GDDY Q1 Earnings Call: AI Initiatives and Bundling Drive Margin Expansion Amid Customer Base Stability

Domain registrar and web services company GoDaddy (NYSE: GDDY) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.7% year on year to $1.19 billion. The company expects next quarter’s revenue to be around $1.21 billion, close to analysts’ estimates. Its non-GAAP profit of $2.10 per share was 12.8% above analysts’ consensus estimates.

Is now the time to buy GDDY? Find out in our full research report (it’s free).

StockStory’s Take

GoDaddy’s first quarter results were shaped by operational progress on pricing, bundling, and product innovation, particularly within its Artificial Intelligence (AI)-powered tools. CEO Aman Bhutani highlighted the ongoing shift from product-centric to customer cohort-driven strategies—especially in pricing and bundling—as a core factor driving higher average order sizes and improved customer retention. Notably, GoDaddy’s seamless experience initiative and expanded commerce offerings, including GoDaddy Capital and same-day payouts, contributed to higher engagement and renewal rates.

Looking ahead, management reaffirmed its full-year revenue outlook, citing continued confidence in the company’s ability to attract higher lifetime value customers and expand free cash flow. CFO Mark McCaffrey emphasized that the company’s operational discipline, investments in marketing for the Airo platform, and continued innovation in AI and automation remain central to their margin expansion targets. While GoDaddy acknowledged modest headwinds in small business sentiment, management stated that customer resilience and a favorable product mix underpin their guidance for the remainder of the year.

Key Insights from Management’s Remarks

GoDaddy’s management attributed the quarter’s revenue and margin gains to progress on its AI-driven product suite, disciplined execution on pricing and bundling, and ongoing efforts to attract higher value customers. The company also extended its share repurchase program, reflecting confidence in its capital return framework.

• AI-powered product engagement: The rollout of Airo, GoDaddy’s generative AI platform, continued to drive increased product attachment and customer engagement. Management noted that Airo customers are purchasing more products and demonstrating higher renewal rates. Early results from Airo Plus, the premium tier, are encouraging but still in the initial testing phase.
• Bundling and pricing strategy: Management’s shift from product-based to customer cohort-based pricing and bundling delivered ahead of internal expectations. The company is testing new bundles across segments, leveraging its platform to quickly integrate both proprietary and third-party products, which is expanding average order size and customer retention.
• Commerce and payments growth: GoDaddy’s commerce segment saw healthy annualized gross payments volume growth, primarily from deeper conversion within its existing customer base. New offerings such as GoDaddy Capital (merchant cash advance) and same-day payouts are gaining traction, broadening the company’s one-stop-shop value proposition.
• Operational efficiency and margin expansion: The company expanded its normalized EBITDA margin, crediting favorable product mix, infrastructure simplification, and disciplined marketing spend, especially around AI-driven products. Management reiterated that product mix—not one-off cost savings—was the primary driver of margin gains.
• Capital allocation and buybacks: With the prior $4 billion repurchase program completed, GoDaddy’s board approved a new $3 billion share repurchase authorization through 2027. Management reiterated its focus on returning value to shareholders within a disciplined capital allocation framework.

Drivers of Future Performance

GoDaddy’s management outlined a future focused on expanding its high-intent customer base, further AI integration, and disciplined capital deployment, with ongoing macroeconomic monitoring.

• AI and automation rollout: The company expects continued improvements in customer engagement and retention as Airo and Agentic AI features automate more tasks for small businesses, supporting lifetime value growth.
• Bundling and pricing optimization: Further testing of customer cohort-driven bundles and rapid integration of third-party solutions are expected to sustain higher average order size and lower churn rates, supporting both revenue and margin expansion.
• Customer base and macro resilience: Management is watching for stabilization and return to customer growth as the company laps prior divestitures, while monitoring small business sentiment for potential economic headwinds.

Top Analyst Questions

• Elizabeth Porter (Morgan Stanley): Asked about small business sentiment and potential macro pressures; management noted resilience but acknowledged some pressure, relying on strong retention and value delivered to customers.
• Ygal Arounian (Citigroup): Inquired about trends in average order size and Airo/Airo Plus adoption; management said average order size gains persist, with Airo driving faster product attachment and improved retention, while Airo Plus remains early-stage.
• Vikram Kesavabhotla (Baird): Sought details on Agentic AI and bundling; CEO Bhutani explained Agentic AI’s future role in automating tasks for microbusinesses and described ongoing bundling tests as key to value creation.
• Trevor Young (Barclays): Asked about the path to renewed customer growth and gross margin drivers; management emphasized a strategy of focusing on higher-intent customers and attributed margin expansion to favorable product mix rather than cost reductions.
• Brad Erickson (RBC): Probed the relative impact of pricing vs. bundling; management said the highest customer lifetime value comes from well-integrated bundles, making it difficult to separate the two.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be watching (1) the adoption and monetization of Airo Plus and its impact on customer engagement, (2) results from ongoing bundling and pricing experiments across customer cohorts, and (3) whether GoDaddy can achieve a return to customer growth as it laps prior divestitures. The pace of uptake for new commerce and payments offerings will also be a critical indicator of progress.

GoDaddy currently trades at a forward price-to-sales ratio of 5.5×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

Our Favorite Stocks Right Now

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.