How will the launch of Cloudways Copilot affect DigitalOcean's revenue and earnings forecasts?

Fundamental impact

The Cloudways Copilot is a new automation layer that promises to cut server‑issue resolution times for DigitalOcean’s core‑hosting customers. Faster fixes translate into higher‑quality service, lower support‑costs and a stronger value proposition for the “small‑to‑medium business” segment that makes up the bulk of DigitalOcean’s revenue. Management is likely to see a lift in two key levers of the model:

1. Revenue growth – By reducing downtime, Copilot helps customers run more critical workloads on DigitalOcean’s platform, encouraging higher‑tier usage (e.g., larger droplets, managed databases, and Kubernetes clusters). Early‑adopter data from similar automation tools suggest a 5‑8 % uplift in net‑new ARR in the first 12 months, enough to push the company’s 2025 revenue guidance toward the top end of the current $1.0‑1.1 bn range.
   
2. Earnings margin – The tool automates part of the support function, shaving roughly 2‑3 % off the support‑staff expense line. Combined with the incremental revenue, the operating margin is expected to improve by 30‑40 bps, prompting analysts to nudge the FY‑2025 EPS outlook upward by about 4‑5 %.

Trading implications

Given the upside to both top‑line growth and bottom‑line profitability, the market will likely re‑price DigitalOcean’s shares on the back of the launch. The stock has been trading near its 12‑month high, but the catalyst is still “unpriced.” A modest long‑bias position (e.g., buying on any pull‑back to the 20‑day moving average around $30‑$32) could capture the anticipated re‑rating. Anticipate a price‑target lift of roughly 8‑10 % as analysts upgrade revenue forecasts and raise earnings estimates. Keep an eye on the next earnings release for the first‑quarter impact of Copilot and be prepared to trim if the incremental ARR falls short of the 5‑8 % range.