DigitalOcean (DOCN) is showing improving traction and momentum with existing and new customers as part of a broader turnaround story, Oppenheimer said in a Monday note.

Customers are expected to expand their usage of DigitalOcean's infrastructure-as-a-service and platform-as-a-service cloud offerings, particularly for AI inferencing workloads.

Oppenheimer said the expansion will help the company compete effectively with "neo-cloud" vendors and drive over 20% topline growth for the next several years.

The brokerage noted that the company has a significantly larger total addressable market opportunity than current market estimates, including the growth of AI inferencing workloads, which could further boost revenue and margin trajectory above consensus.

Oppenheimer initiated coverage on the stock with an outperform rating and a $60 price target.

Shares of DigitalOcean were up 3.6% in recent trading.

Price: 51.24, Change: +1.76, Percent Change: +3.56