GoDaddy Inc. (GDDY) Q1 2026 Earnings Call Transcript
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Overview
The earnings call summary provides mixed signals. Positive aspects include optimistic guidance for Airo AI Builder and strong bookings growth. However, management's lack of clarity on key financial metrics and strategies, alongside slowed international revenue growth and unclear impact of product removals, suggest uncertainties. These factors balance each other out, leading to a neutral sentiment.
Key Financial Performance
Revenue Growth 6% year-over-year growth. This was driven by operational execution and structural leverage.
Normalized EBITDA Margin 33%, up over 200 basis points year-over-year. This reflects operational execution and structural leverage.
Free Cash Flow Growth 15% year-over-year growth, reaching $474 million for the quarter. This was supported by operational efficiencies and AI-driven productivity gains.
Annualized Bookings Run Rate for Airo AI Builder $10 million+ within weeks of beta launch. This reflects strong early adoption and monetization.
Total Revenue $1.3 billion, a 6% year-over-year growth on both reported and constant currency basis. Growth was driven by operational execution and product mix.
Annual Recurring Revenue (ARR) $4.3 billion, a 6% year-over-year growth. This was supported by subscription-based solutions.
International Revenue $416 million, a 7% year-over-year growth. This was driven by strong attach of subscription-based solutions.
A&C Segment Revenue $0.5 billion, a 12% year-over-year growth. Growth was driven by solid attach of subscription-based solutions.
A&C ARR 10% year-over-year growth. This reflects strong attach of subscription-based solutions.
A&C Segment EBITDA Margin 45%, improved by 110 basis points year-over-year. This was driven by product mix.
Core Platform Segment Revenue $769 million, a 3% year-over-year growth. Growth was driven by 5% growth in primary domains and a stronger mix towards higher-priced non-.com TLDs, partially offset by softness in non-core hosting and other factors.
Core Platform Segment EBITDA Margin 33%, expanded by 150 basis points year-over-year. This was driven by product mix.
Total Bookings $1.5 billion, a 3% year-over-year growth. Growth was impacted by promotional offers, contract expiration, and lapping of prior year aftermarket strength.
A&C Bookings 9% year-over-year growth. This reflects strong attach of subscription-based solutions.
Core Platform Bookings 1% year-over-year decline. This was impacted by promotional offers and contract expiration.
ARPU (Average Revenue Per User) $246, a 9% year-over-year growth. This was driven by higher attach and retention rates above 85%.
Normalized EBITDA $414 million, a 13% year-over-year growth. This reflects operational execution and AI-driven efficiencies.
Free Cash Flow (Trailing 12 Months) $1.68 billion. This reflects strong operational execution and cash flow conversion.
Net Debt $2.6 billion, representing a net leverage of 1.4x on a trailing 12-month basis.
Share Repurchases 3 million shares repurchased during the quarter, totaling $280 million. This reflects a commitment to returning capital to shareholders.
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Operating Highlights
Airo AI Builder: Introduced last quarter, this AI-native product enables customers to create websites, applications, and business capabilities quickly. It has scaled to $10 million+ in annualized bookings run rate within weeks of its beta launch. Distribution is expanding through GoDaddy.com and Care, with targeted paid marketing starting in May.
Websites + Marketing Upgrade: AI-native capabilities were added to this product, combining AI-driven features with a powerful editor. Early tests exceeded expectations, and the upgraded functionality will soon be available to all customers.
Agent Name Service (ANS): ANS extends the role of domains as a digital identity provider in the Agentic Open Web. Partnerships have been signed, and non-GoDaddy agents in ANS implementation now number in the thousands.
AI-driven Operational Efficiency: AI is being deployed across operations, improving speed, efficiency, and customer outcomes. Examples include AI-powered automation in Care and internally built solutions replacing smaller third-party SaaS tools.
Airo Care: A new AI-native support technology rolled out to 50+ markets and 20 languages, improving resolution rates by 50% and enhancing performance in non-English markets by over 150%.
AI-native Commerce Sales Agent: Handles commerce sales without human intervention, achieving conversion rates comparable to human-assisted sales for smaller leads.
AI Transformation: GoDaddy is positioning itself as an AI-native company, leveraging AI to enhance customer experiences, operational efficiency, and product offerings.
Focus on High-Intent Customers: Efforts are directed towards attracting and growing high-intent customers, optimizing for long-term value through improved conversion, attach, and renewal rates.
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Risk or Challenges
Market Conditions: Softness in non-core GoDaddy hosting and the expiration of the .CO registry contract have negatively impacted bookings and revenue growth. Additionally, there are tougher comparisons in the aftermarket segment.
Competitive Pressures: The company faces challenges in maintaining competitive positioning as it scales AI-native products and competes in a dynamic environment with rapid technological changes.
Regulatory Hurdles: No explicit regulatory hurdles were mentioned in the transcript.
Supply Chain Disruptions: No supply chain disruptions were mentioned in the transcript.
Economic Uncertainties: No explicit economic uncertainties were mentioned in the transcript.
Strategic Execution Risks: The company is undergoing a significant AI transformation, which involves scaling new products like Airo AI Builder and ANS. There is a risk associated with maintaining disciplined investment while ensuring customer satisfaction and operational efficiency. Additionally, the company is reallocating resources from lower-value offerings to higher-value opportunities, which could pose execution challenges.
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Guidance & Outlook
Revenue Guidance for 2026: Total revenue is expected to range between $5.195 billion and $5.275 billion, representing 6% growth at the midpoint of the range.
Q2 2026 Revenue Guidance: Total revenue is projected to be between $1.285 billion and $1.305 billion, representing 6% growth at the midpoint.
Segment Revenue Growth Expectations: For both Q2 and the full year, A&C revenue is expected to grow in the low double digits, while Core Platform revenue is projected to grow in the low single digits.
Normalized EBITDA Margin: For Q2, the normalized EBITDA margin is projected to be approximately 33%, with a target of over 33% for the full year.
Free Cash Flow Guidance: The company reaffirms its full-year free cash flow target of approximately $1.8 billion, maintaining a greater than 1:1 conversion from normalized EBITDA.
AI Transformation Investments: Increased investments in AI-native products, marketing, and compute costs are planned, while maintaining operational leverage and productivity gains.
Capital Allocation Strategy: The company plans to continue prioritizing share repurchases, having deployed over 95% of free cash flow towards this purpose over the last four years.
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Shareholder Return Plan
Share Repurchase Program: GoDaddy repurchased 3 million shares during the quarter, totaling $280 million. Since 2022, the share repurchase programs have resulted in a gross reduction in fully diluted shares outstanding of over 31%. The company ended the quarter with 133 million shares outstanding.
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Key Q&A
Q:How does the company ensure they are attracting the right type of customer to the platform amidst changes in product portfolio and go-to-market strategy?
A:The company focuses on attracting high-intent customers by analyzing traffic by channel and measuring activation and attachment of other products. This approach is based on years of data showing that such customers have better renewal rates.
Q:What is the company's philosophy on balancing AI-driven operational efficiencies with reinvestment into the business?
A:The company adopts a disciplined framework, balancing margin expansion and reinvestment in innovation. They use data points to ensure returns before investing and are focusing on areas like AI Builder marketing, which, while immaterial for the current year, has potential for future growth.
Q:What is the potential growth trajectory for the Airo AI Builder product?
A:The Airo AI Builder has reached a $10 million annualized bookings run rate, driven by subscriptions and credits. While it is still early, the company is optimistic about its growth potential, supported by customer engagement and upcoming marketing efforts.
Q:Is there potential for GoDaddy's hosting capacity to support additional AI workloads?
A:Yes, Airo AI Builder uses GoDaddy hosting, which is a competitive differentiator. However, the company is focused on serving its unique customer base rather than expanding into enterprise hosting.
Q:What is the expected trajectory for bookings growth relative to revenue growth for the remainder of the year?
A:Bookings growth is expected to be at or above revenue growth for the remainder of the year, reflecting momentum in the business.
Q:What are the unit economics and margin profile of Airo AI Builder compared to legacy products?
A:The company is committed to ensuring Airo AI Builder is a gross margin-positive product. However, it is too early to provide detailed breakdowns of subscription versus credit contributions or comparisons to legacy products.
Q:When will pricing initiatives for the upgraded Websites + Marketing product be implemented?
A:Pricing changes will only be considered once the new version achieves parity in customer experience and metrics like published rates with the current version.
Q:What factors impacted A&C bookings growth in the quarter?
A:A&C bookings were impacted by go-to-market offers and allocation elements in bundled products. Pricing and bundling related to the Websites + Marketing upgrade also played a role.
Q:What is included in the monetization of Airo AI Builder?
A:Currently, monetization includes subscriptions and credits for Airo AI Builder. Upsell or cross-sell revenue from other GoDaddy products is not yet included.
Q:Why did international revenue growth slow in the quarter?
A:The slowdown was due to tougher comparisons from larger aftermarket transactions in the prior year.
Q:What is GoDaddy's competitive advantage with the Agent Name Service (ANS)?
A:GoDaddy's competitive advantage lies in linking agent registries to the Domain Name Service (DNS), leveraging its position as the world's largest domain registrar to establish trust and scalability for agents on the internet.
Q:What is the company's strategy for the Domains business?
A:The company focuses on high-intent customers and is willing to let go of low LTV customers. They aim to drive value through customers who buy domains and engage with other products.
Q:How much traffic is being directed to the Airo Website Builder, and what are the marketing plans for it?
A:Currently, only a small amount of traffic is directed to the Airo Website Builder. Marketing efforts are ramping up in Q2, with a disciplined approach to scaling based on data-driven returns.
Q:What is the pricing strategy for the AI App Builder?
A:The company has settled on a pricing structure that includes free, starter, professional, and ultimate plans with subscriptions and credits. They plan to stick to this structure for the foreseeable future.
Q:What was the impact of removing a lower-value product offering?
A:The removal of a lower-value product had little to no impact on bookings but did slightly affect customer count. The company continues to evaluate its portfolio to optimize for higher-value offerings.
Q:How is GoDaddy positioning itself as customer journeys shift to AI interfaces?
A:GoDaddy is focusing on providing value wherever customer journeys start, ensuring its APIs and offerings are competitive in an AI-driven environment.
Q:How does AI-enabled multilingual Care impact international growth opportunities?
A:AI-enabled multilingual Care allows GoDaddy to compete more effectively in international markets by providing high-quality support in smaller and non-English-speaking markets, potentially accelerating growth in these areas.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the unit economics of Airo AI Builder, the exact timeline for pricing initiatives for Websites + Marketing, and the detailed breakdown of contributions to ARPU from different products. Additionally, they did not quantify the impact of removing lower-value products on revenue or provide a clear growth trajectory for international revenue.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI experience
AI transformation
ANS
Care
GoDaddy
Name Service
adoption monetization
agent
booking
capability
commerce sale
core
cost
customer feedback
customer value
discipline
distribution
domain
efficiency
entrepreneur
experience idea
focus
identity presence
improvement
margin
market
outcome
platform
product
progress
resolution rate
standard
support
technology
use
week
GDDY Transcript
GoDaddy Inc. (GDDY) Q1 2026 Earnings Call Transcript
Unknown4-30
The earnings call summary provides mixed signals. Positive aspects include optimistic guidance for Airo AI Builder and strong bookings growth. However, management's lack of clarity on key financial metrics and strategies, alongside slowed international revenue growth and unclear impact of product removals, suggest uncertainties. These factors balance each other out, leading to a neutral sentiment.
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