Oracle (NYSE: ORCL) is delivering explosive growth in artificial intelligence (AI) infrastructure, with phenomenal demand for its data centers from hyperscalers and pure-play AI companies. But the market’s attention has shifted elsewhere -- to the remarkable rally in DigitalOcean (NYSE: DOCN), whose shares have surged 115% over the past year compared to Oracle stock's modest 4% gain.

Oracle's influence in the cloud AI infrastructure market is evident from its latest quarterly results. The tech giant reported a whopping 325% year-over-year increase in remaining performance obligations (RPO) in the third quarter of fiscal 2026 (which ended on Feb. 28) to a massive $553 billion. That's well above the $67 billion revenue that Oracle anticipates in the current fiscal year, suggesting the company is poised to deliver years of outstanding growth.

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Yet, investors have gravitated toward DigitalOcean, a much smaller data center infrastructure provider.

Let's look at the factors driving DigitalOcean's outstanding surge and check why it is built for more upside.

Oracle's terrific revenue backlog has been driven by the large-scale contracts it has struck with companies such as OpenAI, Meta Platforms, Microsoft, and others. However, these sizable contracts have weighed on Oracle stock, especially on its relationship with OpenAI.

Investors have been concerned about whether OpenAI can come up with the money needed to pay Oracle, especially as the latter has been taking on huge amounts of debt to fund its infrastructure expansion.

DigitalOcean, on the other hand, has a different business model. Its on-demand cloud computing platform caters to developers, small and medium-sized businesses, and start-ups. Simply said, DigitalOcean is a non-hyperscaler cloud computing provider that reduces the complexity and additional costs involved with running workloads in a hyperscaler setting.

In 2022, a third-party report by market research company Forrester noted that DigitalOcean was 50% cheaper than hyperscalers. So, it is easy to see why it has been witnessing robust growth in its customer base and is building a strong future revenue pipeline.

DigitalOcean's 2025 revenue increased by 15% to $901 million. The company has raised its growth estimates for 2026 and 2027, driven by strong customer growth and improving traction for its AI solutions. DigitalOcean is anticipating a 21% jump in revenue this year, followed by a stronger 30% increase in 2027.

AI, specifically, is now a major catalyst for DigitalOcean. The company offers a full-stack AI infrastructure platform that allows customers to not only rent graphics cards and server processors for running workloads, but also to access large language models, agentic AI tools, and managed services for building and scaling AI applications.

Moreover, DigitalOcean doesn't bind customers to long-term contracts and offers predictable, transparent pricing. As a result, the company's annual run rate (ARR) revenue for its AI offerings increased by 150% year over year in fourth-quarter 2025 to $120 million.

It is worth noting that 70% of its AI-centric ARR in the previous quarter came from inference services and general cloud computing services. So, DigitalOcean's strategy of buying AI data center hardware is paying off, as it is getting incremental revenue from software-centric offerings.

The strong AI-driven demand explains why DigitalOcean is going to add 31 megawatts (MW) of cloud computing capacity this year. The company admits that the investments will pressure its bottom line. Still, the good news is that DigitalOcean expects to maintain an unlevered adjusted free cash flow margin of 18% to 20%, despite adding additional capacity.

The good news is that the additional capacity will start ramping up from the second quarter of the year, suggesting that DigitalOcean can quickly generate returns from its data center investments.

DigitalOcean stock is trading at 8.4 times sales, which is a slight premium to the U.S. tech sector's average sales multiple of 8. However, that slight premium is justified by DigitalOcean's improving growth trajectory.

It wouldn’t be surprising to see the stock command a higher premium over time, as new capacity could drive faster-than-expected growth. The robust demand for its software-focused AI offerings should also positively affect the bottom line in the long run.

If DigitalOcean continues to trade at a conservative 8 times sales after three years and achieves $1.78 billion in revenue (as seen in the chart above), its market cap could reach $14.2 billion. That's almost double its current market cap, suggesting that this AI stock is worth buying hand over fist even after the outstanding gains it has achieved in the past year.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DigitalOcean, Meta Platforms, Microsoft, and Oracle. The Motley Fool has a disclosure policy.

Meet the Red-Hot Artificial Intelligence (AI) Infrastructure Stock That Has Crushed Oracle With 115% Gains in a Year. It Is Still Worth Buying Hand Over Fist. was originally published by The Motley Fool