GDDY Q2 Deep Dive: AI Initiatives and High-Intent Customer Focus Shape Results

Domain registrar and web services company GoDaddy (NYSE:GDDY) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 8.3% year on year to $1.22 billion. The company expects next quarter’s revenue to be around $1.23 billion, close to analysts’ estimates. Its non-GAAP profit of $1.90 per share was 6.9% above analysts’ consensus estimates.

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StockStory’s Take

GoDaddy exceeded Wall Street’s revenue and adjusted profit expectations for the second quarter. Management attributed the results to continued execution on attracting high-intent customers and leveraging its AI-powered Airo platform to drive higher retention and average order size. CEO Amanpal Singh Bhutani highlighted progress in expanding the Applications & Commerce (A&C) segment and improved operational efficiency, but also acknowledged ongoing customer count pressure, primarily from the elimination of deep discounts and customer migrations.

Looking forward, GoDaddy’s updated guidance is centered on expanding AI-powered offerings, particularly through its new Ask Airo agentic capabilities, and further scaling pricing and bundling strategies. Management expects these efforts to increase customer engagement and lifetime value, while continued investments in seamless digital experiences and partner integrations are planned to drive recurring revenue. CFO Mark McCaffrey stated, “We are fully committed to delivering our Investor Day targets,” emphasizing ongoing margin expansion and free cash flow growth, even as product testing and market transitions continue.

Key Insights from Management’s Remarks

Management emphasized the success of AI-driven experiences and high-value customer cohorts, while also noting headwinds from customer attrition and shifting product strategies.

• AI integration gains traction: The Airo platform is driving higher conversion, average order size, and near-perfect retention among high-intent customers, with management pointing to Airo cohorts outperforming non-Airo cohorts on key engagement metrics.
• Pricing and bundling expansion: Ongoing testing and rapid deployment, often using AI-generated code, have enabled faster introduction of new bundles and partner integrations, contributing equally to growth alongside volume improvements.
• Seamless customer experience: A large-scale experimentation initiative focusing on frictionless onboarding and product discovery has improved conversion rates and renewal performance, with management attributing meaningful financial impact to these efforts.
• Commerce feature momentum: The introduction of Rate Saver, a credit card surcharging tool, is gaining adoption among merchants and is expected to further enhance the economics of GoDaddy’s commerce offerings.
• Customer base shifts: Despite ongoing pressure on total customer count from discontinued deep discounting and renewals, the company is seeing growth in cohorts spending over $500 annually, which now represent almost 9% of the base and deliver higher retention and ARPU.

Drivers of Future Performance

GoDaddy’s outlook is driven by scaling AI-powered products, optimizing pricing strategies, and expanding digital commerce solutions, while managing competitive and macroeconomic uncertainties.

• Expansion of AI-powered features: Management plans continued rollout of Ask Airo and broader Agentic AI tools across its product suite, aiming to further boost customer engagement, retention, and upsell opportunities, particularly among higher-value cohorts.
• Ongoing pricing and bundling innovation: New bundles and partner integrations are expected to launch in upcoming quarters, supported by AI-driven experimentation and faster code development, with management focused on enhancing both value delivered to customers and monetization per user.
• Customer acquisition and retention trends: While the company anticipates a return to customer growth as migration headwinds abate, risks remain from ongoing shifts in customer behavior and competitive pressures, particularly as AI-powered website and domain solutions proliferate across the industry.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the broader adoption and monetization of Ask Airo and Agentic AI capabilities, (2) the effectiveness of new pricing and bundling initiatives in driving higher average revenue per user, and (3) progress in returning to overall customer growth as migration-related attrition fades. Execution on commerce product enhancements and the rollout of new partner integrations will also be key signposts.

GoDaddy currently trades at $135.76, down from $150.32 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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