Cloud computing marks the next stage in business analytics, computing resources, and information storage. It will be one of the most significant business innovations over the next decade, which is why many market research companies think the cloud computing market could grow by more than 17% annually to $1.6 trillion by 2030.

With prospects like that, investors may be considering how they can get in on this market shift. However, the top three cloud infrastructure companies, Amazon (Amazon Web Services (AWS)), Microsoft (Azure), and Alphabet (Google Cloud), control about 65% of the total market right now. If you know anything about these companies, it's that cloud computing isn't the largest segment of their operations. As a result, investors may be looking for a dedicated cloud computing company to best take advantage of this trend.

If you fit the description, DigitalOcean Holdings (DOCN 0.95%) may be your stock. It's solely focused on the cloud, which also means it competes with the big players.

Can DigitalOcean survive in this cutthroat environment?

A beginner's cloud

What can users can do with cloud computing? The premise is straightforward: A cloud computing provider (be it AWS or DigitalOcean) has data centers around the world with computational power. Customers can sign up to use these computing resources to support an app, store data, or host a website.

Companies of all sizes can find this useful, but the problem is the big three don't want to be spending their time on mom-and-pop start-up businesses. They're after big customers that bring sizable contracts. That's not to say AWS, Azure, or Google Cloud can't be used for this purpose; they're just not optimized for it and are likely more expensive. Providing cloud infrastructure to these smaller businesses is where DigitalOcean's niche is.

DigitalOcean's targets are small businesses and developers, and it emphasizes its simplicity, customer support, and open-source platform, making this solution ideal for its customer base. To back up its affordability claim, here's how it compares to the big three:

Cost for 4 CPUs With 8 GB Memory, 320 GB Storage, and 6,000 GB of Bandwidth
Provider Cost Without Bandwidth (Monthly) Cost With Bandwidth (Monthly)
DigitalOcean $48.00 Included in price
Google Cloud $55.09 $480.09
AWS $60.74 $521.54
Azure $60.74 $452.74

Data source: DigitalOcean.

That's some extreme value compared to the other three, which is why DigitalOcean has 105,000 customers paying at least $50 per month.

However, DigitalOcean points out that there will be 43 million developers by 2025, and more than 100 million small businesses exist globally, with 14 million more being added each year. Not every small business needs to use cloud computing. But many could benefit by using DigitalOcean's product, and relatively few have utilized its services so far.

DigitalOcean has identified a large niche and is doing a great job of catering to its core customer base. But how are its financials?

Growth in line with the big players

Despite general economic uncertainty, cloud computing is an area where businesses continue to spend. This trend was reflected in Amazon's and Alphabet's most recent quarterly results, with AWS sales growing 33% year over year to $19.7 billion and Google Cloud rising 36% year over year to $6.3 billion. (Microsoft doesn't individually break out Azure sales, so it was excluded from this comparison). DigitalOcean's entire business is cloud computing, so investors don't need to look at individual segments. Its revenue was up 29% year over year to $134 million, with annual run rate revenue up 28% from the prior-year period to $544 million.

DigitalOcean may never reach its competitors' run rates, but remember, the larger companies cater to massive enterprise customers, while DigitalOcean focuses on small businesses.

For the full year, DigitalOcean's revenue is expected to grow 32% to $566 million, with free cash flow coming in at $54 million -- a 9.5% margin. Next year, analysts expect DigitalOcean to maintain its growth, and they project 31.7% sales growth on average.

With all that in mind, I think DigitalOcean can survive in its niche. As long as the company stays true to its mission, investors shouldn't have anything to worry about. Moreover, with the company trading for a mere 8.7 times sales, I think it's also a solid buy.

Cloud computing has massive benefits and doesn't need to be solely reserved for the largest businesses. DigitalOcean is there to ensure customers of all sizes are taken care of. As one of few pure-play cloud computing investments, it could generate massive shareholder returns as this space matures over the next decade.