GoDaddy Inc. Q3 FY2025 Earnings Call

Welcome to GoDaddy's Third Quarter 2025 Earnings Call. Thank you for joining us. I'm Christie Masoner, VP of Investor Relations. With me today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. After our prepared remarks, we will open the call for your questions. On today's call, we will reference both GAAP and non-GAAP financial measures and other operating and business metrics. A discussion of why we use non-GAAP financial measures and reconciliations to their GAAP equivalents can be found in the presentation on our Investor Relations site or in today's earnings release. Growth rates represent year-over-year comparisons unless otherwise noted. We will discuss forward-looking statements concerning future financial results and strategies or objectives for our operations. These statements are subject to risks and uncertainties outlined in our SEC filings. Actual results may differ significantly from those projected in forward-looking statements. Any forward-looking statements made during this call are based on assumptions as of today, October 30, 2025, and we are not obligated to update these statements unless required by law. Now, I am pleased to introduce Aman.

Good afternoon, and thank you all for joining us today. At GoDaddy, our mission is to empower entrepreneurs and make opportunity more inclusive for all. We draw inspiration from our customers, millions of micro business owners bringing ideas to life every day. They are resilient, creative, and determined even as technology and the world around them rapidly change. Our mission is to make that journey simpler, supporting their growth and success with tools that cut through the complexity and make running their businesses easier backed by human guidance. In the third quarter, we delivered strong financial results, achieving 10% growth in total revenue while also delivering A&C bookings growth acceleration to 14% on strengthening customer cohort dynamics. We also delivered a normalized EBITDA margin of 32% and increased our AI investment and capabilities with new products ready for launch. Reflecting on our strong performance, we are raising our full-year 2025 revenue guidance to 8% growth, the top end of our 3-year range of 6% to 8%. At GoDaddy, we are energized by the Agentic Open Internet, our vision for an open, trusted, and accessible web with AI agents helping us with our tasks. For more than 30 years, the Open Internet has enabled entrepreneurs to bring their ideas to life, and GoDaddy has been a foundational partner in that journey. The next leap forward is the Agentic Open Internet, where AI-powered agents collaborate and complete end-to-end tasks with speed and precision. These unlocks will help small businesses thrive in the years ahead. And as we meet the moment and build towards this next era, GoDaddy itself is transforming in 3 ways: First, our Airo platform evolution from Generative AI to Agentic AI; second, agents transforming how work gets done internally; and third, by building on the foundation of being the world's largest domain registrar and putting the infrastructure in place to make the Agentic Open Internet safe and accessible for all. The first part of the GoDaddy transformation is the evolution of the Airo experience from a Generative AI platform to an Agentic AI platform. Over the last few days, we launched 5 new Airo agents that handle fundamental customer jobs to be done like finding and buying domain names, building websites and applications, creating logos and compliance documents. This is just the beginning. Our pipeline includes many more agents ready for launch over the next few days and weeks. The interactive design of these agents reflects our unique ethos of guidance, a core differentiator for GoDaddy. Agents are learning to anticipate next steps across multiple jobs, proactively guiding a customer through each interaction with clarity and confidence. Live for both new and existing GoDaddy customers, they deliver tailored support by instantly understanding each customer's unique business context. These new capabilities are available through the beta launch of Airo.ai, a new website built on the GoDaddy software platform. We can test new agents on Airo.ai quickly and maintain a seamless path back to GoDaddy.com. Look out for new agents on Airo.ai every week over the next few weeks, and we will direct targeted traffic to it soon. With this release, Airo Plus was shifted from a Generative AI tool set to an Agentic AI tool set. Airo Plus will serve as a direct monetization vehicle on Airo.ai and on GoDaddy.com. Staying true to the needs of our micro business customer and our culture of experimentation, Airo.ai includes 2 different vibe coding experiences. Both experiences use an Agentic AI chat interface to build websites and both allow seamless publishing. The difference is that one lands the customer in the websites plus marketing editor, while the other introduces the editor in line with the chat interface. As customers use these experiences, we are excited to add more functionality to these tools. The second part of the AI transformation at GoDaddy is the impact Agentic AI is having on how we operate. Teams across the company are reimagining their roles in an Agentic world and identifying the shifts required to solidify gains in velocity and efficiency. From experimentation to care, to engineering, to corporate functions, we are evolving beyond the value of Generative AI and shifting focus on measurable improvements driven by agents. Our evolution in software development provides a good example. In Q2, we set a company-wide goal to reach 70% of AI-generated code by year-end. We are making great progress towards this goal. This month, more than 45% of code written at GoDaddy was generated by AI. And for new applications, this number is significantly higher. With that momentum, we are now shifting our focus from measuring code generation to measuring reduction in product cycle time. The expected net result is faster velocity, which allows us to build more capabilities without incremental investment. The impact is already visible. A small team used AI to build the Airo App Builder and launched it in short order on Airo.ai. The pace of iteration on this product is high, and it positions us to move fast on emerging shifts like Agentic browsers. Another example comes from our aftermarket team, which used AI tools to build a new portal for ultra-premium domain names. In the past, this type of work was hard to prioritize. Now a small team experimented, built, and delivered it end-to-end within weeks. For both the Airo App Builder and the ultra-premium marketplace, our internal measurement tools show that nearly 90% of the code was AI-generated. The third part of GoDaddy's AI transformation builds on our foundation as the world's largest domain registrar. Our vision for an Agentic Open Internet imagine today's open web, enhanced by agents that can operate independently, collaborate across systems, and automate customer journeys. These agents can discover one another, validate identity, and establish trust across domains, creating an open space for agents to collaborate. Working back from that vision, we launched GoDaddy's Agent Name Service or ANS. Built on DNS infrastructure and proposed as an open standard. GoDaddy's ANS provides verifiable identities for AI agents. By registering agents with ANS, value is immediately created for publishers by providing their agents with a verifiable identity. Value is also created for consumers of ANS since they can securely discover and validate agents across the open web. While many companies are beginning to explore this idea, we are excited to be leading the way. GoDaddy is launching ANS with its own agents to showcase registration, discovery and validation, and we are now inviting partners to join this open ecosystem. We have a bold vision for the Agentic Open Internet for our customers, and we look forward to showcasing this vision at our Investor dinner in December. Before I pass it to Mark, as always, I'd like to share some updates on our 2025 strategic growth initiatives. The first is pricing and bundling, which continues to deliver strong results across both segments of our business. This work remains centered on giving customers greater value and choice through tailored bundles that simplify their decision-making and deepen engagement across our platform. Execution remains on track for 2025, and we are focused on launching the 2026 bundles, further extending our reach and impact. Our next initiative, seamless experience, creates frictionless journeys that support our customers from their first search to purchase and renewal. This large-scale experimentation engine continues to deliver improvements in conversion, attach and renewal rates. In Q3, we expanded our optimization work to include more end-to-end flows across the customer journey using AI to personalize recommendations and refine design in real time. This initiative is meaningfully contributing to bookings growth with continued momentum into next year. Turning to commerce. Growth in our payment solution remains solid, driven by continued conversion within our existing customer base. We also drove solid adoption of our high-margin subscriptions, including GoDaddy Capital, Rate Saver, and faster payouts, all of which are helping entrepreneurs simplify their operations and improve cash flow. These capabilities strengthen our commerce ecosystem, deepening relationships with merchants and positioning us to capture more of their business as they scale. And last but not least, GoDaddy Airo continues to be our primary customer engagement engine and key catalysts for our strategic growth initiatives, driving value as it powers better attach, higher average order size, and improved retention. Our history shows that customers who adopt more products stay longer with us, generating higher lifetime value. The success metrics we track make it clear that Airo is creating a more valuable and durable customer cohort than our strongest historical benchmarks. In closing, I am proud of the progress our teams achieved this quarter, advancing our AI vision with Airo.ai, pioneering trust and security in the Agentic Open Internet through ANS, and our experimentation culture that is accelerating innovation across the company. GoDaddy is evolving rapidly with the moment. And as AI reshapes what is possible, we are leading with the solutions we develop and helping entrepreneurs everywhere take the next leap forward with confidence, simplicity and world-class care. With that, here's Mark.

Thanks, Aman. Good afternoon, everyone, and thank you for joining us. We are pleased with our strong execution, which led to favorable results and exceeded our top line guidance. As a result, we are raising our full-year revenue guide to 8% at the midpoint to reflect the continued strength across the business. We delivered A&C revenue growth of 14% and grew free cash flow 21% to an impressive $440 million. We continue to demonstrate our commitment to shareholder returns, repurchasing 9 million shares for a total of $1.4 billion year-to-date. Taken together, we are on track to exceed our Investor Day North Star commitment of a 20% CAGR. How are we getting there? As Aman mentioned, our strategy that elevates GoDaddy Airo as our primary customer engagement engine is hitting its stride. High-intent customers are adopting more products, spending more and generating higher lifetime value. Our $500-plus customer cohort now represents approximately 10% of our base, and this cohort has higher attach and near perfect retention, boosting our ARPU up 10% to $237. In the third quarter, total revenue grew 10% to $1.3 billion, surpassing the high end of our guided range. Growth was broad-based, driven by continued strength in both the primary and secondary domain markets as more ideas come online and by the momentum in A&C, we're rising attach rates, expanding customer lifetime value, and deepening engagement across our ecosystem. Retention rates remained at 85%, and our total customers grew sequentially to $20.4 million, underscoring the durability of our model and GoDaddy's central role in bringing entrepreneurs to the Open Internet. Additionally, international revenue grew 14%, primarily driven by the strength in the primary and secondary domain markets as we continue to expand our reach globally. For our high-margin A&C segment, we drove 14% growth in revenue to $481 million on the ongoing solid adoption and attach of our subscription solutions. Our Core Platform segment delivered elevated revenue growth of 8% to $784 million on 28% growth in aftermarket and 7% growth in primary domains. Moving to profitability. Normalized EBITDA grew 11% to $409 million, delivering a margin of 32%. This reflects leverage gains across the P&L from AI-driven efficiencies and continued operational discipline, partially offset by gross margin pressure from product mix and continued investment in our AI initiatives. Total bookings grew 9% to $1.4 billion. Within that, A&C bookings grew 14% and core platform bookings grew 6%. As a reminder, bookings primarily represent cash collected during the period. Free cash flow grew an impressive 21% to $440 million on our bookings growth, powered by continued strengthening of our customer cohorts and the greater than 1:1 conversion of normalized EBITDA to free cash flow. On the balance sheet, we exited the quarter with $924 million in cash and total liquidity of $1.9 billion. Net debt was $2.9 billion, representing a net leverage of 1.7x on a trailing 12-month basis. We maintained our disciplined approach to capital allocation, repurchasing 4.1 million shares during the quarter, totaling approximately $600 million. As of the end of the quarter, our fully diluted shares outstanding were 137 million. Pivoting to our outlook. For the full-year, we are raising our 2025 revenue guide to a range of $4.93 billion to $4.95 billion, representing growth of approximately 8% at the midpoint. We expect total bookings growth, absent FX impacts to be in line with total revenue growth and A&C bookings growth to continue its momentum. For the full year, we expect A&C revenue growth in the mid-teens and Core Platform growth in the mid-single digits. For the fourth quarter, we expect revenue to be in the range of $1.255 billion to $1.275 billion, representing 6% growth at the midpoint. This range reflects a more difficult A&C revenue comparison, the expected impact from the .CO registry contract expiration and our consistent approach of excluding high-value aftermarket transactions from our guidance. For Q4, we expect A&C growth in the low to mid-teens and core platform growth in the low single digits. For the full year, we expect a normalized EBITDA margin of approximately 32%. And for the fourth quarter, we are projecting 33% normalized EBITDA as we continue to balance operational efficiency with investments in AI innovation. We expect normalized EBITDA to maintain greater than a 1:1 conversion to free cash flow for the full-year and reaffirm our free cash flow target of approximately $1.6 billion, representing growth of over 18%. On capital allocation, our approach remains unchanged, and we will continue to evaluate all opportunities to maximize long-term shareholder value. In closing, GoDaddy is delivering solid profitable growth driven by durable revenue performance and continued operational discipline. Our strategy around Airo is working. We are ahead of our target of our Investor Day North Star, reflecting consistent execution across the business. Our expanding AI-powered innovation and efficient operating model position us to drive long-term value creation for customers and shareholders. We look forward to hosting many of you at our Investor Dinner in Tempe on December 2, where we will showcase the innovation setting the pace for GoDaddy's sustained success. I will now turn the call over to our VP of Investor Relations, Christie Masoner, to open up the line for Q&A. Thank you.

Our first question comes from Vikram Kesavabhotla from Baird.

Can you hear me okay? My first one is a little more conceptual in nature and really a follow-up to some of Aman's comments regarding the changes taking place across the Internet. And specifically, when you think about a lot of the AI and Agentic services that are emerging across the board and changing the way that consumers find information, discover products and make decisions, how do you think all of this will ultimately impact the importance of domains and websites going forward and the demand for those products? And then my second question is on the customer base. It looks like your total customer count was up slightly on a sequential basis. But Mark, curious if you could offer any thoughts on how we should see that metric progress through the balance of the year and going forward. And beyond just the total customer count, what are some of the underlying metrics that you're following to measure the health of your customer base right now?

Yes, Vik. I've always been a strong supporter of AI and have been very optimistic about its potential for a long time. I truly believe that AI, particularly Agentic AI, will automate processes for our customers and their clients, enabling them to deliver services in ways that were unimaginable just a few years ago. It's incredibly exciting to be at GoDaddy during this transformative time, especially with all the internal innovations taking place. We're witnessing a moment where there is a beneficial connection between the increase in websites and the improved models that interact with those websites, making website creation simpler, which will result in more websites being launched. This relationship is beneficial for GoDaddy. If I have ten ideas I want to share with the world, the easier it becomes to execute them, the faster I can do so with the help of various tools. That’s fantastic news, as it suggests there should be more domains and agents in existence. This is what we're aiming to highlight at GoDaddy. With the launch of Airo.ai, we're demonstrating the potential of starting with a few agents, and in the coming weeks, we're planning to introduce many more agents for users to explore as they navigate their ideas. While AI continues to enhance our internal operations and efficiency, we are primarily focused on how agents can reshape our internal processes and how they can function externally. This is where our agent name service comes into play as an exciting innovation based on an open standard. Our goal is to enable worldwide registration and discovery of agents that can operate across different domains and companies. This entire agent infrastructure is grounded in DNS, which is linked to the domain framework where we hold a leading position globally. I believe all these elements are aligning well, and ultimately, making things easier for our customers is our main priority. We're developing the necessary tools while leveraging our extensive range of products, all designed for the customer. The more capabilities agents provide for our clients, the better it will be for us.

Yes, and Vik, on the customer question that you had, yes, we turned positive this quarter. But remember, our strategy is around high-intent customers. We're looking at that cohort of $500 plus, why? That is the cohort that's buying more, attaching more, has a higher average order size. We're seeing great momentum as that is contributing meaningfully to our bookings number going forward. And that will continue to be our strategy. That is what is driving our ARPU number and is adding to that 10% ARPU growth that we had this quarter. So again, no change there. We will continue to focus on that high-intent customer.

Our next question comes from the line of Ygal Arounian from Citi.

Definitely a lot of interesting stuff with Airo and Agentic and GenAI in general. So maybe on the rollout of Airo.ai, and I know we'll learn a lot more about this in the coming weeks at your Investor event. But can you just maybe set the stage a little bit for how this is rolling out, how it works with the current Airo product? You mentioned the monetization on Airo Plus. You'll have things like the vibe coding tool, it looks like we'll have to play around that a little bit, how that compares to the kind of current web builder and how these things sort of integrate and how that contributes. And then second question, which I'm sure ties into the first one. But just on the comments around the strengthening customer cohort dynamics, I know a lot of that is driven by the higher-value customers and that cohort growing faster. Can you talk a little bit more about the drivers of that and what you're seeing there, particularly around conversion from Airo would be helpful to hear.

Let me start by discussing the evolution of Airo and the upcoming launch of Airo.ai. It's crucial to highlight that Airo.ai is integrated with the GoDaddy software platform, meaning that the experience on Airo.ai is closely linked to GoDaddy's offerings. Existing GoDaddy customers visiting Airo.ai will find that it already recognizes their data, providing them with a tailored experience. Our goal with Airo.ai is to attract targeted traffic and swiftly test various agents. The more successful agents will be integrated back into the GoDaddy experience, where we already see a significant amount of traffic. For monetization, Airo Plus will serve as the vehicle for generating revenue on both Airo.ai and GoDaddy.com through these agents, and Airo Plus is prepared to do so. While Airo.ai is currently in beta, we plan to transition to a full release in the coming weeks. With this launch, Airo Plus will also implement paywalls on Airo.ai, allowing us to test this model to facilitate customer conversions. We're excited about our ability to move quickly. I understand you're eager to experiment with it, and I'm enthusiastic about you trying the App Builder, which I believe you will find quite engaging. However, what excites me even more are the upcoming enhancements to the App Builder that will roll out over the next couple of weeks. New features will be added every 5 to 7 days, not just to the App Builder but also to the other agents. I am increasingly thrilled about the capabilities that will become available in the coming months. Now, I’ll hand it over to Mark.

Yes. And we're excited about our ability to get to the high-intent customers. And what we're seeing from that cohort is that they are attaching to a second product at a much higher rate than previous cohorts. We're seeing near perfect retention rates now that we've had experience with these cohorts since we launched Airo in and of itself over 12 months ago. And it's becoming more and more of a driver of not only our bookings and our revenue, but our ARPU as we continue to grow into the year. So these customers are coming in with the idea of doing something with their domain, doing something with their idea, getting to monetization on their end, and we're seeing those strong results start to become a tailwind as we go into future years.

I think it's important to mention that Airo is our primary vehicle for driving engagement and attachment. What Mark is really talking about is the improved attachment, better renewal, and the increased exposure for our customers to the full range of our products that creates this 500-plus cohort. With our nearly perfect retention, we're very excited about expanding that further as we reach 10% of our base.

Our next question comes from the line of Trevor Young from Barclays.

Aman, I'll start with a bigger picture one for you. You mentioned more AI-generated code, reduced production cycles, overall faster velocity of innovation. I think I heard you use the phrase experimentation culture a few times in your remarks. Is there a bit of a shift here where you're going to have more of that experimentation going forward, more small groups going out to create new features quickly and just see how it works? You put that on Airo.ai. And then if it works, you kind of bring it back to core GoDaddy.

That's exactly right, Trevor. I think it's very common for people to think about teams as, let's say, 7 to 10 or groups of 7 to 10 going out building things over multiple weeks and multiple sprints. Now what we're seeing is teams of 3 to 5 that are using AI in the new products, 90% of the code ultimately is being written by AI. So the inefficiencies are really less and less in writing the code part and it's everything else around it. And that's where agents can make a much bigger difference as we automate the full cycle, right? And what we're finding is that smaller team is able to release much faster and Airo.ai gives us a surface where we can have many, many releases every week without worrying about our big funnel, our conversion that we have to do on GoDaddy.com, surface it to a large enough group of people that we get data very quickly on Airo.ai that it's working, and then introduce it to our customers where the big funnels are.

Yes. And just with that, this culture just didn't start this quarter. This has been evolving for years for us. This is now getting to a great pace that it's getting faster and better and the ability to innovate and launch is becoming quicker and to get results that drive meaning in our financial model. It's fantastic.

Great. And then a quick second question. Just in aftermarket, really strong acceleration there. Was that at the higher end, the above $10,000 domains that tend to be more lumpy and tougher to predict? Or did something fundamentally change in kind of the lower-priced domains that's driving that stronger growth?

Trevor, no doubt, we saw a return to high-value transactions this quarter. It was very strong at the higher end level, which, yes, those are the lumpy ones that are difficult to predict. Now we did also see continued strength at the lower levels. Again, no change in momentum there. It's still a great secondary market, but we definitely saw a pickup in the higher-value transactions.

Our next question comes from the line of Josh Beck from Raymond James.

I wanted to ask about how to consider the total addressable market for Airo.ai. Your current business is closely tied to the SMB sector and new business formation. Are you entering a new area that extends beyond just websites? I'm curious if we should be thinking about a different total addressable market. Regarding the custom app component, should we view this as competitive with companies like Lovable or Base44?

Yes. As you'll see on Airo.ai, we offer two experiences for website building. One is designed specifically for our micro business customers. As users interact with it, the AI increasingly prompts them with suggestions like "buy this next" or provides three options to choose from. Our testing revealed that customers prefer AI to guide them through the process rather than constantly needing to be prompted. Guidance is a significant aspect of our culture in customer care. We are using our transcripts and care guides to assist users in building websites, and we are training our agents accordingly, which is unique to GoDaddy and reflects our commitment to guidance. Our models and tools have become more capable, and we also serve a substantial group of designers and developers in our core hosting business who are interested in more complex prompts and allowing AI to generate content for them. Soon on Airo.ai, you will see that the tool, which currently resembles others in the market by being able to create and host sites, will also start generating WordPress sites. We are a major WordPress host with a large customer base, and we believe Agentic AI can significantly assist our customers. However, this tool works differently than the one tailored for our micro business customers, which is specifically designed for that demographic. We see this as an opportunity to serve a broad range of customers with diverse AI capabilities, each tailored to different user needs.

Yes. And another way to look at it, Josh, is as more ideas come online, and people are spending money to get those ideas online and create that opportunity. We're getting more of the wallet share upfront from that high-intent customer that is propelling above $500. So the combination of the 2 is a great tailwind for our business, and we remain laser-focused on that customer, the micro business, and the person who's getting that idea online.

Our next question comes from the line of Ken Wong from Oppenheimer.

Aman, I wanted to ask about the Agent Name Service. I think a very fascinating concept here. We think back to the past, it was clear you guys had a right to win in SSL, given that the website journey starts with the domain, starts with GoDaddy. Help us understand what the rationale might be for why GoDaddy can serve a similar purpose in the Agentic Internet?

I appreciate that question. If we look back to the advent of the Internet, the solution to the identity issue wasn't just websites; it was domains and DNS that initially addressed it. Agents need to be registered so that different companies, domains, or systems can trust and verify the claims made by these agents. This is the role of the Agent Name Service. By linking it to the DNS infrastructure, one of the fundamental building blocks of the Internet, we are leveraging the core principles of how the Internet functions. The Agent Name Service goes beyond just registration; it can embed certificates, and since GoDaddy is also a certificate authority, these certificates are integrated. Additionally, it facilitates the discovery of agents by companies. As we roll out the Agent Name Service with our own agents, you will see how each step functions and how it simplifies the process for different companies and domains to engage with agents. We believe that various companies and individuals will develop specialized agents that excel in specific tasks. When one agent wants to utilize the capability of another, it needs assurance that this interaction is validated and trustworthy, which is precisely what the ANS offers at the foundational level of the Internet.

Got it. I really appreciate the context and looking forward to seeing how that evolves. Mark, one for you. Great to see the higher guide for the year. I guess I'm just trying to unpack what maybe the primary drivers are. I think right off the bat, we can see that aftermarket was really strong. But how should we think about maybe the primary market, the A&C piece contributing to that raise? Or was this largely just a byproduct of that step-up in aftermarket?

We're seeing strength across the business. And even if you took the aftermarket beat out, and we definitely had an elevated aftermarket beat this quarter, we are still growing at a very high rate. And I think if you take out the aftermarket, we're at around an 8% growth, which really reflects the underlying strength that not only in the domains market, primary and secondary, but also in A&C in and of itself because we're seeing those customers come in with that intent. We're seeing that cohort we talked about driving towards that second product, increasing the average order size. We see it through multiple different products in our portfolio. So I would say it's overall momentum. And on top of that, we had a really good aftermarket with a high transactions returning.

If I could just add and take us back to our 3-year model, which I know Mark mentioned already, but it is important to highlight that we are at the top end or ahead in each of the metrics in our 3-year model. And that beat that Mark is talking about goes down to normalized EBITDA, it goes down to free cash flow. And by maintaining the margins on those lower metrics, we are really as a company producing much more dollars on those bottom line metrics. And that's fantastic for our company because it is being driven by the growth on the top line.

Yes, thank you, Aman. Remember, our main focus is free cash flow. When everything aligns, that figure, along with our share buyback, helps us reach our goal. We are ahead of schedule in delivering that number or the compound annual growth rate we discuss.

Our next question comes from the line of Arjun Bhatia from William Blair.

I'm Willow Miller filling in for Arjun Bhatia. Regarding the balance of investing in AI and maintaining profitability, can we say that your AI investments could be balanced by the efficiencies gained from internal AI use cases? Additionally, could you discuss the internal applications of GenAI and Agentic AI in the customer care organization and whether this could lead to a reduction in headcount over time?

I believe we have already shown this. Our investment in AI is not solely dependent on achieving efficiencies. For more than a year, we have been actively offsetting our investment by creating efficiencies in other areas. This is one reason I mentioned the significant amount of AI-generated code at GoDaddy and how quickly new products are being developed and launched. I am very optimistic about this and pleased with the team's progress. So far, Generative AI has had the most substantial impact, especially in generating content like code across various functions. With Agentic AI, we are now focusing on the overall cycle time of product life cycles and corporate processes. We are discovering that by utilizing agents, we can pursue efficiencies in additional areas, which has us excited. Regarding customer care, we have leveraged this for the past six years, maintaining discipline and demonstrating numerous moments of efficiency while enhancing service. Our goal is to offer higher service quality at a lower price, and I am confident that we will continue to improve our care offerings with AI, allowing us to operate more efficiently over time. Mark, do you have anything to add?

Yes, I believe you made an excellent point. We have been on this journey for many years, focusing on creating operating leverage in our model. We are now witnessing the benefits of that as we achieve greater efficiency in areas like engineering, care, and corporate functions. This efficiency enables us to free up time and resources, which we can then reinvest in exciting initiatives such as the AI capabilities we discussed today. It has indeed been a journey, and we have structured our operations to achieve these efficiencies while reaching our targeted EBITDA levels. We are confident in the 33% projection we set for next year, as it strikes a balance between enhancing efficiency and facilitating innovation moving forward, ensuring that GoDaddy's long-term value remains strong into the future.

Our next question comes from the line of Mark Zgutowicz from The Benchmark Company.

Guys, just thinking about ongoing A&C bookings variables, is the forward acceleration more dependent today on new product adoption versus pricing and bundling, which I think supported your guidance at the beginning of the year. That's question number one. Question number two, it looked like there was a little bit of deleverage in A&C adjusted EBITDA year-over-year. I was just curious what that might be attributable to? Is that AI investments in product or marketing and sort of what that looks like over the next couple of quarters?

Yes, I will begin with the first part. The strategy is effective, Mark. We are maintaining our focus on the high-intent customers, specifically those in the $500-plus cohort, because their average order size tends to increase, and they contribute more overall. This is what is driving the strength in A&C right now. Our pipeline is solid, and Aman mentioned the return of agents, which will contribute positively to our future growth. What you are witnessing today is a result of our efforts over the past few years with Airo, targeting these customers and emphasizing the stronger ones in that cohort. This approach is set to continue as we wrap up 2025 and enter 2026. Regarding leverage and product mix, we experienced some shifts in product mix within the normalized EBITDA for the segment. There is nothing significant to report, and it should remain in a similar range, varying slightly as we progress, depending on the product mix.

Got it. And maybe if I could squeeze one more in. Just in terms of incremental token costs perhaps as it relates to vibe coding. Is there any considerations we should have there in terms of how that may or may not impact gross margin?

Yes, we are closely monitoring our AI costs, which we have been doing for quite some time. Airo has been utilizing Generative AI for almost two years. We have alternative model capabilities that we host internally, which help us manage costs. You'll see us experimenting with different models to find the right balance between generating revenue, providing an excellent customer experience, and controlling costs. We are considering the entire equation, and we are confident in our ability to manage it while still achieving the 33% margin.

Our next question comes from the line of Naved Khan from B. Riley.

This is Ryan Powell on for Naved. So we were wondering, you introduced some AI upgrades to manage WordPress earlier this year, and we're hoping if you could talk about any uptake you've seen by the pros since rollout. And then secondly, on international growth outpacing overall, if there are any specific markets to call out?

Yes. The WordPress updates have gone really well. Designers, developers that work with us are using the tool. We measure how quickly they are able to get up the site running. We see improvements in that cycle time, and we're happy about that. The bullishness from what we tested with the WordPress upgrade is what is bringing the agent to Airo.ai very, very soon, where we'll be able to offer a fully Agentic ad interface that works with the other agents and allows the customer to create a WordPress site, skipping many, many, many, many steps. So we feel very good. We recently actually won a couple of awards for best WordPress for small businesses. So word is starting to get out, but GoDaddy has a new WordPress platform that we're putting AI tools around it and the capabilities are new and different. We do have a small amount of effort around tapping into agencies and sort of new markets on that. And that's still very early, but the early feedback that we've received has been good. Of course, they want to see more, and we're excited to sort of give them more AI capabilities and sort of continue the testing.

And Ryan, on international, nothing to call out. We saw strength similar to what we saw in the domestic market in both primary and secondary. And we saw some large aftermarket transactions land in the international geographies, but nothing specific to call out.

Our next question comes from the line of Ella Smith on for Alexei Gogolev at JPMorgan.

So first, I was hoping to ask about the state of SMBs since it's become more opaque under the government shutdown. What are you hearing from your customers?

Yes, Ella, what our survey shows is that our customers continue to be more bullish about their businesses than they are about the economy, but their overall view of the economy has not changed too much in the last several quarters. Now obviously, when we engage with them, they have a lot on their mind right now. But what we've seen in the past is that this is a very resilient group of people, and they have a high propensity to believe in themselves and believe in their businesses. And we don't find any sort of pullback in terms of their engagement or sort of entrepreneurship in general. And if we get down sort of to the specific metrics, then broadly, when we look across all of GoDaddy, we're seeing higher 2-plus attach, so more customers taking 2 and more products. We're seeing higher average order size. We're seeing the 500-plus cohort growing in the business. We're seeing customers try many more products, even though they're buying more, but they're trying even more products. So we still see a lot of positive signals for engagement for conversion and renewals have continued to be better. Now of course, renewals are going to be better given our focus on high-intent customers. But we think some of that renewal goodness is also indicating that while folks have stuff on their mind, our services tend to be essential to their success. So we're not seeing any weakness in the renewals for them.

Yes. And I would just focus on the word they continue to be a very optimistic group about their ability to be successful. And that hasn't changed, and we haven't seen that showing up or heard it showing up anyway.

Great. That's very helpful. If I could ask one more question, we're really interested in how domains and AI are perceived. It seems that Airo has had a positive impact on domain sales. Are you noticing any changes in your customer funnel composition? Are customers beginning to adopt new types of TLDs that weren't as popular before?

We have noticed an increase in the usage of .ai domains over the past couple of years. As certain top-level domains become more popular, we observe shifts in demand. However, when I look at a broader time frame, there haven’t been significant changes in customer preferences. We maintain a steady flow of traffic and opportunities, and we are experiencing improving conversion rates over time. This result stems from our focus on marketing and targeting high-intent customers. Overall, demand for domains remains consistent among our customers. I feel very optimistic about AI and believe it will greatly benefit our company and our clients. As creating content and building websites becomes easier, I anticipate a mutually beneficial relationship where large language models utilize websites to access content, which in turn creates tools that simplify website creation, leading to increased domain sales. Additionally, I am particularly excited about the potential for a future where this domain infrastructure supports agents globally. I have touched on this before, but I am truly enthusiastic about what we refer to as the Agentic Open Web, where agents collaborate using the ANS infrastructure and open standards. This future will be incredibly exciting for our customers, allowing them to accomplish things they could hardly have imagined just a few years ago.

And just one thing to call out, Ella, nothing on the TLD-specific, but we did see a return to large transactions in the aftermarket, the secondary market, not calling that a trend just yet, but it was increased activity, and we'll continue to monitor as we go forward.

Yes. While it’s not a perfect correlation, it usually indicates optimism among people purchasing those domains as they target high-value names.

Our next question comes from the line of Brent Thill from Jefferies.

Can you hear me okay now? This is actually John Byun for Brent Thill. Two questions. One, just on industry trend. There's a lot of talk about the MCP servers and exposing some of the features and functionality to the outside and maybe to partners. Wondering how you're thinking about that in terms of exposing functionality and letting integration into some of what you provide? And then I have a follow-up after that.

Yes. We're all on board with MCP and A2A. And you will find like GoDaddy with ANS supports both protocols. So when you register an agent, you actually tell it they want to use MCP or A2A. And we're looking at the best ways of offering all our customers the ability to surface their content or functionality, let's say it's a commerce offering, all using MCP or maybe ACP in the future. So all of that is very much in the wheelhouse for us. We're excited about being able to offer our customers all of this capability or something like an MCP capability wrapped in an agent, right, wrapped in a manner that they can trust that they feel good about and it represents them in the best way possible and builds on the content or functionality they already own.

So make it easy to consume for SMBs, makes sense. And then the other question, the A&C growth, it's been growing kind of like mid-teens. You've been guiding to mid-teens for quite a while now, maybe the last several quarters. And you have a couple more quarters of maybe tougher comps in the 16% level, I guess, through the March quarter. But how should we think about that going forward in general? I mean, is it kind of now going back to low to mid-teens or low teens in general as we kind of anniversary that as you get bigger and bigger?

Yes. So John, just a couple of highlights there. We were talking about revenue for Q4 that we have a tough comp for revenue. So we called that out. As we go into 2026, and obviously, we'll talk about '26 as we close out the year, we feel really good about the momentum we're seeing, and that's why we're calling out that cohort that is attaching faster, greater AOS, and higher retention. A lot of that shows up in the A&C bookings and then obviously becomes A&C revenue. And we feel really good about how we're going into the second half of this year and what that will mean for '26 and what that will mean for the long term.

Our next question comes from the line of Elizabeth Porter from Morgan Stanley.

Great. We've talked a lot about Agentic, and I wanted to ask a little bit more specifically as it relates to commerce, where we've seen examples like OpenAI, Instant Checkout. And so the question is, as customers increasingly shift towards conversational or some of these AI-driven interfaces that may be sitting just outside of the traditional website real estate, how are you expecting the role of the traditional website to evolve within that ecosystem? And what are some of the investments that you're making in the product portfolio to capitalize on this potential shift and interfaces for engagement?

Yes. I mean, I'm sure since you're asking the question how early we are in this AI life cycle. And when we look at commerce with AI or with the large LLMs, we're even earlier when it comes to commerce. Now everything we've seen, and we're engaged with sort of the big players out there and keeping up to speed and how things are evolving and changing. Ultimately, our customers do need a place where all their content is available, where all the different functions that have to be executed are available. And the investments we are making is to prepare ourselves to be able to surface our customers' content and data and actions across the LLMs, across Agentic browsers, across whatever new AI technology comes along. And secondarily, making sure that our customers surface in those LLMs in a manner that makes sense for them and is accretive for them. So those are the 2 areas where we're putting in the most energy, but it's just very, very early. And I mean, none of us have really a crystal ball and how this is evolving. But what we try to do is stay very much up to speed with it and look forward 3 to 6 months and say, look, we're here now, what do we expect next and move very quickly towards that.

Great. And then just as a follow-up, Mark, I wanted to follow up on your most recent kind of comments around that strengthening customer cohort dynamics kind of showing up in A&C. So could you provide a little bit more color on what exactly you're seeing as it relates to the strengthening dynamics? Is this incrementally more users or more of just the better ARPU? And how should we think about the skew between gross new customers driving the strengthening versus more going back to the installed base of existing customers and that being the bigger driver?

Yes, absolutely. A good way to look at it is, and if you want to look at what is being driven by quantity, you look at stronger renewal rates, better attach and new customers coming in for the first time and getting to all 3, right? And then you have the pricing and the bundling on the other side that as we provide more value, we can start to charge. Both of them are contributing about equal to our funnel right now, which is, again, going to the initiatives around pricing and bundling and seamless experience contributing both equally as we go forward. So it's a good way to look at it. We're seeing strength across the board, and that's why we feel really good about our momentum going into 2026.

Thank you. That concludes our call. I'll hand the call back over to Aman for closing remarks.

Well, thank you all for joining. A shout out to all GoDaddy employees for a fantastic quarter, and I look forward to welcoming all our investors at our Investor Dinner in December. Thank you.