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GoDaddy's Q1 2025 Earnings: Revenue Growth and Strategic Momentum Amid Shifting Markets

Rhys NorthwoodThursday, May 1, 2025 4:50 pm ET

30min read

GoDaddy Inc. (GDDY) delivered a resilient Q1 2025 performance, defying market headwinds with an 8% year-over-year revenue increase to $1.2 billion. The company reaffirmed its full-year 2025 guidance, signaling confidence in its ability to navigate economic uncertainties through strategic execution. Underlying this growth are initiatives like its AI-driven Airo platform, pricing optimization, and commerce expansion, which are reshaping its value proposition for small businesses. Let’s dissect the key drivers and implications for investors.

Revenue Growth and Margin Expansion: A Solid Foundation

GoDaddy’s top-line growth of 8% (both reported and constant currency) placed it at the upper end of its guided range, with annual recurring revenue hitting $4.1 billion (+7%). International markets shone, contributing a 10% revenue surge driven by strong domain sales in regions like Europe and Asia. Domestic performance, however, remained steady, reflecting cautious small-business spending.

Margin performance was equally compelling. Normalized EBITDA rose 16% to $364 million, with a margin of 31%—a 200-basis-point improvement over Q1 2024. This expansion underscores the efficacy of cost discipline and pricing strategies. Free cash flow jumped 26% to $411 million, aligning with its long-term goal of maximizing liquidity.

Strategic Levers Fueling Growth

Pricing & Bundling: The company’s push to bundle its core domain hosting with premium services like websites and marketing tools is paying off. Cohorts using these bundles exhibit lower churn and higher ARPU (+9% to $225). Third-party integrations (e.g., payment processing, e-commerce tools) are expanding the addressable market without significant incremental costs.
Commerce Ecosystem: Gross payments volume (GPV) grew at a healthy clip, with new high-margin products like GoDaddy Capital (merchant cash advances) and Same-Day Payouts gaining traction. While these remain small, they signal a shift toward recurring revenue streams outside traditional hosting.
Airo Platform Dominance:
The Airo platform’s AI capabilities continue to drive engagement. Customers using Airo’s monetized version (Airo Plus) exhibit longer contract terms and higher attachment rates, boosting lifetime value. Agentic AI, the next-gen toolset, promises even more personalized recommendations, potentially unlocking new revenue tiers.

Balance Sheet Strength and Capital Allocation

GoDaddy exited Q1 with $719 million in cash and a net debt-to-EBITDA ratio of 1.9x—a notable improvement from 2.7x in 2023. The company completed its $4 billion share repurchase program, reducing shares outstanding by 25%, and secured a new $3 billion authorization through 2027. This prioritization of buybacks reflects confidence in its ability to generate free cash flow, which is now projected to exceed $1.5 billion in 2025.

Risks and Considerations

Despite the positives, challenges linger. Customer count stabilized at 20.5 million, with growth expected later in 2025. While retention remains robust (above 85%), the company must ensure Airo’s AI tools can counteract macro-driven hesitancy among small businesses. Additionally, competition in the SMB tech stack (e.g., Shopify, AWS for startups) requires constant innovation to maintain pricing power.

The Investment Case: Long-Term Value in Strategic Execution

GoDaddy’s reaffirmed 2025 guidance—$4.86–$4.94 billion in revenue (+7% midpoint), 31% EBITDA margins, and $1.5+ billion free cash flow—aligns with its “North Star” targets of 6–8% annual revenue growth through 2026 and a 33% EBITDA margin by 2026. These goals are achievable given its:

Operational leverage: Pricing discipline and bundling are driving margin expansion.
AI-driven differentiation: Airo’s ability to upsell and reduce churn positions it as a must-have for SMBs.
Balance sheet flexibility: $1.7 billion in liquidity and a disciplined buyback program support shareholder returns.

Conclusion: A Steady Hand in Volatile Markets

GoDaddy’s Q1 results reaffirm its status as a resilient operator in the SMB tech space. With a 31% EBITDA margin, $411 million in free cash flow, and strategic initiatives like Airo and commerce services gaining traction, the company is well-positioned to meet its 2026 targets. The reaffirmed guidance and $3 billion buyback plan further validate its confidence.

Investors should focus on the long view: GoDaddy’s $4.5 billion cumulative free cash flow target by 2026, combined with its 25% share reduction, could drive meaningful EPS growth. While macroeconomic pressures persist, GoDaddy’s diversified revenue streams and AI-powered solutions make it a compelling play on the $4.5 trillion SMB tech market. For now, the numbers—and the strategy—are trending upward.

Final Take: Buy-the-dip opportunities in GDDY warrant attention, especially if valuation multiples compress further. The stock trades at ~6x 2025 EV/EBITDA, offering a reasonable entry point for investors willing to bet on SMB tech consolidation.

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