Why did DigitalOcean stock soar today? Paperspace buy to boost AI offerings

DigitalOcean (NYSE:DOCN) shares gained more than 11% on Thursday after the cloud services provider said it acquired privately held Paperspace for $111M in cash to boost its artificial intelligence offerings.

Paperspace provides cloud infrastructure with high-performance GPU tools to allow small and medium-sized businesses to test and scale their AI models on the cloud.

In a statement, DigitalOcean (DOCN) said Paperspace, which has more than 500,000 users and has raised $36M in funding, would become a part of its platform and boost the company’s overall cloud services.

DigitalOcean CEO Yancey Spruill described the deal as a “significant milestone” to let small and medium-sized businesses use the cloud for their applications and incorporate AI and machine learning into their businesses.

“The combined offerings allow customers to focus more on building applications and growing their businesses and less on the infrastructure powering them,” Spruill added.

DigitalOcean (DOCN) added that the deal will have an “immaterial impact” on the company’s results this year, with revenue growth expected to come next year and beyond. The company will have more to say about the deal on its second-quarter earnings call, scheduled for August 3.

A consensus of analysts expect DigitalOcean (DOCN) to earn 41 cents per share on $169.92M in revenue.

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