735, a dual agonist that targets GLP-1 and GIP receptors. This mechanism mirrors the biology behind some of the most effective treatments available, such as Zepbound, but Viking is advancing it at a pace that sets the company apart from most clinical-stage biotechs and supports the case for meaningful commercial demand.
The company recently hit a major milestone by completing enrollment for its Phase 3 VANQUISH-1 obesity trial, exceeding its target of 4,500 patients ahead of schedule. That rapid enrollment signals two things: strong patient demand for alternatives and investigator enthusiasm for Viking's molecule. VANQUISH-2, which studies obesity in patients with Type 2 diabetes, is also nearing full enrollment in the first quarter of 2026.
Perhaps the clearest differentiator is not the injection, but the tablet. Viking is developing an oral formulation of VK2735 that produced up to 12.2% weight loss in Phase 2. Phase 3 trials for the oral version are slated to begin in the third quarter of 2026.
Most current competitors require weekly injections, which can be a barrier for many patients. Viking is one of the few companies developing a dual agonist in both injectable and oral forms, enabling a flexible treatment paradigm:
- Induction: Rapid weight loss with an injection.
- Maintenance: Daily oral therapy to sustain results.
That flexibility allows patients to remain within the Viking treatment ecosystem, a meaningful advantage over single-format therapies.
Built to Buy or Built to Last?
Wall Street has long viewed Viking as an attractive takeover target for a major drugmaker seeking entry into the obesity market. Management appears to be running a dual-track play: positioning the company to be acquired while building the infrastructure necessary to commercialize independently.
Evidence of that approach is visible in recent hires. In January 2026, Viking appointed Neil Aubuchon as Chief Commercial Officer. Aubuchon spent nearly 17 years at Eli Lilly (NYSE: LLY), and his move to Viking suggests confidence in the commercial potential of the pipeline.
Viking also signed a comprehensive agreement with CordenPharma to support commercial-scale manufacturing of VK2735. This is a strategic step: Lilly and Novo have both faced manufacturing shortages, and many small biotechs falter not because their drugs fail, but because they cannot produce enough supply.
By securing a top-tier manufacturing partner and experienced commercial leadership, Viking reduces execution risk. That creates leverage: an acquirer would be buying not only intellectual property but a near-turnkey commercial operation, which can force potential buyers to pay a premium knowing Viking could launch on its own if needed.
Burning Cash to Build Value
Biotech growth is expensive, and Viking's financials reflect those costs. In its fourth-quarter earnings report released in February 2026, the company reported a loss of $1.38 per share, wider than analyst estimates of a $0.89 loss. That gap was driven primarily by Research and Development expenses, which rose to $345 million for the fiscal year from $101.6 million the previous year.
Investors should view that spending in context: the capital is funding large, simultaneous Phase 3 programs. To support those trials, Viking maintains a strong balance sheet with clear strengths:
- Liquidity: $706 million in cash, cash equivalents, and short-term investments.
- Runway: That liquidity should fund the company through its major data readouts in 2026, reducing the immediate need for a dilutive capital raise.
Yet the market remains skeptical. As of late January 2026, short interest in Viking was about 26 million shares, roughly 24.04% of the float. That level of bearish positioning creates a volatile, coiled-spring dynamic.
Short sellers are betting the stock will fall. But if Viking posts positive news — for example, completion of VANQUISH-2 enrollment or a successful IND filing for its new amylin agonist — shorts could be forced to cover quickly. That buying pressure can drive the stock higher regardless of broader market trends, a phenomenon known as a short squeeze.
The gap between market sentiment and analyst expectations is wide. While the stock trades in the mid-$30s, the average analyst price target is $87.80, implying more than 150% upside if Viking executes its roadmap.
The Final Weigh-In: Risk Meets Reward
Viking Therapeutics represents a high-stakes opportunity in one of modern medicine's most lucrative areas. It offers exposure to the obesity drug revolution, with the potential to become a major player either through a lucrative acquisition or a successful independent launch.
The company has moved from early-stage research to late-stage execution: VANQUISH-1 is fully enrolled and the oral program is moving toward Phase 3. At the same time, the dual-track strategy of securing manufacturing capacity and commercial leadership provides a measure of protection if a buyout does not occur.
That said, the path is volatile. Viking's stock reacts strongly to news from larger competitors, and high short interest makes further swings likely. For investors with a tolerance for risk, the company's cash reserves and advanced clinical data present a compelling case. The next near-term catalyst to watch is the completion of enrollment in the VANQUISH-2 diabetes trial, expected later this quarter.
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