Nebius Vs. DigitalOcean: The Cash Positive Neocloud Arguably Looks Better
Both neoclouds are selling AI computing power as fast as they can build it, but one funds its own growth while the other has taken on billions in new debt to keep up. Which model survives a price correction?
DigitalOcean (NYSE:DOCN | DOCN Price Prediction) and Nebius Group (NASDAQ:NBIS) both reported Q2 2026 results in August. Both are selling AI computing power as fast as they can build it. DigitalOcean grew revenue 28.6% and still produced free cash flow. Nebius grew revenue 454.0% while spending billions on data centers. Both stocks have dropped more than 23% in a month, so how each one funds for growth now matters most.
Inference Pays DigitalOcean’s Bills While Gigawatts Drain Nebius
DigitalOcean generated $60.59 million in free cash flow at a 40% adjusted EBITDA margin. That cash lets it grow without leaning on outside capital. Inference grew nearly 800% and now makes up more than 70% of AI customer ARR. That mix keeps customers around longer because they add databases, storage and agents. The CEO stressed “attractive margins, positive free cash flow, capacity delivered on or ahead of schedule, and a stronger balance sheet.”
Nebius operates on a different scale. Its AI cloud adjusted EBITDA rose to $285.7 million from $9.5 million, which shows real operating leverage. But first-half capex of $8.13 billion ran well ahead of $4.50 billion in operating cash flow. To cover the gap, Nebius raised $4.34 billion in convertible securities and $2.0 billion through NVIDIA (NASDAQ:NVDA) warrants. Interest expense rose to $119.1 million from $4.8 million. That is the financing cost of rapid expansion.
| Business Driver | DigitalOcean | Nebius |
|---|---|---|
| Growth Engine | Inference and core cloud | Large GPU cluster contracts |
| RPO | $894M | $37.49B |
| Concentration | Top 25 customers: 20% of ARR | Three customers: 24%, 21%, 14% of revenue |
Diversified Developers or Billion-Dollar GPU Clusters
Nebius closed four deals that averaged more than $1 billion each. Customer prepayments covered 50% to 60% of the related capex. Management says it could sell all of its 2027 capacity today. Instead, it is holding some back for short-term deals at $40 million to $50 million per megawatt. Whether prices that high hold remains an open question.
DigitalOcean is building on a smaller scale, with about 155 megawatts committed. It retired about $472 million of convertible notes, which leaves pro forma net leverage at 0.7 times. That balance sheet leaves room to absorb mistakes.
Capacity Timing Will Decide Who Delivers in 2027
I will be watching whether DigitalOcean reaches 35%+ growth by Q4. Hitting that would set up its 50%+ growth target for 2027. For Nebius, watch its $20 billion to $25 billion capex plan for 2026. Its convertible securities also carry a $20.8 billion fair value against $8.5 billion on the books. That gap signals real dilution risk.
Why DigitalOcean’s Self-Funded Growth Could Prove More Durable
Nebius has the bigger opportunity, coupled with greater dilution risk. DigitalOcean offers a steadier financial profile. It pays for its own expansion, spreads revenue across a wide customer base and keeps leverage low. If Nebius’s asset-light partnerships and customer prepayments start covering most of its capex, that comparison would shift.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
