GoDaddy Inc. Q3 FY2026 earnings call

• Strategic Transformation: GoDaddy is transitioning to become an 'agentic operating system' for micro and small businesses, with 'Aero' as the flagship product replacing Websites Plus Marketing.
• Aero Adoption and Performance: Aero’s analyzed bookings run rate more than doubled to over $100 million in Q3. It contributed incrementally to overall bookings growth, offsetting legacy product migrations. Free-to-paid conversion rates and customer satisfaction remain healthy.
• AI and Agent Integration: GoDaddy has launched agent-friendly APIs for domains, hosting, email, and commerce. The company is integrating with LLMs and AI agents to capture new traffic sources where developers and entrepreneurs are building websites.
• Identity and Trust (ANS): GoDaddy joined Infoblox, Google, and Cloudflare to demonstrate 'Chain of Trust,' using Agent Name Service (ANS) to verify agent identities and enable secure transactions on the open internet. This positions ANS as a foundational infrastructure component for the agentic web.
• Operational Efficiency: Normalized EBITDA margin expanded to over 33%, driven by structural leverage and AI-driven productivity gains across operations (engineering, support, finance).
• Customer Retention: Retention rates remain above 85%. Customers spending over $500 annually with two or more paid products exhibit nearly perfect retention. For Aero customers, over 70% have at least two paid products.

• Applications and Commerce: Revenue grew 9% to $524 million. Segment EBITDA margin expanded approximately 120 basis points to 47%. Growth was driven by productivity and commerce, partially offset by the ongoing migration of customers from Websites Plus Marketing to Aero.
• Core Platform: Revenue grew 4% to $818 million, driven by high-value transactions, new primary domain registrations, and renewals across various TLDs. Segment EBITDA margin remained flat at 33%.

• Full-Year Revenue: Expected to finish toward the higher end of the $5.215 billion to $5.255 billion range.
• Full-Year Revenue Mix: Applications and Commerce (ANC) revenue growth expected at approximately 10%; Core Platform revenue growth expected at approximately 4%.
• Fourth Quarter Bookings: Expects bookings growth to accelerate and be slightly ahead of revenue growth, driven by increasing Aero unit adoption within ANC.
• Full-Year Margin: Reaffirms normalized EBITDA margin target of over 33%.
• Full-Year Free Cash Flow: Reaffirms target of approximately $1.8 billion, with a normalized EBITDA to free cash flow conversion ratio greater than 1:1.

• Gross Margin Pressure: Aero currently has lower gross margins compared to internally developed software like Websites Plus Marketing due to inference/token costs, creating short-term headwinds.
• Competitive Pricing Environment: Industry-wide discounting on domains and freemium offers on hosting may pressure pricing power.
• AI Model Costs: Dependence on third-party frontier models vs. internal open-weight models creates volatility in cost structures; however, GoDaddy is actively testing internal data center solutions to mitigate this.
• New Demand Uncertainty: While AI coding tools drive new cohorts, the buying behavior of these new customers differs, requiring continuous adaptation of marketing and bundling strategies.

Q: Analyst asked if Aero's incremental booking contribution stems from higher contract values or new business via the domain funnel, and whether gross margins will erode further.

A: Management clarified that almost all incremental volume came from existing customer migrations, not the newly launched domain path. Aero’s starter tier drives volume, but strong attach rates for credit packs propel incrementality. CFO noted gross margins will face pressure due to Aero’s lower margin profile vs. legacy software, but operational efficiencies will offset this, allowing continued EBITDA expansion.

Q: Analyst inquired about adapting to traffic originating from AI environments/LLMs and early observations from API expansions.

A: CEO reported a jump in LLM-originated traffic from a small base, validating recent efforts. GoDaddy is expanding its suite of agent-friendly APIs and testing new pricing bundles designed to perform favorably in LLM recommendations. These bundles aim to attract high-intent customers entering via coding assistants and agent interfaces.

Q: Analyst asked about the mix of subscription vs. credit pack revenue in Aero and how consumption behavior evolves after the initial build phase.

A: CFO stated the mix is roughly two-thirds subscription and one-third credit packs, primarily driven by migrating existing customers. CEO explained that while some users are 'power users' consuming many credits, most transition to a subscription model. There are opportunities to upsell marketing and communication tools to users who have completed their initial website build.

Q: Analyst asked if Aero’s long-term monetization can match Websites Plus Marketing and if consumer agents are causing churn in domain renewals.

A: CEO acknowledged Aero is early-stage and lacks the multi-year optimization of WAM, but sees similar long-term potential through iterative value steps. Regarding agents, management stated they see no evidence of agents auditing subscriptions or canceling domains; retention remains strong, and any seat reductions in email are attributed to business needs, not agent-driven behavior.

Q: Analyst asked about the monetization timeline for Agent Name Service (ANS) and how GoDaddy plans to handle VeriSign price increases amid competitive discounting.

A: CEO described ANS as a long-term opportunity focused on identity and trust to enable machine-to-machine commerce, with no immediate financial impact. On pricing, management emphasized a data-focused approach, rolling partner price increases into renewals rather than due dates, and using bundling tests to maintain competitiveness without sacrificing lifetime value.