GoDaddy Q1 2025 Earnings Preview: Navigating Growth Amid Headwinds
36min read GoDaddy (NASDAQ: GDDY) is set to report its first quarter 2025 earnings on May 1, 2025, with investors scrutinizing its ability to balance top-line growth, margin pressures, and the impact of its AI-driven Airo platform. Analysts project revenue of $1.19 billion and adjusted EPS of $1.41, but the path to these figures is fraught with currency headwinds, rising expenses, and retention challenges. This analysis breaks down the catalysts, risks, and what to watch for in the results.
Ask Aime: "Are we witnessing a potential earnings beat for GoDaddy, despite currency headwinds and rising expenses?"
Revenue Outlook: A Delicate Balancing Act
GoDaddy’s revenue is expected to grow 7.1% YoY to $1.19 billion, aligning with its guided range of $1.175–1.195 billion. The growth, however, masks a widening gap between domestic and international performance. U.S. revenue is projected to outpace international growth by 200 basis points, driven by stronger demand for its Applications & Commerce (A&C) segment. This segment, which includes e-commerce tools and marketing solutions, is forecast to hit $441 million, up 15.1% YoY, fueled by Airo’s success.
Ask Aime: "Is GoDaddy's Airo platform driving its q1 2025 revenue growth?"
Airo’s early traction is critical here: 50% of Q4 2024 paid subscriptions originated from the Airo experience, with premium tiers like Airo Plus driving monetization. Yet, this momentum comes at a cost. GoDaddy is ramping up marketing spend to scale Airo’s adoption, which could pressure margins. Meanwhile, currency fluctuations are expected to shave ~$15 million off international revenue growth, a drag the company has struggled to offset.
EPS Drivers: Growth vs. Costs
The $1.41 EPS estimate reflects a 30.56% YoY increase, but the figure has softened slightly in recent weeks—down 3.4% over 30 days—as concerns over rising expenses take hold. While Airo’s customer engagement is positive, the broader sales and marketing push for the platform may eat into profitability. Additionally, divestitures and customer migration costs are weighing on retention metrics, which remain a key vulnerability.
Historically, GoDaddy has been inconsistent in beating estimates, with three wins and one miss in the past four quarters. Its Zacks Earnings ESP score of -17.31% suggests analysts’ forecasts may still be overly optimistic. This caution is amplified by the stock’s current price of $188.50, well below the $211.86 average analyst target, hinting at embedded skepticism around near-term execution.
Segment Deep Dive: A&C Leads, Core Platform Lags
The A&C segment’s 15.1% growth to $441 million underscores GoDaddy’s strategic pivot toward higher-margin services. This contrasts with its core domain hosting and website builder business, which is projected to grow only 7.4% YoY to $233 million. The disparity highlights a shift in customer priorities: businesses are increasingly investing in advanced tools (e-commerce platforms, AI content creation) rather than basic web hosting.
However, this transition is not without friction. Customer retention rates dipped in late 2024 due to reduced discounting and ongoing migrations from legacy platforms. While Airo’s premium tiers help offset attrition, the net result is a revenue base increasingly reliant on upselling—something that requires sustained innovation.
Peer Comparison: Can GDDY Keep Pace?
In its sales and marketing software segment, GoDaddy faces peers like VeriSign (VRSN) and Freshworks (FRSH), which reported 4.7%–18.9% YoY revenue growth in their latest quarters. While GDDY’s 7% growth is in line with historical trends, its margin pressures and stock underperformance suggest investors are demanding clearer proof of its AI-driven transformation.
Long-term, the full-year 2024 EPS target of $6.20 (up 28.9% YoY) offers optimism, but Q1 will test whether the Airo platform can deliver recurring revenue at scale. If margin erosion from marketing spend or retention issues overshadows growth, the stock’s valuation could remain under pressure.
Conclusion: A Mixed Bag with Long-Term Potential
GoDaddy’s Q1 earnings are a microcosm of its broader challenges: can it sustain growth while managing margin headwinds and customer transitions? The $1.19 billion revenue target is achievable, but EPS faces a tougher test. Key takeaways:
- Airo’s adoption is a double-edged sword: While driving subscriptions and engagement, its marketing costs may limit profit margins in the near term.
- Currency and retention risks are quantifiable: Analysts have already priced in some of these drags, but overperformance here could surprise positively.
- Long-term EPS trajectory remains strong: The 28.9% full-year EPS growth target reflects confidence in Airo’s scalability and cost discipline over time.
Investors should watch for two metrics:
1. A&C segment growth rate: A beat on the 15.1% estimate would validate its strategic shift.
2. Adjusted EBITDA margin guidance: Any upward revisions here would alleviate margin concerns.
Despite the Zacks #4 “Sell” rating, the stock’s discount to analyst targets and the long-term AI tailwinds suggest a cautiously bullish stance for those willing to look beyond Q1’s bumps. If GoDaddy can execute its Airo strategy without overextending, this could be a pivotal quarter for re-rating its valuation.
Final Note: Always conduct your own research and consult a financial advisor before making investment decisions.
