Executive Summary / Key Takeaways

• GoDaddy is successfully executing a strategy focused on empowering entrepreneurs through an integrated platform, driving profitable growth and maximizing free cash flow by attracting higher lifetime value customers and enhancing conversion, attach, and retention.
• Recent financial results, particularly in Q1 2025, demonstrate strong momentum with 7.7% revenue growth, 16.4% Normalized EBITDA growth (expanding margin to 31%), and 36.2% operating cash flow growth, exceeding guidance and reinforcing confidence in full-year targets.
• The Applications and Commerce (AC) segment is a key growth engine, with Q1 2025 revenue up 16.5% and bookings up 14%, driven by successful pricing and bundling initiatives, seamless experience enhancements, and expanding commerce offerings.
• GoDaddy Airo, the AI-powered experience, is transforming customer interactions, becoming a significant funnel for website products, and showing early signs of improved retention and attach rates, representing a substantial future growth opportunity.
• The company maintains a strong balance sheet, is reducing its target net leverage to under 3x, and continues to prioritize shareholder returns through a new $3 billion share repurchase authorization approved through 2027.

A Platform for Entrepreneurs: Setting the Stage

GoDaddy Inc. (NYSE:GDDY) operates at the intersection of digital identity, presence, and commerce, serving a vast market of entrepreneurs, small businesses, and individuals seeking to establish and grow their online presence. The company's mission is rooted in empowering these everyday entrepreneurs and making opportunity more inclusive. Over its history, GoDaddy has evolved from primarily a domain registrar and hosting provider into a comprehensive platform offering a suite of integrated tools and services designed to simplify the complexities of running a digital business. This strategic pivot, emphasizing a "one-stop shop" solution backed by personalized guidance, is foundational to its current approach. A notable structural change in early 2024, converting a key subsidiary to a C corporation for U.S. tax purposes, further streamlined its operational and financial structure.

In a competitive landscape characterized by constant innovation and diverse players, GoDaddy faces rivals across multiple fronts. Direct competitors like Wix.com (WIX) and Bigcommerce (BIGC) challenge its website building and e-commerce offerings, while DigitalOcean (DOCN) competes in the cloud hosting space. Larger tech giants like Amazon Web Services (AWS) and Google Cloud also pose indirect competition in infrastructure services. GoDaddy differentiates itself through its integrated ecosystem, offering a wide range of services under one roof, a strong brand built over years, and a focus on providing high-quality customer care, often referred to as "GoDaddy Guides." While competitors like Shopify (SHOP) may exhibit faster growth rates in specific niches or offer more advanced features for certain user segments, GoDaddy leverages its scale, extensive customer data, and operational efficiencies to maintain a competitive edge, particularly in attracting and retaining cost-sensitive and less technically inclined entrepreneurs. The company's strategic focus on attracting higher lifetime value customers, rather than simply maximizing customer count, is a direct response to this dynamic environment, aiming to build more resilient and profitable customer cohorts.

Central to GoDaddy's strategic evolution and competitive positioning is its investment in technology, particularly artificial intelligence. The company is leveraging its proprietary software platform, vast data resources, and machine learning capabilities to deliver more intuitive and automated customer experiences.

Technological Differentiation: Powering the Entrepreneurial Journey

GoDaddy's technological differentiation is increasingly centered around its AI-powered initiatives, most notably GoDaddy Airo and its internal AI tools like GABI.

GoDaddy Airo: Launched for initial testing in late 2023 and rapidly expanded, Airo is designed to transform the customer experience by automating and simplifying complex tasks involved in establishing an online presence. It acts as an AI-powered guide, helping customers move from an idea to an online presence quickly. While specific quantifiable performance metrics for Airo's direct technological superiority over competitors' AI tools are not detailed, its impact is measured through customer engagement and downstream business results. Airo is becoming a significant on-ramp for customers, particularly for website products. Data from early cohorts shows that Airo is driving changes in customer behavior, leading to more customers purchasing second and third products. Early signs also indicate improved renewal rates for both domains and Websites + Marketing for customers who engage with Airo. This suggests that by providing immediate value and simplifying the initial steps, Airo increases customer stickiness and lifetime value. The company is actively developing Airo Plus, a directly monetized experience offering advanced features like AI-powered marketing tools and enhanced site building, signaling a clear path for future revenue generation from this technology. The vision extends to Agentic AI, where personalized AI agents will perform tasks for customers across multiple products, further simplifying the entrepreneurial journey.

Internal AI Tools (GABI, Conversational Bot): Beyond customer-facing tools, GoDaddy is leveraging AI for internal operational efficiency. GABI, the AI-powered guide assist bot, is rolled out globally and helps customer care guides serve customers more efficiently. A generative AI-powered conversational bot is augmenting care interactions in international markets, leading to double-digit improvements in containment rates (deflection), representing significant savings in contact minutes without sacrificing customer satisfaction. These tools enhance the quality and efficiency of GoDaddy's renowned customer care, a key competitive advantage.

The "so what" for investors is clear: GoDaddy's investment in AI, particularly Airo, is not just about new features; it's a strategic play to fundamentally change how customers interact with the platform, drive higher engagement, increase product adoption, and ultimately boost customer lifetime value. The internal AI tools contribute to operational leverage, helping to expand margins. While still in early stages of monetization, the potential for Airo to become a major driver of future growth and profitability is a key element of the investment thesis.

Performance Reflecting Strategic Execution

GoDaddy's recent financial performance underscores the effectiveness of its strategy and operational discipline. In the first quarter of 2025, the company reported total revenue of $1.194 billion, a 7.7% increase year-over-year (approximately 8.0% on a constant currency basis). This growth translated into a significant increase in profitability, with Normalized EBITDA rising 16.4% to $364.4 million, expanding the margin to 31%, exceeding the company's guidance for the quarter. This margin expansion was attributed to a favorable product mix, driven by the strong performance of higher-margin offerings, coupled with sustained operational discipline from infrastructure simplification and global talent recruitment.

The Applications and Commerce (AC) segment continues to be a primary growth engine, reflecting the success of the company's strategic initiatives. AC revenue grew 16.5% year-over-year to $446.4 million in Q1 2025, with bookings increasing by a robust 14%. This performance was fueled by continued customer adoption of subscription-based products and the positive impact of pricing and bundling initiatives. The AC segment's profitability also saw significant improvement, with Segment EBITDA expanding nearly 200 basis points to 44%. This segment is expected to continue delivering mid-teens revenue growth in the near term.

The Core Platform segment, while growing at a slower pace, remains foundational to GoDaddy's business. Core revenue increased 3.1% to $747.9 million in Q1 2025, with bookings up 5%. This growth was primarily driven by strength in domain registrations and aftermarket sales, partially offset by a decrease in hosting revenues related to past divestitures. The Core segment also contributed to overall profitability, with Segment EBITDA margin expanding by over 50 basis points to 31%.

Overall, total bookings, a key indicator of future revenue, increased 7.9% (approximately 8.7% constant currency) to $1.417 billion in Q1 2025, demonstrating continued demand for GoDaddy's offerings. Average Revenue Per User (ARPU) also grew 9% to $225 on a trailing 12-month basis, indicating the company's success in selling additional products to its customer base. While the total customer count remained stable at 20.5 million in Q1 2025, lapping the impact of recent divestitures, the focus remains on attracting higher lifetime value customers, and the company anticipates a return to customer growth later in 2025. The customer retention rate remains strong, above 85% for customers on the GoDaddy platform, and over 50% of total customers have subscribed to multiple products.

From a liquidity perspective, GoDaddy's operational performance translates directly into strong cash flow generation. Net cash provided by operating activities increased significantly by 36.2% to $404.7 million in Q1 2025, driven by the growth in total bookings and lower operating expenses. The company ended Q1 2025 with $719.4 million in cash and cash equivalents.

Outlook and Capital Allocation

GoDaddy's management expressed confidence in the durability of its business model and reaffirmed its full-year 2025 outlook. The company expects total revenue for the year to be within a range of $4.86 billion to $4.94 billion, representing growth of 7% at the midpoint. This guidance assumes continued mid-teens revenue growth in the AC segment and low single-digit growth in the Core Platform segment. For the second quarter of 2025, the company is targeting total revenue between $1.195 billion and $1.215 billion, also representing 7% growth at the midpoint.

Profitability is expected to continue its upward trajectory. The company projects a Normalized EBITDA margin of about 31% for Q2 2025 and is reaffirming its full-year 2025 target for Normalized EBITDA margin expansion of approximately 100 basis points. Management remains on track to deliver its Investor Day target of a 33% Normalized EBITDA margin by 2026. This expansion is expected to be driven by the continued shift towards higher-margin AC products, ongoing operational efficiencies, and disciplined investment.

The strong operational performance and margin expansion are expected to translate into robust free cash flow generation. GoDaddy expects Normalized EBITDA to maintain an approximate one-to-one conversion to free cash flow. The company is reaffirming its full-year 2025 free cash flow target of at least $1.5 billion, representing growth of over 11%. Management is also making steady progress towards its Investor Day target of achieving over $4.5 billion in cumulative free cash flow generation by 2026.

GoDaddy maintains a disciplined capital allocation framework. As of March 31, 2025, net debt stood at $3.1 billion, with a net leverage ratio of 1.9 times on a trailing 12-month basis. The company is reducing its target net leverage ratio to under 3x, indicating a focus on strengthening the balance sheet.

Share repurchases remain a key mechanism to return value to shareholders. The company recently completed its prior $4 billion authorization, having repurchased over 25% of its fully diluted shares outstanding since January 2022. In April 2025, the board approved a new authorization to repurchase up to an additional $3 billion of Class A common stock through the end of 2027, underscoring confidence in future cash flow generation and commitment to shareholder returns.

Risks and Challenges

While GoDaddy demonstrates strong execution and a clear strategic path, several risks could impact its performance. The macroeconomic environment, including potential economic slowdowns, inflation, and changes in foreign currency exchange rates, could affect customer demand and spending, particularly among small businesses. Increased competition across its various segments, including from larger, more resource-rich players and rapidly innovating niche providers, could pressure pricing, margins, and market share. The rapid evolution of AI technology presents both opportunities and risks, including potential reputational harm, liability, and challenges in maintaining a competitive edge if other companies develop superior AI products. Reliance on third-party infrastructure providers like AWS exposes the company to potential service interruptions and increased costs. Cybersecurity incidents remain a significant threat, potentially disrupting operations, compromising data, and leading to substantial costs and reputational damage. The quality of customer care is critical to retention and growth, and any failure to maintain high standards could adversely affect the business. Risks associated with payments-related operations, including compliance with regulations and managing fraud, could also impact financial results. Furthermore, litigation, including intellectual property claims and class action lawsuits, can be costly and divert management attention. Changes in laws and regulations related to the internet, data privacy, and taxation could also impose additional burdens and costs.

Conclusion

GoDaddy's investment thesis is grounded in its successful transformation into a comprehensive platform empowering entrepreneurs, driven by a clear strategy focused on profitable growth and free cash flow maximization. The company's recent financial performance, particularly the strong Q1 2025 results with robust revenue growth, significant EBITDA margin expansion, and impressive operating cash flow generation, provides tangible evidence of this strategy's effectiveness. The momentum in the higher-margin Applications and Commerce segment, fueled by initiatives like pricing and bundling and seamless experience enhancements, is a key driver of this success.

Looking ahead, GoDaddy's commitment to its Investor Day targets, including reaching a 33% Normalized EBITDA margin and generating substantial cumulative free cash flow by 2026, is reinforced by its current trajectory. The strategic focus on attracting higher lifetime value customers, enhancing the integrated platform, and leveraging AI through initiatives like GoDaddy Airo positions the company for continued growth and value creation. While competitive pressures and macroeconomic uncertainties persist, GoDaddy's operational discipline, strong balance sheet, and commitment to shareholder returns through share repurchases underpin its resilience. For investors, GoDaddy represents a company executing effectively against a well-defined strategy, translating operational improvements and technological innovation into expanding profitability and increasing free cash flow, making it a compelling consideration in the evolving landscape of online business services.