DOCN Earnings Preview: Options Turn Bullish as Shorts Retreat

DigitalOcean heads into its August 4 Q2 print having given back a significant chunk of its post-earnings rally, yet with options traders making an unusually assertive bullish bet heading into the release.

The most striking positioning signal is in options. The put/call ratio has dropped to 0.62 — more than 2.6 standard deviations below its 20-day average of 0.79 — making this the most call-skewed reading of the past year. That is not defensive hedging; it is directional conviction on the upside. The context matters: the stock has fallen 25% over the past month to $117.50, and slipped another 5% over the past week, so this aggressive call positioning is coming into a stock that has been genuinely punished. The last time DOCN reported — the May print — the stock jumped nearly 48% in a single session and held most of that gain over the following five days. Options traders appear to be positioning for a repeat.

Short interest tells a story of capitulation rather than renewed pressure. From a peak near 13.7 million shares in late June, shorts have unwound steadily and consistently. Short interest now represents 10% of the free float — down 30% from the one-month high and falling at a rate of roughly 15% per week. Borrow availability has widened dramatically to 845%, meaning there are more than eight shares available to lend for every one currently shorted — the loosest the lending market has been all year. Cost to borrow sits at a negligible 0.45%. The short score has fallen from 56 a week ago to 48.5 now. Shorts are not rebuilding ahead of the print; they are continuing to exit.

The analyst community has grown notably more constructive. Stifel upgraded to Buy and lifted its target from $135 to $160 on July 22. Baird initiated at Outperform with a $165 target the same day. Barclays trimmed its target from $184 to $160 while keeping Overweight, and Citigroup raised its target to $185. The Street's mean target sits at $177 — roughly 50% above the current price. Bulls point to AI workload demand, cost-competitive positioning versus hyperscalers, and strong EPS momentum that ranks in the 90th percentile of the universe. Bears flag infrastructure overbuilding risk, margin contraction concerns, and the still-rich EV/EBITDA multiple of 23.5x. The analyst recommendation diffusion score ranks in the 98th percentile, meaning the recent shift in analyst sentiment is unusually broad and fast-moving.

On the institutional side, T. Rowe Price added nearly 2.4 million shares in the most recent reported period — a meaningful accumulation for a stock of this size. Insider activity runs the other way: the CFO, CEO, and a 10% holder all sold in May and June, with the 10% holder offloading nearly 3.3 million shares at $150. That selling happened well above current prices, and the stock has since corrected sharply.

The August 4 print tests whether the AI-infrastructure growth thesis that drove the May blowout is durable — or whether the 25% pullback since then reflects a genuine reset in expectations that the quarter cannot reverse.