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DigitalOcean heads into its November 3 earnings with short sellers adding aggressively and the Street divided on whether its AI momentum can survive margin pressure.
Short interest has been the defining story this week. Bears have added meaningfully, with short interest rising nearly 7% over the past week to 11.9% of the float, around 10.9 million shares. The month-on-month build is even starker: up 32% from late September levels, a rapid acceleration that places DOCN firmly in the high short interest tier. The pace of that build is what stands out. Through September, shorts were anchored near 8.5 million shares; that jumped toward 10 million in the third week of September and has continued climbing. Days to cover, at 3.6, give this short book meaningful weight.
The lending market tells a different story. Despite the surge in short interest, availability remains loose, with around 84 million shares still lendable against fewer than 11 million borrowed. That puts availability at roughly 693%, well above any level that would suggest borrow stress. Cost to borrow is negligible at 0.53%, barely moved on the week. This is not a squeeze setup. The short side has room to grow without hitting any friction in the lending pool, and the 52-week peak availability was tighter by comparison, so today's relative looseness matters. Options positioning has also eased: the put/call ratio has dropped to 0.99, notably below its 20-day average of 1.06 and roughly 1.3 standard deviations below that mean. After weeks of elevated put demand, traders appear to be reducing downside hedges rather than adding them ahead of the print.
Analyst sentiment has shifted constructively, even as valuation stays stretched. Oppenheimer raised its target today to $220 from $190, maintaining an Outperform rating, a notable move given the stock is at $128.21. The mean Street target across the analyst group is $177.20, implying meaningful upside from current levels, though UBS remains a sceptic with a Neutral and a $140 target set after August's results. The bull case rests on DigitalOcean's AI infrastructure positioning: AI customer ARR reportedly grew 212% year-on-year to $234 million, and RPO expanded from $243 million to $894 million in the second quarter of 2026, signalling stronger forward demand visibility. The bears counter that gross margin has compressed to 55% in the most recent quarter, adjusted EBITDA guidance is capped in the high thirties, and the GPU scarcity premium that powered the re-rating may not last as hyperscalers scale inference capacity. On valuation, the PE ratio is at 72.9x and EV/EBITDA at 22.2x, both drifting lower over the past 30 days but still reflecting a growth-premium stock priced for continued execution. The EPS momentum factor score ranks in the 81st percentile on a 90-day basis, suggesting estimate revisions have been running in the right direction, though the forward earnings yield factor is near the bottom of the universe at the 3rd percentile.
The ownership picture carries one headline. Access Industries, which filed a Schedule 13D (an activist disclosure) in June 2025 and has amended four times since, is the largest holder at 15.86% of shares, down from 17.87% at the prior filing in August. That 13D is the most newsworthy fact on the register: this is not a passive stake. As of last disclosure, Access holds roughly 18.7 million shares. Meanwhile, JPMorgan's asset management arm added aggressively, reporting 6.5 million new shares in its most recent filing, lifting its declared position to 8.7% of shares. Vanguard, by contrast, exited its position entirely according to a March 2026 filing, though as a reminder, Schedule 13D/G disclosures are event-driven around the 5% threshold and a holder can fall below without filing again. CEO Padmanabhan Srinivasan sold shares under a 10b5-1 plan in both September transactions, as did the CFO and Chief Accounting Officer. None of those sales carry the same signal weight as discretionary trades, but the net insider position over 90 days is negative at roughly $5.5 million.
The last earnings print in August produced a one-day decline of around 2.1% and a five-day decline of nearly 5%. With November 3 now 20 days away, the question heading into the print is less whether AI demand is real and more whether the margin trajectory and customer concentration story holds up under scrutiny as the short book continues to build.
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