Q1 2025 Earnings Summary
- Higher-Intent Customer Focus: Management emphasized pursuing higher-intent customers with a focus on improving average order size, product attach rates, and retention. This stratification ensures a more profitable customer base even if total customer growth remains stable.
- Innovative AI-Driven Offerings: The rollout and enhancements of Airo and Airo Plus, including plans for Agentic AI and personalized AI platforms, are boosting product conversion and customer engagement, potentially driving further monetization and differentiation.
- Robust Pricing and Bundling Strategy: The ongoing pricing and bundling initiatives are delivering ahead of expectations by integrating third-party products and adapting offers based on customer cohorts, which is anticipated to sustain revenue growth and long-term margin expansion.
- Weak Customer Sentiment: Recent survey feedback indicated that customers are showing some pressure in their outlook, suggesting that if broader economic headwinds worsen, GoDaddy’s resilient customer base may be at risk, impacting retention and revenue growth.
- Unproven New Product Monetization: Early-stage innovations like Airo Plus and ongoing pricing and bundling tests, although promising, remain largely unproven. If these initiatives fall short of expectations, future revenue and margin expansion might be adversely affected.
- Bookings Growth and Margin Uncertainty: While revenue growth remains robust, there are concerns regarding slower growth in certain key bookings—especially within the A&C segment—which could signal challenges in consistent cash flow conversion and sustaining favorable product mix margins.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | ~7.7% increase: from $1,108.5 million in Q1 2024 to $1,194.3 million in Q1 2025 | Growth was driven by strong operational performance across key segments, with continued momentum from earlier pricing, bundling, and subscription initiatives that boosted revenue in FY 2024 and carried over into Q1 2025. |
Segment – Applications and Commerce | ~16.5% increase: from $383.1 million in Q1 2024 to $446.4 million in Q1 2025 | Robust adoption of subscription-based products, productivity applications, and commerce solutions continued from the previous period’s 15.6% growth, enhanced by ongoing pricing and bundling initiatives that further accelerated revenue in this segment. |
Segment – Domains | ~5.6% increase: from $532.0 million in Q1 2024 to $561.9 million in Q1 2025 | Steady growth in domain registration and add-on revenues supported this change; the segment’s performance built upon prior period improvements and a consistent demand for domain services. |
Segment – Core Platform | ~3.2% increase: from $725.4 million in Q1 2024 to $747.9 million in Q1 2025 | Modest growth results from incremental gains in domain registration and aftermarket revenues, though partly offset by declines in hosting revenue similar to prior trends, leading to a modest overall increase. |
Geographic – International | ~10.2% increase: from $352.9 million in Q1 2024 to $388.8 million in Q1 2025 | Accelerated international growth is attributed to both operational improvements and favorable currency effects, building on previous period efforts in localizing marketing and payment systems that enhanced global product adoption. |
Income Statement – Operating Income | ~40.7% increase: from $175.9 million in Q1 2024 to $247.3 million in Q1 2025 | Improved operating income reflects a strong combination of revenue growth and cost management. Enhanced segment margins (particularly in A&C) and lower restructuring and other charges compared to Q1 2024 contributed to a significant efficiency gain in operations. |
Income Statement – Net Income | ~45% decrease: from $401.5 million in Q1 2024 to $219.5 million in Q1 2025 | The steep decline results primarily from the absence of one-time non-recurring tax benefits in Q1 2025 that inflated Q1 2024 net income, despite improved operating performance; this highlights the impact of extraordinary items in previous periods. |
Cost of Revenue | ~6.3% increase: from $414.5 million in Q1 2024 to $440.5 million in Q1 2025 | Rising costs are in line with increased sales across high-volume product lines such as domains and applications, reflecting the higher absolute revenue levels and corresponding cost fluctuations that continued the trends seen in Q1 2024. |
Marketing and Advertising | ~14.3% increase: from $87.5 million in Q1 2024 to $100.1 million in Q1 2025 | Increased discretionary spending aimed at boosting brand awareness and supporting new product initiatives led to a higher investment in marketing; this strategic spend grew at a pace higher than revenue, promoting long-term market positioning building on previous period initiatives. |
Cash Flow & Share Repurchases | Operating cash up ~36.2% (from $297.2 million to $404.7 million) and share repurchases surged from $(128.3) million to $(767.4) million | Improved operating cash flow is driven by better operational efficiency and growth in bookings, while the dramatic acceleration in share repurchases reflects a strategic pivot seen in Q1 2025 to return more capital to shareholders—marking a significant increase from the more measured buyback pace in Q1 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | FY 2025 | $4.86B–$4.94B (7% growth at midpoint) | $4.86B–$4.94B (7% growth at midpoint) | no change |
Normalized EBITDA Margin | FY 2025 | ~100 basis points expansion | Targeting expansion of 100 basis points | no change |
Free Cash Flow | FY 2025 | ≥$1.5B (with >11% growth) | Reaffirmed target of at least $1.5B | no change |
Revenue Growth | FY 2025 | no prior guidance | 6%–8% annual growth through 2026 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | Q1 2025 | $1.175B to $1.195B | $1.1943B | Met |
Applications & Commerce (A&C) Growth | Q1 2025 | Mid-teens year-over-year | 16.5% (from $383.1MTo $446.4M) | Met |
Core Platform Growth | Q1 2025 | Low single digits year-over-year | 3.1% (from $725.4MTo $747.9M) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Customer Segmentation | Previously, Q4 2024 emphasized a focus on high-value and high-intent customers along with initiatives around Airo-driven engagement and higher retention , while Q2 2024 highlighted broad customer segmentation with high product adoption and integrated Airo strategies. | In Q1 2025, the emphasis remains on attracting high-intent customers driven by customer cohort-based pricing and bundling with increased average order size and lifetime value; sentiment remains positive though with slight economic pressure among micro businesses. | Recurrent emphasis on high-intent segmentation but with an evolving focus from a product lens to a customer cohort lens, and a subtle adjustment in sentiment driven by economic pressures. |
Customer Sentiment | Q4 2024 discussions noted strong customer engagement through initiatives like Airo which enhanced sentiment, and Q2 2024 showed overall positive customer stories and satisfaction from long-term relationships. | Q1 2025 commentary indicates that while surveys show sentiment generally within 5‑year norms, there is some pressure on the positive outlook (notably among micro businesses) despite overall optimism about business growth. | Consistent positive sentiment overall with slight moderation due to external economic concerns, but the fundamentals remain strong. |
Innovative AI | In Q2 2024, GoDaddy introduced Airo, GABI, and expanded AI-generated content to optimize customer actions. Q4 2024 further highlighted Airo Plus, testing of third‑party integrations, and early mentions of Agentic AI as a future growth vector. | Q1 2025 deepened the focus with Airo’s AI-driven automation, generative AI “magical experiences,” and the introduction of Agentic AI for personalized services along with continued internal innovation through GABI. | Consistent commitment to AI innovation with a progression toward more advanced, generative, and agentic AI capabilities that reinforce product and service enhancements. |
Pricing and Bundling Strategy | Q2 2024 discussions framed the strategy as a key multiyear growth driver powered by data and experimentation, while Q4 2024 stressed the transition from a product‑led approach to a customer cohort-based lens and successful integration of third‑party products. | In Q1 2025, the pricing and bundling initiative is described as a multiyear initiative now testing with customer cohorts across segments, resulting in improved average order size, renewal rates, and ARPU growth, with significant early wins. | Evolving from a product-centric to a customer cohort approach, with continued iterative testing and broader integration of third‑party offerings, strengthening the impact on growth and retention. |
Bookings Growth and Revenue Conversion | Q2 2024 results showed robust overall bookings growth—with A&C driving much of the momentum—and revenues gradually trailing bookings, while Q4 2024 emphasized strong top‑line bookings growth and growing ARR alongside segment details. | Q1 2025 reported 8-9% bookings growth overall, with A&C segment growing at 14% and Core Platform reporting modest gains, while improved revenue conversion (including a 9% ARPU increase) validates earlier investments. | Steady momentum across periods where strong bookings growth consistently translates into improved revenue conversion, albeit with some variability due to tougher year‑on‑year comps. |
Margin Performance | Q2 2024 saw normalized EBITDA margins at around 29% with clear projections for continued performance, and Q4 2024 demonstrated expanded margins (normalized EBITDA at 32%) with strong segment contributions and full‑year improvements. | In Q1 2025, margins are at 31% normalized EBITDA, up over 200 basis points from prior periods, driven by a favorable product mix and operational discipline, with further margin expansion projected into Q2 2025. | Consistent margin expansion driven by product mix optimization and operational efficiencies, though the pace is moderated by strategic investments—reflecting a stable improvement trajectory. |
Applications & Commerce Growth | Q2 2024 discussions highlighted a robust 15% revenue increase and 24% bookings growth in the A&C segment driven by pricing, bundling, and commerce initiatives , while Q4 2024 noted 17% revenue and bookings growth with strong margins and transactional innovations. | Q1 2025 reported 17% revenue growth in the A&C segment with solid performance in subscription adoption and pricing and bundling integrations, reinforcing its role as a growth engine. | Robust and consistent growth in the A&C segment, demonstrating effective execution of pricing/bundling strategies and product innovations that bolster both revenue and margin performance. |
Aftermarket Domain Sales | Q2 2024 commentary highlighted modest, low single‑digit growth with occasional volatility due to unpredictable larger transactions , and Q4 2024 reiterated a low single‑digit growth while noting some volatility from larger deals. | Q1 2025 mentioned aftermarket contributions as part of Core Platform strength but did not specifically delve into sustainability aspects. | Steady modest growth anticipated with consistent low single‑digit rates; the pattern of volatility from larger transactions has remained consistent. |
Foreign Exchange Headwinds | In Q4 2024, FX headwinds were mentioned as having a small impact on bookings and expected to roll into early revenue, while Q2 2024 did not raise the issue. | Q1 2025 did not mention foreign exchange issues, suggesting minimal current impact. | Largely insignificant; FX headwinds have been only a minor factor in previous quarters and are no longer a prominent concern in the current period. |
New Product Monetization | Q2 2024 discussions acknowledged early stage monetization of Airo with cautious forecasts and limited immediate impact , while Q4 2024 emphasized monetization uncertainty with Airo Plus undergoing pricing and performance tests and modest near‑term financial impact. | Q1 2025 detailed distinctions between Airo (free functionality) and Airo Plus (premium features) with an ongoing testing process for digital marketing suites, reflecting a cautious yet strategic approach to monetization. | Recurring uncertainty around monetization of new products remains, but there is a gradual shift toward refining testing processes and sequencing monetization efforts, indicating a measured approach to unlocking long‑term revenue potential. |
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Margin & Growth Outlook
Q: What drives customer growth and margins?
A: Management emphasized that attracting higher‐intent customers—who order larger, quickly attach second products—and a favorable product mix have driven margin expansion and solid free cash flow conversion, reinforcing confidence in sustained growth. -
Share Repurchase
Q: What drove the recent buyback activity?
A: They highlighted opportunistic share repurchases—reporting a $767M buyback under the 2022 program—as part of a disciplined capital allocation approach. -
Airo & Bundling Advances
Q: How is Airo enhancing bundling?
A: Management noted that Airo’s automation is boosting order sizes and facilitating bundled product sales, while early feedback on Airo Plus shows promise for monetized upgrades. -
Booking Dynamics & Third-Party
Q: How are bookings and third-party tests progressing?
A: They reported $1.4B in bookings with robust third-party bundling trials, expecting A&C growth in the mid-teens as these strategies mature. -
Gross Margin & Digital Marketing
Q: What explains the recent gross margin dip?
A: Margins remain around 64%, with minor dips attributed to shifts in product mix; the digital marketing suite is still early in adoption with modest attach rates. -
ARPU Growth Drivers
Q: What boosted ARPU to 9%?
A: A 9% ARPU increase is driven by the focused strategy on high-intent customers paired with effective pricing and bundling that enhances order value and conversions. -
Customer Count & Campaign Impact
Q: How stable is the customer base amid campaigns?
A: Despite recent divestitures, the customer count remains steady at 20.5 million, with broad awareness efforts, including a Super Bowl campaign, supporting overall stability. -
Average Order Size Trends
Q: How has the average order size evolved?
A: Management observed a steady improvement in average order sizes, as customers rapidly add second products, contributing to better revenue quality. -
Macro Sentiment
Q: What is current small business sentiment?
A: Surveys indicate slight economic pressure but overall sentiment remains resilient and consistent with five-year norms. -
Airo Plus SKU Feedback
Q: How is Airo Plus performing so far?
A: Early indications for Airo Plus are encouraging, with competitive pricing feedback suggesting potential for broader adoption as testing continues. -
Airo vs. Airo Plus Differentiation
Q: What distinguishes Airo from Airo Plus?
A: Airo delivers a free, baseline automation service across products, whereas Airo Plus offers an enhanced, premium experience aimed at deeper customer engagement. -
Professional User Airo Response
Q: How are professional users leveraging Airo?
A: Professionals, such as small business operators in fast-paced sectors, are effectively using Airo’s Conversations feature to streamline customer interactions rapidly. -
Agency Market Opportunity
Q: What opportunity exists with agency clients?
A: There’s an emerging, long-term opportunity in the agency space through improved Websites + Marketing and Managed WordPress offerings, though the market is still in an exploratory phase. -
Hosting Bundling Efforts
Q: How is bundling being tested for hosting customers?
A: The team is actively experimenting with bundling strategies across hosting and presence products to better serve defined customer cohorts. -
Upmarket Opportunity
Q: How is the upmarket opportunity evolving?
A: New initiatives are starting to attract clients nearing $1M in revenue, signaling a gradual expansion of GoDaddy’s addressable market beyond micro businesses. -
Airo for Professionals & A&C Bookings
Q: How does Airo impact pro users and A&C bookings?
A: Airo’s enhanced functionalities are driving faster product attachment among professionals, which, alongside solid A&C bookings, underpins robust revenue fundamentals even in tougher comps. -
Commerce Mix & Office 365
Q: Does commerce mix change with Office 365 moves?
A: The commerce segment continues to lean toward service businesses, and long-standing contracts mean Office 365 price adjustments do not materially affect overall performance. -
Digital Marketing Bundling Opportunity
Q: Can digital marketing bundles scale significantly?
A: While the current attach rate for the digital marketing suite is modest, ongoing bundling tests aim to identify optimal customer cohorts for future scaled growth. -
GABI Future Use
Q: What is the plan for GABI tools?
A: GABI is enhancing internal efficiency with its AI capabilities, and while external deployment isn’t imminent, evolving technology may alter that in coming months. -
Resilience in Downturn
Q: How resilient is the business in a recession?
A: GoDaddy’s proven, customer-centric model—with competitive pricing and essential services—positions it well to navigate economic downturns, as evidenced by historical resilience. -
GPV Post-Tariff Update
Q: Any update on GPV after tariffs?
A: Gross payments volume remains healthy, driven by steady conversion of the existing customer base, with no significant impact from tariffs observed. -
Pricing & Bundling Dichotomy
Q: Which has a stronger effect: pricing or bundling?
A: Management finds it challenging to isolate the two, as both pricing and bundling work synergistically to enhance long-term customer value.