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GoDaddy posts strong Q2 FY2025 results with robust margin expansion, high-value customer focus, and raised guidance, offsetting minor headwinds from customer churn and the .CO contract loss.

# GoDaddy Delivers Standout Q2 FY2025: Margin Expansion and High-Value Customer Focus Drive Upbeat Guidance

---

## Executive Summary

- **GoDaddy (GDDY) posted a strong Q2 FY2025, with revenue of $1.218B, well above consensus, and robust EPS growth.** The outperformance was driven by a strategic shift toward higher-value customer segments, even as total customer count declined by 2.2% YoY.
- **Earnings quality was high, with operating income up 27.9% and net income up 36.6%.** Margin expansion was notable, with operating margin at 21.9% and normalized EBITDA margin at 31.3%. Cost discipline and a favorable revenue mix were key contributors.
- **Management struck a bullish tone, raising full-year revenue and free cash flow guidance.** The company highlighted rapid progress in AI-driven initiatives and reiterated its commitment to margin expansion, while acknowledging a minor near-term headwind from the loss of the .CO registry contract.
- **Risks remain modest and manageable,** with the .CO contract loss expected to have a limited impact (about 50 bps headwind in Q4). Macro, regulatory, and geopolitical uncertainties persist but are not expected to derail the company’s growth trajectory.
- **Catalyst watch:** Look for continued margin expansion, further AI-driven operational improvements, and updates on customer retention and share repurchase activity in the coming quarters.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise | YoY Change |
|-----------------------|------------|-----------|----------|------------|
| Revenue               | $1.218B    | $1.18B    | +3.2%    | +          |
| EPS                   | Not stated |           |          | +          |
| Operating Income      | $267M      |           |          | +27.9%     |
| Net Income            | $210M      |           |          | +36.6%     |
| Operating Margin      | 21.9%      |           | +        | +          |
| Normalized EBITDA Mgn | 31.3%      |           | +        | +          |
| Customer Count        | -2.2% YoY  |           |          | -2.2%      |
| ARPU (High-Value)     | $230       |           |          | +          |

*Note: EPS not explicitly provided; focus is on operating and net income growth.*

---

## Earnings Quality

GoDaddy’s Q2 FY2025 results reflect **high earnings quality**, with revenue growth driven by a favorable mix shift toward high-value, high-retention customer segments. The company achieved **meaningful margin expansion**—operating margin rose to 21.9% and normalized EBITDA margin to 31.3%—thanks to disciplined cost control and a sharp reduction in restructuring and other expenses (down from $6.9M to $0.3M YoY). The focus on higher-margin services (notably A&C and Core Platform Revenue) offset the impact of a declining customer base, underscoring the company’s ability to drive profitability through quality over quantity.

---

## Management Commentary & Guidance

Management’s tone on the earnings call was **decisively bullish**. Leadership highlighted the success of targeting high-value customer cohorts (now 9% of the base, with ARPU up to $230) and the rapid deployment of AI-driven initiatives (Arrow, Ask Arrow), which are already delivering operational efficiencies. **FY2025 revenue guidance was raised to $4.89B–$4.94B, and free cash flow guidance increased to ~$1.6B.** Q3 revenue is expected in the $1.22–$1.24B range. Management remains confident in continued margin expansion, even as they flagged a near-term headwind from the .CO registry contract loss.

---

## Key Risks

- **.CO Registry Contract Loss:** Expected to create a ~50 bps headwind to bookings/revenue in Q4 FY2025.
- **Customer Churn:** Ongoing decline in total customer count, though offset by higher-value segment growth.
- **Macro/Regulatory/Geopolitical:** Broader uncertainties could impact demand or cost structure.
- **Execution Risk:** Continued success depends on effective rollout of AI initiatives and retention of high-value customers.

---

## Expected Market Reaction

Analyst and investor sentiment is expected to be **positive**, given the strong revenue beat, margin expansion, and raised guidance. The market may focus on the company’s ability to drive growth through high-value customers and technology investments, while concerns about customer churn and the .CO registry loss are likely to be viewed as manageable in the context of overall performance.

---

## Final Takeaway

**GoDaddy delivered a strong, high-quality quarter, marked by margin expansion, disciplined cost management, and a successful pivot to high-value customer segments.** The market may be underestimating the positive impact of AI initiatives and the resilience of GoDaddy’s business model, while overemphasizing short-term risks like the .CO registry loss and customer churn. 

**Upcoming catalysts:**  
- Further updates on AI-driven operational improvements  
- Progress on customer retention and share repurchase activity

Overall, GoDaddy’s Q2 FY2025 results reinforce its position as a scalable, margin-focused leader in the digital services sector, with significant upside potential as technology investments and strategic customer focus continue to pay off.

GoDaddy (GDDY): Margin Expansion and High-Value Shift

GoDaddy (GDDY) is set for Q2 2025 margin expansion, driven by strong Applications & Commerce growth and rising ARPU, though customer attrition and macro risks remain key watchpoints.

# GoDaddy Inc. (GDDY): Margin Expansion and Segment Outperformance Set the Stage for Q2 2025 Earnings

## Executive Summary: Bullish Outlook Anchored by Margin Gains and A&C Momentum

We are **Bullish** on GoDaddy Inc. (GDDY) heading into the Q2 2025 earnings release. The company’s **Q1 2025 revenue of $1.19B (+7.7% YoY)** and **operating margin expansion to 20.7%** signal robust execution, particularly in the high-growth Applications & Commerce (A&C) segment (**+16.5% YoY**). Management’s Q2 guidance of **$1.195B–$1.215B** in revenue and a focus on margin improvement underpin our positive stance. However, the market may be underestimating the impact of **declining active customers (-2.4% YoY)**, which could cap upside if not offset by continued ARPU gains and A&C outperformance.

## Recent Trends Signal What’s Next: Revenue and Margin Trajectory

GoDaddy’s last two quarters have demonstrated a clear pattern of **accelerating margin improvement** and **segment-driven revenue growth**. The A&C segment is the primary growth engine, while the Core Platform remains stable but slower-growing. Operating margin has improved by nearly **500 bps YoY**, and EPS has tracked this margin expansion.

### Key Financial Trends Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q2 2024      | 1.13         | 65.2             | 15.8                 | 10.1          | 0.72    |
| Q3 2024      | 1.15         | 66.0             | 17.2                 | 11.3          | 0.80    |
| Q4 2024      | 1.17         | 66.5             | 18.9                 | 12.5          | 0.89    |
| Q1 2025      | 1.19         | 67.1             | 20.7                 | 13.8          | 0.98    |

**Trend:** Revenue and margins have steadily increased each quarter, with EPS rising in tandem. This momentum is likely to continue into Q2, especially if A&C growth persists.

## Management’s Forward Tone and Positioning: Cautious Optimism with Margin Focus

Management’s Q1 2025 commentary was **measured but confident**, emphasizing resilience and progress while acknowledging macro headwinds. Notable quotes include:

- “We’re seeing steady progress in our Applications & Commerce business, which continues to outperform expectations.” (Q1 2025 Earnings Call)
- “There is some pressure from small business sentiment, but our diversified model is helping us navigate.” (Q1 2025 Earnings Call)
- “We expect NEBITDA margins to approach 31% in Q2.” (Q1 2025 Earnings Call)

Compared to prior quarters, the tone has shifted from defensive to proactive, with a clear focus on **margin expansion and operational discipline**. The reaffirmation of guidance and explicit margin targets suggest management is confident in delivering on near-term objectives.

## KPI Trends & Upcoming Quarter Drivers: Monetization Offsets Customer Decline

The most relevant KPIs for Q2 2025 are **Active Customers, ARPU, and Bookings/ARR**:

### KPI Movement Table

| KPI                | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|--------------------|---------|---------|---------|------------|------------|
| Active Customers   | 21.0M   | 20.8M   | 20.5M   | -2.4%      | -1.4%      |
| ARPU ($)           | 206     | 218     | 225     | +9.2%      | +3.2%      |
| Bookings ($B)      | 1.32    | 1.39    | 1.42    | +7.9%      | +2.2%      |
| ARR ($B)           | 3.77    | 3.98    | 4.05    | +7.5%      | +1.8%      |

- **Active Customers:** The decline could pressure topline if not offset by higher ARPU.
- **ARPU:** Strong growth in ARPU is driving revenue efficiency, mitigating customer attrition.
- **Bookings/ARR:** Both are trending up, supporting near-term revenue visibility.

**Impact:** If ARPU and A&C growth continue to outpace customer losses, revenue and margin expansion should persist in Q2.

## Missed by the Street: Short Interest and Insider Activity

Two subtle but important signals are being overlooked:

1. **Short Interest:** Now at **3.7% of float (+19% QoQ)**, indicating rising skepticism or hedging ahead of Q2. This could amplify volatility if results surprise.
2. **Insider Activity:** Recent CAO share sales (Q1 2025 10-Q) may signal caution internally, though not at levels suggesting broad concern.

These factors suggest the market is not fully pricing in potential downside from customer attrition or macro shocks.

## Scenarios for the Upcoming Quarter: Bull, Base, Bear

### Scenario Table

| Scenario | Revenue ($B) | EPS ($) | Operating Margin (%) | Key Assumptions                                              |
|----------|--------------|---------|----------------------|--------------------------------------------------------------|
| Bull     | 1.22         | 1.05    | 21.5                 | A&C outperforms, ARPU rises, FX tailwinds, stable macro      |
| Base     | 1.21         | 1.00    | 21.0                 | A&C steady, ARPU growth offsets customer decline, no shocks  |
| Bear     | 1.19         | 0.95    | 20.5                 | Customer attrition accelerates, macro/FX headwinds, A&C slows|

**Most Likely:** The **Base case** is most probable, given current KPI trends and management’s reaffirmed guidance. Upside is possible if A&C momentum accelerates, but customer attrition and macro risks cap the bull case.

## Appendix – Data Tables & Management Quotes

### Quarterly Financial Trends Table

| Quarter      | Revenue ($B) | EPS ($) | Operating Margin (%) |
|--------------|--------------|---------|----------------------|
| Q2 2024      | 1.13         | 0.72    | 15.8                 |
| Q3 2024      | 1.15         | 0.80    | 17.2                 |
| Q4 2024      | 1.17         | 0.89    | 18.9                 |
| Q1 2025      | 1.19         | 0.98    | 20.7                 |

### KPI Movement Table

| KPI                | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|--------------------|---------|---------|---------|------------|------------|
| Active Customers   | 21.0M   | 20.8M   | 20.5M   | -2.4%      | -1.4%      |
| ARPU ($)           | 206     | 218     | 225     | +9.2%      | +3.2%      |
| Bookings ($B)      | 1.32    | 1.39    | 1.42    | +7.9%      | +2.2%      |

### Key Management Quotes

1. **“We’re seeing steady progress in our Applications & Commerce business, which continues to outperform expectations.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: A&C is the primary growth driver for Q2.*

2. **“There is some pressure from small business sentiment, but our diversified model is helping us navigate.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: Macro risks are present but manageable.*

3. **“We expect NEBITDA margins to approach 31% in Q2.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: Management is targeting further margin expansion.*

4. **“Active customer count declined modestly, but ARPU gains more than offset the impact.”**  
   Source: Q1 2025 10-Q  
   *Interpretation: Monetization is mitigating customer attrition risk.*

5. **“We remain committed to disciplined cost management as we scale.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: Ongoing focus on margin and expense control.*

6. **“Recent FX volatility is a watch item, but not a material headwind at this stage.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: FX risk is present but not yet significant.*

7. **“We are reaffirming our full-year guidance based on current trends.”**  
   Source: Q1 2025 Earnings Call  
   *Interpretation: Confidence in near-term outlook.*

---

**In summary:** GoDaddy’s Q2 2025 setup is defined by margin expansion, A&C outperformance, and robust ARPU growth, with customer attrition and macro risks as the key watch items. The base case scenario is most likely, but upside exists if A&C momentum accelerates further.

GoDaddy (GDDY): Margin Expansion Drives Q2 2025 Outlook