GoDaddy Inc. (GDDY): Q2 Beat, Rising ARPU and an AI-Driven Pivot Tested by Customer Attrition

Q2 beats and a clear tension: revenue up but customers down#

GoDaddy reported a quarter that combined a modest top-line beat with a sharp strategic pivot — GAAP EPS of $1.41 (beats by ~+5.2%) and Q2 revenue of $1.22 billion, while total customers fell -2.2% YoY to 20.4 million. According to the company’s Q2 release, management raised full-year revenue guidance to a range implying roughly mid-single-digit growth, signaling confidence in the product-led transition even as the market punished signs of customer attrition GoDaddy Reports Second Quarter 2025 Earnings (Investor Relations). News coverage of the quarter captured the market’s reaction and skepticism about whether AI investments can offset shrinking customer counts Reuters, CNBC.

The headline is straightforward but paradoxical: GoDaddy is generating better revenue per customer while deliberately shedding lower-value accounts. That tradeoff — higher ARPU versus lower customer counts — is central to assessing whether GoDaddy’s AI-first pivot (Airo and agentic AI) can produce durable, higher-margin revenue instead of a one-off ARPU boost.

Financial picture: growth, margins and cash flow (FY 2021–2024)#

GoDaddy’s FY 2024 results show a company that grew revenue and expanded operating margins while generating strong cash flow and deploying capital aggressively into buybacks. The following table summarizes the last four fiscal years’ core income-statement metrics in absolute dollars and margins (calculated from the provided financials):

Revenue growth from 2023→2024 was approximately +7.53% (4.57/4.25 - 1), consistent with GoDaddy’s reported growth trajectory and the company’s move toward higher-value subscriptions. Operating margin expanded markedly in 2024 to 19.54%, indicating operating leverage and mix improvement as higher-margin Applications & Commerce (A&C) products gained share.

The balance-sheet and cash-flow picture reinforces the operating story: GoDaddy produced $1.29B of operating cash flow and $1.26B of free cash flow in FY 2024, while repurchasing $676.5M of common stock during the year and ending with $1.09B in cash and net debt of $2.81B. Those moves demonstrate both cash-generation capacity and a capital-allocation prioritization of buybacks over dividends or major M&A in the recent period.

Sources: company financials (FY 2021–2024) as provided in the dataset. These dynamics — improving cash flow with active share buybacks — help explain why management felt comfortable raising guidance after Q2 despite the customer-count contraction GoDaddy Reports Second Quarter 2025 Earnings (Investor Relations).

Reconciling valuation and metric inconsistencies: P/E, EPS and leverage ratios#

At the market close in the provided snapshot GoDaddy traded at $147.87 with a market capitalization of $20.47B. Valuation metrics in the raw data show conflicting EPS and P/E figures: one data point lists EPS = $5.60 and P/E = 26.41x, while TTM metrics report Net income per share TTM = $4.39 and P/E TTM = 33.7x. Calculating P/E directly from price/EPS using the TTM EPS yields 147.87 / 4.39 = 33.7x, consistent with the TTM ratio but at odds with the 26.41x figure. We flag this discrepancy and prioritize the TTM EPS-based calculation because it is internally consistent with the company’s TTM net-income and the stated earnings-per-share TTM value in the fundamentals dataset.

Leverage ratios show similar divergence. The dataset lists net debt = $2.81B and EBITDA (FY 2024) = $1.06B. A simple calculation using those FY-2024 numbers gives net-debt / EBITDA = 2.81 / 1.06 = ~2.65x. The provided ratiosTTM show net debt to EBITDA = 2.29x, which is lower than the FY-only calculation. The difference can be explained by disparate denominators (TTM EBITDA versus FY 2024 reported EBITDA) or timing differences in reported debt and EBITDA. We note both figures; the conservative interpretation is to expect net-debt leverage in the ~2.3–2.7x range depending on the exact trailing-period EBITDA used.

Another similar reconciliation: the dataset’s year-end current ratio (2024) calculates as total current assets $1.95B / total current liabilities $2.7B = 0.72x, whereas the ratiosTTM current ratio is listed as 0.64x. Again, timing differences and rolling-quarter calculations explain the gap, but both measures indicate a sub-1.0 current ratio that warrants attention for short-term liquidity analysis.

Earnings quality and capital allocation: cash flow is the signal#

One of the clearest strengths in GoDaddy’s financials is convertibility of earnings into cash. FY 2024 net income of $936.9M produced $1.29B of operating cash flow and $1.26B of free cash flow, indicating strong cash conversion and modest capex needs (capex was -$26.6M in 2024). That free cash flow funded $676.5M of share repurchases and reduced net debt modestly versus peak levels. Free cash flow per share TTM is stated as $4.88; using the latest price of $147.87 this implies a free-cash-flow yield of ~+3.30% (4.88 / 147.87).

This cash-generation profile allows management to pursue an aggressive buyback program while continuing to invest in R&D (R&D was large at ~$814.4M in FY 2024) and AI product development. The high R&D spend — roughly ~17–18% of revenue TTM per the ratios — is a deliberate choice to scale Airo and agentic AI capabilities, and it comes from a company structure that can sustain investment due to positive free cash flow.

Strategic transformation: AI, Airo and the pivot from volume to value#

GoDaddy has made a visible strategic choice to trade low-margin, discount-driven customer additions for higher-intent customers who buy multiple, higher-priced products. The company’s AI platform, Airo, and the company’s emphasis on agentic AI — tools that execute workflows across products and partner APIs — are the centrepieces of that pivot. Management argues the goal is to lift ARPU, shorten onboarding and increase cross-sell into payments, A&C, and financial services such as GoDaddy Capital GoDaddy Capital launch materials.

Early commercial signs are visible in A&C performance and ARPU. The Applications & Commerce segment grew +14% YoY in the quarter cited in the provided draft, and trailing-12-month ARPU rose approximately +9% to $225, with Q2 ARPU up roughly +9.5% YoY — metrics management explicitly links to higher-value service adoption (AI-enabled features, commerce, and embedded payments). Those top-line mix improvements contributed to operating-margin expansion in FY 2024 and the Q2 beat that prompted a guidance raise GoDaddy Reports Second Quarter 2025 Earnings (Investor Relations).

However, the strategy’s execution risk is material. The company’s customer base declined -2.2% YoY, reflecting both voluntary pruning of discount-era accounts and incomplete replacement by higher-intent buyers. The critical question is whether Airo’s agentic capabilities can be translated into repeatable, measurable monetization: conversion rates to premium Airo tiers, retention lift attributable to operational AI, and incremental revenue per customer sustained beyond an initial uplift.

Competitive dynamics: how GoDaddy's AI play differs from peers#

GoDaddy’s strategic differentiator is a backend-first, operational AI approach rather than a consumer-facing creative AI play. Competitors such as Wix and Squarespace emphasize creative, front-end AI for website creation and content; Shopify pushes AI into commerce optimization and personalization. GoDaddy’s agentic AI intends to be a workflow automation layer that executes actions — configure email, populate storefronts, route payments, or wire third-party services — thereby creating stickiness through embedded workflows and partner integrations.

That approach can be durable if it yields true product locks (difficult to reverse data flows, deeper integrations, and finance rails like GoDaddy Capital). The risk, however, is visibility: operational AI benefits can be subtle to end users and harder to market than flashier design or copy-generation features, meaning adoption may require longer sales cycles or clearer ROI evidence.

Unit economics and margin implications#

GoDaddy’s shift to higher-intent customers shows in ARPU and margins. Operating margin rose to ~19.5% in FY 2024 and EBITDA margin to ~23%, reflecting higher-margin A&C and greater product penetration. But the strategy requires sustained conversion: if churn remains elevated and ARPU gains are one-time (price/mix instead of persistent behavioral change), margin improvement can stall.

The balance-sheet reality tempers risk: the company’s FCF generation funds R&D and buybacks and limits refinancing pressure given net debt in the mid-single-digit billions and leverage in the ~2.3–2.7x net-debt/EBITDA band. That headroom gives GoDaddy time to prove AI monetization without immediate liquidity stress.

Capital allocation: buybacks, debt, and no dividend#

Management has chosen buybacks as the primary capital return mechanism. GoDaddy repurchased $676.5M in FY 2024 and $1.27B in FY 2023, while dividends remain at $0. Net debt stood at $2.81B at year-end 2024 with long-term debt of $3.86B, indicating a levered but manageable balance sheet supported by consistent free cash flow. The lack of dividends preserves optionality for reinvestment, but it also concentrates return expectations on buybacks and operational improvement rather than recurring cash returns.

Key contradictions and what to watch (data-driven checklist)#

Several measurable tensions will determine whether GoDaddy’s pivot sustains:

• Conversion metrics: management needs to show conversion rates from basic plans to Airo-enabled tiers and retention lift attributable to agentic workflows. ARPU increases are promising but not definitive.

• Customer-count dynamics: is the -2.2% YoY decline a temporary pruning (improving customer quality) or a structural loss of lower-value cohorts that may not be fully offset by higher-intent signups?

• Cash generation vs reinvestment: FY 2024 FCF was $1.26B and funded buybacks; if buyback pace continues, watch whether R&D funding remains sufficient to develop Airo into a core monetization engine.

• Leverage trajectory: net debt is $2.81B; depending on TTM EBITDA treatment, leverage sits in the ~2.3–2.7x range. Debt maturities and interest costs are manageable today, but a meaningful slowdown in FCF would compress flexibility.

• Metric reconciliations: market data feeds disagree on EPS (TTM $4.39 vs quoted $5.60). Investors should reconcile EPS bases (diluted vs adjusted; calendar vs fiscal) when comparing multiples.

What This Means For Investors#

Investors should treat GoDaddy as a company in the middle of a strategic transition with measurable early wins but non-trivial execution risk. The Q2 beat and raised guidance show the pivot to higher-value services and AI is starting to affect revenue and margins, but the -2.2% YoY drop in customers tempers confidence that ARPU gains alone can sustain long-term top-line growth.

Practically, the implications are: GoDaddy has the cash generation to fund AI investment and share repurchases, providing time for Airo to mature. However, success hinges on clear, repeatable monetization metrics (conversion to premium AI tiers, retention lift and payments penetration) and on management demonstrating these KPIs sequentially.

Key takeaways#

GoDaddy’s FY 2024 and Q2 trends present a coherent, data-backed story: revenue and margins are improving while customer counts decline as the company re-weights toward high-intent, higher-ARPU customers. Cash flow is a genuine strength, enabling buybacks and continued R&D. The principal risk is execution: converting operational and agentic AI into measurable, scalable revenue streams and customer-retention improvements.

• Q2 2025: GAAP EPS $1.41; revenue $1.22B; customer count -2.2% YoY (20.4M) GoDaddy Q2 release.
• FY 2024: revenue $4.57B, operating income $893.5M, net income $936.9M, FCF $1.26B (capex -$26.6M) — strong cash conversion.
• Leverage: net debt $2.81B with net-debt/EBITDA in the ~2.3–2.7x band depending on TTM/period choices.
• Valuation: TTM P/E ~33.7x using TTM EPS $4.39; datapoint inconsistency with an alternate EPS of $5.60 (P/E 26.41x) requires reconciliation.

Concluding synthesis#

GoDaddy’s transition from volume-led domain and hosting growth to a product-led platform focused on higher-value subscriptions and operational AI is producing measurable improvements in ARPU, revenue mix and margins. The company’s cash-generation profile underpins both aggressive buybacks and continued investment into Airo and agentic AI, which are central to the strategic thesis.

That said, the market’s skepticism after Q2 is rooted in measurable risk: customer counts are declining and management must demonstrate that AI-driven products drive durable retention and cross-sell rather than temporary ARPU uplifts. The balance sheet provides time for execution, but the next meaningful data points that will alter the investment narrative are not macro price targets but operational KPIs: Airo conversion rates, retention delta for AI users, and payments/GoDaddy Capital penetration. If those metrics sequentially improve, the current concerns about customer attrition will be easier to dismiss.

For now, GoDaddy stands at an inflection defined by clear early wins in revenue mix and margin expansion, offset by realistic execution hurdles that require transparent, repeatable evidence of AI monetization.

Sources: GoDaddy investor materials and Q2 2025 earnings release GoDaddy Reports Second Quarter 2025 Earnings (Investor Relations); market coverage from Reuters and CNBC. Financial statement figures and metrics derived from the provided company dataset (FY 2021–2024) in the briefing materials.