AI Initiatives Driving Growth
GoDaddy has pivoted sharply into AI to enhance its product offerings. “Airo” – the company’s generative AI suite – is transforming how customers start and build their online presence. According to management, “GoDaddy Airo continues to transform the customer experience … quickly gaining traction, and we view it as a key driver of future growth and customer lifetime value” (www.gurufocus.com). In fact, Airo has become the largest funnel for new Website + Marketing subscriptions, with about 50% of paid website-builder subscriptions now originating through the Airo AI onboarding experience (www.gurufocus.com). GoDaddy is already moving into monetization of these AI features via a premium tier called Airo Plus, slightly ahead of schedule (www.gurufocus.com).
Importantly, GoDaddy’s AI push isn’t just talk – it’s yielding tangible improvements in customer metrics. The company launched multiple AI “agents” (for domain search, site building, logo design, etc.) on its new Airo.ai site, and internal data showed nearly 90% of the code for a recent app builder project was AI-generated (mlq.ai). By accelerating product iteration, Airo is helping GoDaddy improve attach rates and Average Revenue Per User (ARPU) – management notes that high-intent customers using Airo adopt more products and have higher lifetime value than historical cohorts (mlq.ai) (mlq.ai). As generative AI becomes a bigger theme, GoDaddy’s early mover advantage in AI-assisted site design could attract more small business customers. All told, AI integration is a bright spot heading into earnings, with the potential to drive upside surprises in customer growth or guidance. However, execution will be key: the monetization of Airo’s tools is just beginning, and it remains to be seen how many users will pay for advanced AI features versus using free tools. (Notably, 36% of small businesses are trying generative AI, but most stick to free or low-cost tools for now (www.axios.com).) This is a space to watch as GoDaddy reports results and updates its outlook on AI-driven growth.
No Dividend, But Significant Buybacks
GoDaddy has no dividend history – its trailing twelve-month payout is $0.00, for a current yield of 0.00% (www.macrotrends.net). Management has preferred to return capital via share repurchases instead of dividends. In fact, GoDaddy executed an unusually large buyback program in recent years: by Q1 2025 the company retired over 25% of its outstanding shares as part of a 2022 repurchase plan (investors.godaddy.net). In early 2025, the Board authorized a new $3 billion multi-year buyback program (through 2027), signaling ongoing commitment to share repurchases (investors.godaddy.net). This aggressive buyback approach suggests management and activists see value in the stock – repurchases are often a sign the company believes its shares are undervalued (www.nasdaq.com). For investors, while no dividend income is a drawback, the reduction in share count boosts earnings per share and can support the stock price. It’s worth noting that share repurchases have been funded by GoDaddy’s strong free cash flow generation (and possibly some debt refinancing), which we discuss next. So far, GoDaddy’s capital returns have been 100% via buybacks, and initiating a dividend is not expected in the near term given the growth-focused, tech-oriented strategy.
Financial Position & Leverage
Cash Flow & Profitability: GoDaddy generates robust cash flow from operations – $1.3 billion in operating cash in 2024, yielding $1.4 billion in free cash flow, up 25% year-over-year (www.prnewswire.com). This implies a healthy free cash flow margin (~30%) and has enabled the aforementioned buybacks. On an earnings basis, 2024 net income was $937 million (20% net margin) (investors.godaddy.net), although this was inflated by a one-time tax benefit in the prior year. Normalized EBITDA came in at $1.4 billion (31% EBITDA margin) (www.prnewswire.com). Overall, profitability is solid for a company growing revenue at a high-single-digit pace (FY2024 revenue was $4.6B, +8% YoY) (redmondspokesman.com).
Debt & Leverage: The company carries a significant debt load but at comfortable leverage levels relative to cash flow. As of year-end 2024, GoDaddy had $3.9 billion in total debt and about $1.1 billion in cash, for net debt of ~$2.8 billion (investors.godaddy.net). This net debt is roughly 2.0 times EBITDA – a manageable ratio given its cash generation. Interest expense is running about $150 million per year in cash interest (redmondspokesman.com), which is well-covered by earnings. By one measure, GoDaddy’s interest coverage stands around 7× (EBIT-based, mid-2025) (www.gurufocus.com), indicating ample ability to meet interest obligations.
Maturity Profile: The debt maturity schedule is reasonably staggered, with no large maturities until 2027. The company’s $600 million senior notes due 2027 will be the first significant principal due (after minimal term-loan amortizations of ~$25M per year) (www.sec.gov). The bulk of GoDaddy’s debt matures in 2029, when term loans (due 2029) and another senior note come due, totaling roughly $2.21 billion in that year (www.sec.gov). A remaining term loan tranche matures in 2031 (~$995M principal) (www.sec.gov) (www.sec.gov). This long-dated debt structure gives GoDaddy time and flexibility to refinance or pay down debt with future cash flows. In 2024, the company proactively refinanced $1.5B of term loans at a 0.25% lower rate spread (investors.godaddy.net), which should help reduce interest costs. Overall, leverage is elevated but not excessive – the stable cash flows (domains are a subscription-like business) and high interest coverage mitigate credit risk. Still, investors should monitor leverage trends, as the company’s strategic choices (e.g. large buybacks or acquisitions) could alter the debt profile.
Valuation & Comparables
Despite its solid fundamentals, GoDaddy’s stock appears modestly valued relative to peers and the market. The shares trade around 12× earnings**, roughly half the P/E multiple of the S&P 500 (www.nasdaq.com). In other words, the market is assigning a low-teens earnings multiple to GoDaddy versus ~20–25× for the average large-cap – a potential value gap. On a cash flow basis, the stock looks similarly discounted: considering ~$1.4B in free cash flow and a market capitalization near ~$12–14B (at recent prices), GoDaddy’s free cash flow yield is roughly 10%, which is attractive for a business growing in the high single digits. The EV/EBITDA multiple is in the ballpark of 10×, given enterprise value of ~$16–17B and EBITDA ~$1.6B (2025E), again reasonable if not cheap.
Peer comparisons: GoDaddy’s closest peers include web presence providers like Wix.com (NASDAQ: WIX) and Squarespace (NYSE: SQSP – recently taken private). Wix, known for its website builder, has been growing revenue faster but until recently was less consistently profitable; it trades at higher multiples of revenue and has a smaller EBITDA margin. Meanwhile, Squarespace agreed to be acquired by private equity in 2024 for ~$6.6B (www.axios.com), suggesting appetite for established web platforms. Notably, Wix commands the largest share (~33%) of the website-builder market as of 2026, outpacing GoDaddy’s share (www.techradar.com). This leadership by Wix (and strong marketing by Squarespace) may partly explain GoDaddy’s valuation discount – investors see GoDaddy’s core hosting/domain business as mature or commoditized. However, GoDaddy’s bulls argue that the stock is “ridiculously cheap” given its improving margins and cash returns (www.nasdaq.com). Management’s actions support this view: the company has authorized up to $4 billion in buybacks in recent years, and explicitly repurchased shares because it “may view shares as undervalued” (www.nasdaq.com). If GoDaddy can reignite revenue growth through its commerce and AI offerings (closing the growth gap with Wix), there is room for a valuation re-rating. For now, the stock offers a blend of value (low multiples, high FCF yield) and growth optionality (via new products), which could drive gains if the next earnings report shows positive momentum.
Key Risks & Challenges
While GoDaddy’s outlook is promising, investors should be mindful of several risks and potential red flags:
- Intense Competition: The market for web presence solutions is highly competitive. Rivals like Wix (33% market share) and Squarespace are aggressive in marketing and feature development (www.techradar.com) (www.techradar.com). These competitors often lead in website builder capabilities (e.g. templates, e-commerce, AI tools) and spend heavily on advertising (Super Bowl ads, etc.), which could pressure GoDaddy’s customer growth and pricing power. GoDaddy’s domain registry business also faces competition from Google Domains (which exited and sold its customer book to Squarespace) and others, meaning customer acquisition is an ongoing battle.
- Slow Growth in Core Business: GoDaddy’s core “Core Platform” segment (primarily domains and hosting) has matured – recent growth was under 5% YoY (www.nasdaq.com). Domains are a saturated market, and many small businesses now use social media or marketplace pages instead of dedicated websites. If GoDaddy cannot accelerate growth in its Applications & Commerce segment (+13% in Q1 2024) (www.nasdaq.com) through new services, overall revenue may stagnate in the mid-single digits. That level of growth may not justify multiple expansion, especially if peers grow faster.
- Unproven AI Monetization: The enthusiasm around GoDaddy’s AI-powered tools needs to translate into actual revenue uplift. Many small businesses are experimenting with AI, but mostly via free tools (www.axios.com). There is a risk that Airo’s nifty features drive engagement but not paid subscriptions. If customers don’t adopt the Airo Plus paid tier in large numbers, the ROI on GoDaddy’s AI investments could disappoint. Additionally, rapid advances by big tech (e.g. AI site generators from Amazon, Adobe, etc.) could leapfrog GoDaddy’s in-house solutions.
- Leverage and Financial Risk: GoDaddy’s ~$3.8 billion debt load is significant (investors.godaddy.net). While current interest coverage is strong, rising interest rates or a downturn in cash flow could tighten that coverage. The company has $600M due in 2027 and over $2.2B coming due in 2029 (www.sec.gov) – refinancing that in a higher-rate environment could increase interest costs. Any large debt-funded shareholder payouts or acquisitions would add to leverage. Investors should watch that net debt/EBITDA stays in a reasonable range and that free cash flow remains ample to service debt.
- Activist/Strategic Uncertainty: Activist investor Starboard Value owns nearly 7.8% of GoDaddy and has been pressuring the company since 2022 (www.theregister.com). Starboard has criticized management for falling short of growth and margin targets and even suggested GoDaddy consider strategic alternatives (including a sale) if performance doesn’t improve (www.theregister.com). This external pressure could lead to strategic shake-ups – potentially positive (cost cuts, asset sales) but also creating uncertainty. The company has so far resisted giving Starboard board seats (www.theregister.com), and it’s unclear how this tension will resolve. There’s a risk that if improvements falter, activists might push for more drastic changes or a sale at a not-so-huge premium.
- Other Operational Risks: As a tech company, GoDaddy faces typical risks around cybersecurity (it has a history of occasional outages or breaches), regulatory matters (internet domain regulations by ICANN, data privacy laws), and integration of acquisitions. The company must also continuously update its infrastructure (including migrations to cloud hosting) – any execution missteps could impact service quality. High customer retention (85%+ for GoDaddy-branded customers) (mlq.ai) has been a strength, but it could erode if competitors offer a clearly superior product or if pricing is raised too aggressively.
Open Questions & Outlook
Looking ahead, here are a few open questions that upcoming earnings calls and company actions will hopefully address:
- Can AI Move the Needle on Growth? Investors will be watching for data on how Airo is contributing to revenue. Will GoDaddy’s AI features actually boost conversion rates or ARPU in a measurable way? Management’s commentary that Airo is driving higher attach rates is encouraging (mlq.ai), but more evidence (e.g. incremental revenue from Airo Plus subscriptions or higher customer adds) is needed. The Q4 earnings report and guidance for 2026 could give clues – e.g. if management raises long-term growth targets thanks to AI. An open question is how much will AI-related enhancements accelerate GoDaddy’s mid-single-digit revenue growth toward double-digits, if at all.
- Will GoDaddy Pivot to a Dividend or Stick to Buybacks? Thus far, GoDaddy has eschewed dividends in favor of repurchases. With a new $3B buyback plan in place (investors.godaddy.net), it seems likely buybacks remain the favored tool. However, as the company matures and if leverage comes down, there’s an open question whether a modest dividend could be introduced to broaden the investor base. Any hints from management about capital return policy changes will be noteworthy (though none are expected imminently).
- Is GoDaddy a Takeover Target? Given GoDaddy’s strong cash flows and lagging valuation, the company could be attractive to private equity (similar to how Squarespace was taken private) (www.axios.com). Activist pressure adds fuel to this idea – Starboard has explicitly urged exploring a sale if performance doesn’t improve (www.theregister.com). A key question is whether management will deliver a convincing turnaround (via growth and margin expansion) or face mounting calls to sell. Any strategic review news or activist maneuvers will be a wildcard for the stock.
- How Will Competition Shape the Future? GoDaddy’s strategy to be a “one-stop shop” for small business online needs (www.theregister.com) is being tested by specialized rivals. For example, Wix’s aggressive innovation in AI and site design is a competitive benchmark (www.techradar.com). Can GoDaddy continue to differentiate with its integrated suite (domains, hosting, marketing, commerce, etc.)? Will partnerships or M&A be needed to fill gaps? These questions tie into the broader narrative of whether GoDaddy remains the go-to platform for new businesses versus ceding ground to upstarts and specialized tools.
Earnings Catalyst: In the very near term, the fourth-quarter 2025 earnings (scheduled for Feb 24, 2026) will be a key catalyst (aboutus.godaddy.net). Investors should look for any upside in results or upbeat 2026 guidance driven by recent product initiatives. If GoDaddy can demonstrate accelerating momentum – for instance, stronger bookings growth in the Applications & Commerce segment or higher customer additions – it could validate the “AI boost” thesis and drive the stock higher. Conversely, if results are merely in-line and the AI narrative is still more future promise than present reality, the stock might stay range-bound. Given the setup, the risk/reward skews positive for now, but execution in the coming quarters will be crucial.
Disclosure: This report is for informational purposes on behalf of an unknown publisher, and the analyst does not have a financial interest in GDDY at the time of writing. All information is sourced from company filings, investor communications, and reputable financial media as cited. Investors should conduct their own due diligence and consider their risk tolerance before making any investment decisions.
