DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• VP of Investor Relations - Christie Masoner
• Chief Executive Officer - Amanpal Bhutani
• Chief Financial Officer - Mark McCaffrey

TAKEAWAYS

• Total Revenue -- $1.3 billion, representing 6% growth year over year driven by the expansion of the Applications and Commerce segment.
• Applications and Commerce Revenue -- $524.3 million, growing 9% due to strength in productivity services and the ongoing transition of presence customers to Airo.
• Core Platform Revenue -- $817.5 million, up 4% year over year reflecting higher transaction volumes and domain renewal strength.
• Airo Annualized Bookings Run Rate -- Over $100 million, representing a doubling from the $50 million reported in the previous quarter.
• Normalized EBITDA -- $449.3 million, with margins expanding 120 basis points to 33.5% due to operational discipline and AI-driven productivity gains.
• Free Cash Flow -- $480.8 million, growing 9% year over year with a conversion ratio from normalized EBITDA exceeding 1-to-1.
• Average Revenue Per User (ARPU) -- $253, a 6.8% increase compared to last year as customers adopt a broader suite of products.
• Total Customers -- 20.5 million, reflecting a net increase of 40,000 during the third quarter.
• Annualized Recurring Revenue (ARR) -- $4.5 billion, representing 5% growth year over year.
• Applications and Commerce Segment EBITDA Margin -- 46.9%, increasing 120 basis points primarily through productivity gains in customer care and development.
• Core Platform Segment EBITDA Margin -- 32.9%, which remained relatively flat compared to 33.0% in the prior year.
• Share Repurchases -- $477 million for 5 million shares in the third quarter, totaling $1.4 billion in repurchases year-to-date.
• Cash and Total Liquidity -- $1.1 billion in cash and $2.3 billion in total liquidity, providing flexibility for strategic investments and capital allocation.
• Net Debt and Leverage -- $2.7 billion in net debt, resulting in a net leverage ratio of 1.4 times trailing 12-month normalized EBITDA.
• Full Year Revenue Guidance -- $5.215 billion to $5.255 billion, with management expecting results toward the higher end of the range.
• Full Year Free Cash Flow Guidance -- Approximately $1.8 billion, supporting a three-year CAGR target of over 25%.
• Operating Income and Margin -- $362.5 million, growing 22% year over year resulting in a 27.0% operating margin.
• International Revenue -- $435.5 million, up 3.1% year over year as domestic transactions accounted for a larger share of aftermarket volume.
• Airo Product Attachment -- More than 70% of new Airo customers have at least two paid products, exceeding the company-wide average of over 50%.
• Customer Retention Rates -- Over 85% for the total customer base, which management noted improves as customers increase their annual spend.
• Airo Unit Growth -- Driven by the starter tier as many existing presence customers migrated to annual plans during the third quarter.
• Applications and Commerce Bookings -- Growing 8% year over year, representing an acceleration from the 7% growth reported in the second quarter.
• Core Platform Bookings -- Growing 4% year over year, supported by high-value transactions and primary domain registrations.
• Total Bookings -- $1.4 billion, growing 6% year over year on a reported and constant currency basis.
• Airo Booking Mix -- Approximately two-thirds subscription and one-third credit packs, with subscription revenue recognized over the term of the customer contract.

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RISKS

• McCaffrey stated, "the gross margin is going to see a little deterioration as we move forward," noting that Airo has lower gross margins than legacy internally developed software products.
• Bhutani noted, "we are seeing sharper discounting across the industry on products like domains, along with freemium offers on hosting," as competitive dynamics evolve.
• McCaffrey mentioned, "Productivity grew on targeted pricing actions taken earlier this year, partially offset by a lower unit volume as customers renewed e-mail accounts with fewer seats," indicating a potential headwind in specific segments.

SUMMARY

GoDaddy Inc. (NYSE:GDDY) reported third quarter results highlighting the expansion of its Airo artificial intelligence platform and growth in the Applications and Commerce segment. Management reported that Airo became the default website product in the domains purchase path during late September, which contributed to total bookings growth. The company reduced its fully diluted shares year-to-date through a repurchase program. The company is transitioning its presence products to an agentic operating system while focusing on high-intent customers who adopt multiple products.

• CEO Bhutani noted that Airo became the default website solution in the domains purchase path during late September, which is expected to facilitate broad customer adoption.
• The company launched a developer platform featuring APIs for domains, hosting, and commerce to integrate GoDaddy services into AI coding tools and agent interfaces.
• CFO McCaffrey indicated that high-intent customers spending more than $500 annually demonstrate nearly perfect retention, aiding long-term customer lifetime value.
• The company demonstrated the Chain of Trust open architecture to establish auditable identity pathways for autonomous agents completing transactions on the open internet.
• Bhutani indicated that the company strategy involves embedding artificial intelligence at the core of software architecture rather than as an additional layer.
• Management indicated that AI-driven productivity gains in software development and customer care are providing structural leverage for margin expansion.
• Bhutani observed that traffic impacts from Google's transition to AI-powered search have been small due to the resilience of the company's direct brand traffic.

INDUSTRY GLOSSARY

• Airo: GoDaddy's AI-powered platform that automates website creation, marketing, and business operations for small businesses.
• Agent Name Service (ANS): A core component of the infrastructure needed to support identity and discovery for autonomous agents on the open internet.
• Annualized Recurring Revenue (ARR): The projected annual value of subscription-based revenue from new and renewed services.
• Applications and Commerce (A&C): A reporting segment encompassing website builders, marketing services, professional email, and payment processing solutions.
• Chain of Trust: An open architecture developed to verify agent identities and permissions for secure, auditable transactions.
• Core Platform: A reporting segment consisting primarily of domain name registrations, renewals, and the domain aftermarket.
• Normalized EBITDA: A non-GAAP measure that adjusts net income to exclude interest, taxes, depreciation, amortization, and other non-core expenses.
• Presence Solutions: Tools including website builders and mobile-optimized stores that enable customers to establish a digital identity.
• Starter Tier: An entry-level pricing plan designed to encourage initial adoption and free-to-paid conversion for new and migrating customers.

Full Conference Call Transcript

Christie Masoner: Welcome to GoDaddy's Third Quarter 2026 Earnings Call. Thank you for joining us. I'm Christie Masoner, VP of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. [Operator Instructions] On today's call, we'll be referencing 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 of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted on our Investor Relations site at investors.godaddy.net or in today's earnings release on our Form 8-K furnished with the SEC. Growth rates represent year-over-year comparisons unless otherwise noted.

The matters we'll be discussing today include forward-looking statements such as those related to future financial results and our strategies or objectives with respect to future operations. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings. Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statement that we make on this call are based on assumptions as of today, October 29, 2026, and except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm pleased to introduce Aman.

Amanpal Bhutani: Good afternoon, and thank you for joining us. At GoDaddy, our purpose is to make opportunity more inclusive for all. And our strategy is to become the Agentic operating system for micro and small businesses, creating customer value and transitioning it to shareholder value over time has been our formula for success. Airo is at the heart of meeting this moment, and we are transforming GoDaddy to stay ahead of what comes next, evolving our customer experience and building the foundation for long-term growth. We are early in this journey, and the meaningful growth in Airo's adoption over the last 2 quarters has validated our strategy.

In Q3, we delivered bookings growth of 6% and expanded normalized EBITDA margin to over 33%, reflecting continued operational execution and structural leverage we achieved from the strategy we launched at our 2024 Investor Day. We are excited to announce that Airo's annualized bookings run rate more than doubled to over $100 million, up from $50 million last quarter and $10 million the quarter before. Even more encouraging, Airo incrementally contributed to our bookings growth this quarter as its bookings more than offset the impacts of migration of our legacy website products.

Looking forward, we are excited to share more about our vision for the next several years with you at our Investor Night on December 1 in Tempe, where we will lay out where we are driving this business and how we will continue to deliver value for our customers and our shareholders. This is a pivotal moment for our industry and for GoDaddy to help entrepreneurs succeed online. Small businesses everywhere are experimenting with AI tools, and we are bringing more capabilities and customers to Airo as fast as possible. This year, we made a strategic decision to make Airo our flagship website product, replacing Websites + Marketing.

Over time, Airo will become the operating system, bringing together all the products that GoDaddy offers. And in late Q3, Airo became the default option in the domains path. With that change, we are stepping up marketing, shifting planned spend and investing in brand awareness with the incremental spend in Q4, offset by efficiencies elsewhere in the business. We have also deployed significant internal resources behind Airo as it performs more marketing and commerce jobs for our customers. We priced Airo for broad adoption for both new and existing customers in a competitive agent-first and AI-native market, we are using our advantage of scale to quickly get our product in front of customers.

As Airo is scaling, we are encouraged by the free-to-paid conversion rate and customer satisfaction, as well as attach rates for new and existing customers that are on par with our legacy Websites + Marketing product. There is a lot more to do, and we are excited to keep going. Turning to what we see in the broader environment. In Q3, Google quickly pivoted towards AI mode for the bulk of search in our space. Based on early data we observed, we believe the impact to our traffic has been small, which speaks to the resilience of our direct traffic and brand. The more important development is where new demand in our space is coming from.

We believe AI coding tools are driving strong growth in our industry, and we believe a broader set of customers, including developers, are driving that growth. New cohorts are increasingly starting inside coding assistants, command line tools and agent interfaces, and they buy differently. As this new demand grows, we are also seeing sharper discounting across the industry on products like domains, along with freemium offers on hosting. We have moved quickly to launch and expand a suite of agent-friendly APIs spanning domains, hosting, professional e-mail and commerce. Understanding that pricing is a critical component of going to market, as we move into 2027, we will lean into testing new bundles with competitive offers that will deliver more value.

We will test these new bundles as part of our Pricing and Bundling program, which we have had success with over the last several years. We also expect these new bundles to show up favorably in LLMs and AI agents. We are working to improve how we appear in these channels to attract more of the traffic that comes from them with a continued focus on high-intent customers. This is an ongoing effort, and we are driving incremental progress. As the agentic open web unfolds, we continue to see a long-term opportunity for GoDaddy to play a foundational role with Agent Name Service serving as a core component of the infrastructure needed to support an increasingly Agentic world.

Earlier this month, we joined Infoblox, Google and Cloudflare to demonstrate Chain of Trust, an open architecture developed in collaboration with the Singapore government and informed by its AI governance framework. For the first time, agents on different platforms that had never worked together, completed a simulated live purchase on the open internet using ANS, ARD and other open internet standards. The system verified agent identities and permissions in an auditable pathway, while also blocking impostor agents before they could transact. This demonstration shows the integral role that identity, Agent Name Service and GoDaddy will play in an agentic open Internet. We are transforming GoDaddy for an agentic world, and this quarter, we made real progress.

Airo is doing more of the work for business owners. Our expanded suite of APIs is making GoDaddy available in the tools where people now build, while our work on identity and discovery is laying the groundwork for businesses to be found and trusted as agents take on more of the customer jobs to be done. Together, we believe these efforts will continue to make GoDaddy's offering more valuable and mission-critical for our customers. With that, here's Mark.

Mark McCaffrey: Thanks, and good afternoon, everyone. We are transforming GoDaddy with the same financial rigor that has long defined us, and our third quarter results reflect that focus. We delivered revenue above the high end of our guide and expanded our normalized EBITDA margin by approximately 120 basis points. We generated free cash flow of $481 million, with trailing 12-month free cash flow of $1.8 billion and fully diluted shares outstanding of 123 million. Taken together, these show strong continued progress toward our North Star. Total bookings grew 6% to $1.4 billion in line with revenue growth. Applications and Commerce grew 8%, up from 7% in the second quarter.

Airo adoption drove incremental bookings this quarter while Productivity grew on targeted pricing actions taken earlier this year, partially offset by a lower unit volume as customers renewed e-mail accounts with fewer seats. Airo unit growth acceleration was led by our starter tier as many existing presence customers migrated to annual Airo plans. Higher unit volume and token credits more than offset the lower price point of this entry-level tier. That growth came largely before we introduced Airo in the domains purchase path, our largest funnel, in late Q3. Core Platform grew 4%, driven by an increased volume of high-value transactions and strength in new primary domain registrations and renewals across many of our TLDs.

Total revenue for the quarter grew 6% to $1.3 billion, and ARR grew 5% to $4.5 billion with international revenue up 3% to $436 million. Our Applications and Commerce segment grew 9% to $524 million on continued growth in productivity and commerce, partially offset by the ongoing transition of customers to Airo from Websites + Marketing that we began in the first quarter. Segment EBITDA margin expanded roughly 120 basis points to 47%. Core Platform grew 4% to $818 million, on a strong Aftermarket, overcoming a tough compare, driven by increased volume of high-value transactions. Segment EBITDA margin was flat at 33%. Underpinning everything we are doing is the resilience and durability of our model.

Once customers are with GoDaddy, they tend to stay and do more with us. More than half of our customers have at least 2 paid products, and retention rates remain above 85% and continue to improve. For Airo customers, more than 70% have at least 2 paid products. With ARPU reaching $253 and more customers spending over $500 annually, we are now using Airo to attract and retain high intent customers and help them adopt more of our products. Our experience shows that customers spending over $500 annually with 2 or more paid products have nearly perfect retention.

As Airo helps us build more of these relationships, we see an opportunity to strengthen retention and customer lifetime value over the long term. And the strength of our model allows us to pursue these opportunities while still returning capital to shareholders. Normalized EBITDA grew 10% to $449 million with margin expanding approximately 120 basis points to 33%, reflecting revenue growth and continued expense discipline. Free cash flow grew 9% to $481 million with normalized EBITDA converting to free cash flow at better than a 1:1 ratio. Our healthy balance sheet gives us flexibility to move quickly as the market evolves. We ended the quarter with $1.1 billion in cash and total liquidity of $2.3 billion.

Net debt was $2.7 billion, representing net leverage of 1.4x on a trailing 12-month basis, well within our target range. We also continued our responsible and prudent capital allocation program, repurchasing 5 million shares for $477 million during the third quarter. Year-to-date through October 26, we repurchased $1.4 billion, reducing our fully diluted shares outstanding by 12%. Turning to our outlook. For the full year, we expect to finish toward the higher end of our $5.215 billion to $5.255 billion revenue range, helped by outperformance in the Aftermarket in the first 3 quarters. We expect A&C revenue growth of approximately 10% and core platform revenue growth of approximately 4% for the full year.

For the fourth quarter, absent any impact of FX, we expect bookings growth to accelerate and be slightly ahead of revenue growth, driven by the increasing units from adoption of Airo within our A&C segment. We are reaffirming our normalized EBITDA margin target of over 33% for the year, reflecting more than 100 basis points of expansion on continued operating leverage and AI-driven productivity alongside continued investment in AI products, platform, marketing and compute. We are reaffirming our full year free cash flow target of approximately $1.8 billion with a normalized EBITDA conversion ratio of greater than 1:1. On capital allocation, we operate within a disciplined, returns-based framework.

We remain focused on allocating capital to its highest value users, with a priority on driving long-term shareholder returns. Taken together, our free cash flow and approach to capital allocation keeps us on track to deliver on our free cash flow North Star of a 3-year CAGR of over 25%, well ahead of the 20% target we set at our last Investor Day. Finally, we look forward to hosting many of you at our investor night on December 1, 2026, at our Tempe, Arizona headquarters. Registration for the evening is now open. Please contact our Investor Relations team at investors@godaddy.com to request a link for registration.

We will use the evening to give you a more comprehensive view of our strategy, how we plan to invest behind it and what we expect it to deliver for our customers and our shareholders. With that, I will hand the call back over to our VP of Investor Relations, Christie Masoner, to open up the call for Q&A.

Christie Masoner: Thanks, Mark. [Operator Instructions] Our first question comes from the line of Ken Wong at Oppenheimer.

Hoi-Fung Wong: Aman, great to hear that Airo is incrementally contributing to bookings that seems to have come a lot faster than we would have expected. I would love to see if you can maybe unpack that a little bit. How much of that is perhaps customers coming in at a higher total contract value, so that being additive versus how much of it is potential new business that's coming through the doors because of the Airo funnel, the marketing spend put behind it. But just love to understand some of the moving pieces there.

Amanpal Bhutani: Thanks, Ken. Super excited about Airo being incremental to bookings. And yes, it has come sooner than we expected to. Airo has just grown very, very fast, and customers love the product and are adopting it at higher rates than we expected. Just overall, and Mark touched on this, and I'm sure he'll jump in as well. Overall, Airo is priced very competitively, and we worked hard to improve the attach with Airo as well. So overall, we actually have to sell more units and attach it better to domains and other products. You get it to be incremental because it's cannibalizing Websites + Marketing. And in the past, we've also talked about our do-it-for-you offering that it cannibalizes.

So we're super excited about being incremental, but it's actually had to jump a couple of significant hoops to get there. As an example, we added it to the Domains path late in the quarter. And overall, it's attaching already better than Websites + Marketing in the Domains path, which is fantastic. We actually wanted to attach better and better and better, so we can bring more traffic into that path, have really strong attach rates and then open up all kinds of jobs to be done with Airo. Mark?

Mark McCaffrey: Yes. And I'll just add, you said it great, Aman, is that we're excited about the volume, excited that it's incremental. So it's adding more than we're losing in our Websites + Marketing and other presence products. So it's a great place to be. Almost all of it is attributable to the migration of existing customers as we just launched it into the domain purchase path. So that didn't contribute too much this quarter. And the exciting part is we're seeing them come in at the lower starter tier, but they're attaching more credit packs. And that attach is really propelling us to get to a better place and get to that incrementality faster than we thought.

So more to come as obviously, we've rolled it out now, but really excited about the momentum of Airo right now in the marketplace.

Hoi-Fung Wong: Got it. And then on the other side of the growth, how should we be thinking about potential margin pressures? I did notice gross margins downtick. Is there further erosion that we should be thinking about?

Mark McCaffrey: Yes, Ken, there's no doubt that Airo from a gross margin perspective, has less of a gross margin than some of our internally developed software products like Websites + Marketing. So there will be pressure on the gross margin itself. But we think our operational efficiencies up and down the rest of the P&L will more than offset that and allow us to continue to expand our normalized EBITDA into the future. Obviously, we have an Investor Day coming up, so we'll talk a little bit more about what those moving parts are. But yes, the gross margin is going to see a little deterioration as we move forward.

Christie Masoner: Our next question comes from the line of Vik Kesavabhotla from Baird.

Vikram Kesavabhotla: Okay. Great. I wanted to follow up on some of your comments regarding the impact to the industry as more traffic originates from AI environments. Can you elaborate more on some of the steps that you're taking to adapt to that trend? I know you expanded the suite of APIs this year. What are some of the early observations that you're seeing from your efforts there? And then you also referenced testing some new pricing and bundling activity in 2027. It'd be great if you could talk more about some of the opportunities that you see and how you plan to approach that process.

Amanpal Bhutani: Yes. Thanks, Vik. On the AI traffic with LLMs, we're engaged with all of the LLM companies. And there's a lot of history with GoDaddy that we're working through with them. But over the last quarter, we did see a jump in our traffic coming from LLMs. And it was on a small base, but it was a good result based on the efforts we have made. We still have a long ways to go, and we think these new bundles that we mentioned will continue to help in that area. But this is an ongoing activity with us, and we just want to keep improving on it as much as we can.

In terms of the new bundles, we're taking pricing and bundling into sort of what it's going to be in the future. And with the way LLMs are indexing and taking behavior, we think by introducing new value into our bundles, we'll get more traffic and better visibility in the LLMs. And that's what we're going after. We'll be testing these bundles at near the end of this year, into early next year. And our expectation is that together with our efforts on improving some of the existing and adding the new that we'll continue to make improvements with these new sources of traffic. And just very quickly on the APIs.

Yes, those are targeted towards the agent builders and sort of the CLI and the new -- you can almost call it a new channel of traffic where customers are engaging differently and they're buying different way. And our APIs are very new, but we're excited about having expanded that quickly. And we're sort of working that track as well to get our APIs better integrated into the tools that are out there so we can attract that traffic as well.

Vikram Kesavabhotla: Okay. Great. And then separately, I also wanted to ask about the A&C segment. Mark, I think on the last call, you said that you expected A&C bookings to remain in kind of the high single-digit range for the remainder of the year. Obviously, it looks like it was about 8% in the third quarter. Is that still your expectation for fourth quarter? And anything else we should keep in mind as we think about bookings for the rest of this year?

Mark McCaffrey: Yes. Generally, we're on pace. And obviously, a lot has to do with the momentum of Airo into the domain purchase path. But from what we're seeing right now, we feel really good about the bookings being slightly ahead of our revenue coming out of the year. And obviously, we'll talk about 2027 as we get closer. But right now, we're seeing that trend. We feel good and we feel good about the contribution of Airo, and we feel that's improving quarter-to-quarter.

Christie Masoner: Our next question comes from the line of Mark Zgutowicz from StoneX.

Mark Zgutowicz: Thanks, Christie. Just curious on the -- by Airo cohort. I'm curious what percent of users convert to paid, repurchase credits and renew.

Amanpal Bhutani: Yes. What we see with Airo, and I'll give you color from sort of new customers that are not GoDaddy customers at all and existing. I'll give you a little bit of color separately. What we're seeing is that the free-to-paid conversion rate continues to be very healthy with Airo. And that's one of the 2 key indicators we're looking at in terms of how we're positioning Airo, how we're pricing it and how customers are doing that free first build and then getting into paid.

And that number has remained very stable and healthy even as we've added more and more traffic to it, whether it's adding the traffic in the domains path or other sources or directly from channels, we've seen continued stability in that metric, which is fantastic. The other piece is we continue to have a really good reaction from customers in terms of how -- in terms of customer satisfaction. And that continues to tell us that it's a good indicator for what renewal we might expect that they're able to build, they're able to get to the outcome they're looking for, and they give it a good score.

And in terms of adding other products, what we are seeing is that when a new customer comes to Airo and to be very clear, there is someone that's not a GoDaddy customer. They actually add a second product, 70% of the time, which compares to our average at a little over half. So Airo is actually really doing a great job for the customer we're looking for, which is the high intent customer, the customer that's going to have 2 products, 3 products and so on. So we're pretty excited that even a lot of what we've done so far is with existing customers, the new we have is actually performing better than our average.

Mark Zgutowicz: That's helpful, Aman. And Mark, if I could ask a quick follow-up to an earlier question on the gross margin headwinds. Is that still predominantly inference costs? Or is there still like W + M migration or product mix pressuring there? And how does that I guess, alleviate itself and when? Is there an open weight model benefit at some point that you're going to comp positively against? I'm just trying to get a sense of on the inference side, when that maybe subsides.

Mark McCaffrey: Yes. And speaking specifically to A&C and Airo, obviously, our margin itself is pressured by other products like Aftermarket, which we've called out before. But when it comes to Airo, keep in mind a couple of mechanical things when it comes to bookings and revenue, while a lot of those costs are built into the inferences of the token use, that revenue on the subscription is recognized over time. So while it will improve over time, and we feel good about that improvement starting to show up as we go through '27, it's still not going to be at the margins that are things like Websites + Marketing was at.

So there will be some of that downward pressure as we go forward. So we feel good about margin, where it's going. It's positive, it's contributing. Having said that, it will get better over time. And I'll let Aman handle the inference part of this because I know it's something we look at a lot.

Amanpal Bhutani: Yes. So I think I've probably touched on this before. As GoDaddy, we are a scale hosting player. We do have some of our own data centers as well. And we do have actually GPUs deployed. And right now, we are testing models that are open weight models in our data centers. So what we've been seeing in the market is that the frontier models, they've introduced sort of cheaper pricing they're encouraging people to use it. And for Airo, we built the technology so Airo can switch between these models and use whichever makes the most sense.

So what you're going to see from us over the next 3, 6, 9 months is that we're going to deliver the best value for our customers at a cost that we think delivers good margin for us and leads to a price that our customers can afford. And within that mix, we will have all of the options, which include routing to different models for different queries, using open weight versus frontier models and a couple of other things that we're very focused on in terms of what we can do internally with our data centers, right, that doesn't require us to go out to third party.

So there's 3 or 4 levers there that we intend to use to sort of balance this equation. And we intend to do it incrementally to keep driving growth of Airo and keep managing its margin.

Mark McCaffrey: And Mark, just coming back, these are the costs associated with Airo, right. There's no other migration costs or anything along those lines associated with that.

Christie Masoner: Our next question comes from the line of Jamesmichael Sherman-Lewis.

Jamesmichael Sherman-Lewis: Hopefully, you can hear me. Two for me, if I may. First, on the developer platform, could you touch on the adoption trends you're seeing with that? And how we should think about these new customer entry points at GoDaddy evolving into next year? And then following up on that, given this more competitive domain discounting environment, should we expect any changes to your promotional intensity towards acquiring these new customers?

Amanpal Bhutani: Yes, sure. On the developer platform, it's all very, very new. We really want to get to situation where our APIs have the competitive differentiator in terms of the breadth of products that we offer. So we just got to the point where we've got domains. We've got hosting. We've got commerce enabled as well and professional e-mail. Those 4 things together when combined, bundled, we think that's differentiated. But we're still very, very early and folks are just starting to realize that GoDaddy has this offering. And we have work to do in terms of go-to-market and linking it into all of the tools that people are using. But we're very excited. It started out really well.

We've done a bunch of testing, experimentation on it. We work with customers. There is a good ecosystem developing there. And again, always a lot more to do, but what we like where we're going. And on the second part of the question, while we see domain intensity in terms of discounting and such, we have a long history of testing pricing of testing, merchandising. And we tend to look at these things with a very data-focused way, right?

We collect multiple data points, not in terms of just what the conversion is or units is or what bookings it carries, but also what kind of behavior those customers have in terms of attach or second or third actions that they might take, which in some cases might take 14 days or 30 days or so on. So I feel very good about our ability to continue to focus on that high-intent customers given the data we have. And if in the short term, there are some tactical decisions that are made because of what I would call, short-term dynamics. I think we have the ability to test into those and really compete where we need to compete.

But overall, our strategy is based on the same ethos that we have had for a long time; test into these items, understand the data, and continue to look for that lifetime value that we know only exists when the customer has high intent when they do multiple things with us, and then they stay with us a long time and that turns customer value into shareholder value.

Christie Masoner: Our next question comes from the line of Alexei Gogolev from JPMorgan.

Alexei Gogolev: Mark, so you talked about starter tier growth plus higher attach of credit packs driving incrementally. Can you maybe share what percent of Airo bookings are credits versus subscription today? And whether credit attach is primarily from existing customer migrations or new customers coming through the domains path?

Mark McCaffrey: Yes. Alexei, thanks. And I would say it's roughly 2/3 subscription, 1/3 credit packs is contributing, and it's primarily coming from the migration as we launched the Airo in the domain purchase path late in the quarter in and of itself. So that's a pretty good breakdown of how it's coming in right now. Now remember, you have to have a subscription to get to the credit pack. So it's natural that it would have a ratio of about that.

Amanpal Bhutani: I think the only thing to add, Alexei, is as we look at open weight models and multiple sources of earning efficiency and the agents themselves improve and the LLMs improve as well. This is a pretty dynamic space. So we watch it pretty carefully to see how it's shifting, how customers are using these credits and what value are they getting with them. So I would expect this space to still be dynamic given how early we are in the AI wave.

Alexei Gogolev: And you said that LLM originated traffic increased in 3Q, but from a smaller base. Can you size that channel in a way that's useful, maybe like a share of traffic or a share of new customer adds and call out what specifically drove the improvement. Was it bundles or SEO or maybe API distribution?

Amanpal Bhutani: Yes. Its a number of small improvements Alexei, that we are focused on in terms of improvement. Some of it relates to what we control, some of it relates to things on the Internet or how we work with partners. So we have a hit list of things that we're going through. What's encouraging for us is that as we got through some of the items on the list, we actually saw a jump. Again, it's on a small base. It's too small to parse out. right? But we are encouraged by that jump because it shows where our efforts are working.

And also keep in mind, right, that a significant percentage of our traffic, like the majority of our traffic comes to us directly, right? It's based on our brand. It's based on sort of the awareness GoDaddy has and the customer base we have and so on. So that's still the sort of larger area of focus for us.

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

Willow Miller: I'm Willow on for Arjun Bhatia. Aman, you commented there are more jobs done with Airo on the GoDaddy platform. I'm curious to hear what are you seeing in terms of early repeat consumptive behavior related to Airo? Are customers already coming back to buy more credit packs, given there are more opportunities to use these credits?

Amanpal Bhutani: Yes. What we're seeing is that the sort of Pareto-type curve where a percentage of customers are using a lot of credit packs, right? But most customers tend to use credit packs to get to a certain point and then they sort of turn more into a subscription-type model.

Now for those customers or with those customers where we think there's a ton of opportunity because if those -- if we can help those customers discover that if they build a website, Airo can help them do marketing or Airo can help them respond to their customers or communicate with their customers, those are all incremental opportunities that we're looking at because with Airo, we already have a product that's does a great job. Customers like it. It's priced to be very competitive. So we're getting good energy into the product. And now we can truly work on the engagement and get people to do more and more and more with it.

So I'm pretty excited about actually being able to move that needle with a large group of customers.

Mark McCaffrey: And there's 2 paths once they enter the Airo platform, right? And that's why we're seeing a lot of the starter. Once you get through your credit packs, you have the option to buy more or you could upgrade to the higher level tier and pay a higher subscription and get that access to those credit packs at a higher level as you move forward. So again, we're giving the customers a couple of different paths to grow and the initial engagement showing that they're doing both.

Christie Masoner: Our next question comes from the line of Kishan Patel from Raymond James.

Kishan Patel: This is Kishan Patel on for Josh Beck. Where are you seeing the strongest early demand across the expanded suite of Agentic APIs? And how are you thinking about the Agentic hosting opportunity?

Amanpal Bhutani: Yes. So I think it's just very early for us to sort of comment on where we see the most. We're excited to have the product. The API is out there, and we're excited to have the breadth of the product. Again, we have more to do there. In terms of the Agentic hosting, we think there's a good opportunity for GoDaddy there. GoDaddy actually recently launched Node.js hosting, which is very much sort of the new style hosting with very simple experience, very competitive in terms of what it offers customers and we're seeing good adoption with those customers, but most of that adoption is still coming from the web for us.

Only a small percentage of it is coming from APIs. And we think that's mostly a discovery issue. It's not an issue in terms of product we have on the API. But people just don't know yet that GoDaddy has these APIs and this capability, and we have work to do to get there.

Christie Masoner: Our next question comes from the line of Robert Coolbrith from Evercore.

Robert Coolbrith: So just -- I'm probably asking the same question in a different way, but just wondering, as users maybe get -- even users are migrating get past that initial sort of maybe heavy build phase. Just wondering the subscription itself with a multiproduct attached, setting aside the consumption of credit packs, is that enough to be sort of at equalization with WAM from a TLB perspective? Is it significantly lower, potentially higher. Just wanted to see if you have any early proof points or could maybe talk us through that a bit.

And then I wanted to ask, as we're seeing early proliferation of consumer agents, we're doing a lot of subscription audits and things of that nature, if you've seen any change in behaviors, whatsoever people coming in and maybe questioning how many domains they own or whether they want to have auto renewal on or things like that. So I just wanted to ask on that, too.

Amanpal Bhutani: Yes. On the first one, as we think about Websites + Marketing, I would just share the context that the optimization of Websites + Marketing across the different plans that exists has been done over -- over multiple years. And what each of those plans have and how upsell happens into those plans or other products are attached into those plans, those went through multiple optimization cycles, right? So for Airo, while it's very early, it's already doing a very good job of attaching with like -- Airo selling to more customers, and it's doing a good job attaching other products now. So Airo is able to keep up just by selling more basically versus WAM, which is highly optimized.

But when we look at it long term, we see those similar opportunities of multiple cycles of optimization that Airo can go through, which can deliver some of those same things that you're talking about in the future, where it becomes more and more about stepping customers through the value that they get and being able to optimize the monetization of those pieces. So while we're not up that path, that you're talking -- I think you're talking about already, we are on the first few steps, and we know where the stair case is, if you will, right? So that sort of -- that should cover the first question.

On the second question, we don't yet see a similar type of concern of agents coming in and doing things. I don't know if Mark will comment on that a little bit, perhaps. But the domain names tend to be things that people are really attached to, right? People don't typically give up their domain if they think that, that idea has any more value for them. And it's typically one of the smaller purchases a customer is doing across their ecosystem of purchases, right? Very often what customers are paying for a domain for a year is less than what they are paying every month for other subscriptions that they have.

So I'm not sure that we have yet seen the type of behavior that you're talking about.

Mark McCaffrey: Yes. I would even add a step further. If anything, we're seeing stronger retention rates and included in that is the retention improving around our domains over the last couple of years. We haven't seen anything that looks as a headwind to that improvement. Again, it's a result of going after the high intent customers. We did call out that e-mail renewals, we are seeing some seat reductions there. But there's no indication that's agent driven versus just customers needing less seats with their e-mails right now for the micro business.

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

Naved Khan: Okay. So I just wanted to clarify something first. I think -- one thing just on bookings growth, I think you spoke about how Q4 bookings should be slightly ahead of revenue. And I think it was in the context of overall revenue. How should we be thinking about A&C? I think A&C you said revenue should be around roughly 10%. So just to help us think through A&C bookings. And why shouldn't the A&C bookings accelerate if Airo is deployed on a broader scale. That's part one of the question. And the second thing I wanted to ask is just launch of, say, other agents like Meta just launched Meta Business Agent.

And how do you sort of think about GoDaddy sort of Agentic offering working in conjunction with those that are available through these large platforms such as Meta.

Mark McCaffrey: Thanks, Naved. I'll take the first part on that one. Yes, the comment that we would be slightly ahead on bookings to revenue was for the full year, but we attributed to the momentum in Airo adoption, which is obviously A&C related. So we do expect to see bookings ahead of revenue in A&C in and of itself. Again, we just launched Airo into the domain purchase path. So we have some data points. But yes, this will be the first full quarter we'll be able to observe that momentum and see how it's attaching. Early signs are great, but we'll keep everybody updated. We like where the fourth quarter is going, and we like this trajectory.

But yes, it's early in the journey right now.

Amanpal Bhutani: Yes. And on agents like, Muse, I think we'll see how these agents are positioned and what jobs to be done these agents do and how far they go in terms of being able to do certain things. Airo is very targeted towards our customer. Airo has built-in things like hosting and payments and a number of jobs to be done that Airo can natively handle. And we think there's an advantage to an agent that has all of those items built-in and being able to produce an outcome fairly easily for customers. But it's a brave new world.

It's kind of like going -- like the start of the Internet again, there's lots of new things, lots of new business models, lots of technology and customer adoption to think about. I don't know if you got my comment at the beginning of the prepared remarks, I said -- we have a thesis or I have a thesis that all software is going to get rewritten with the agent at the heart of every software. Like it's not about putting agents on top of software. It's about having agents at the core of software. And I think we're going to see consumer behavior evolve and we're going to see these technologies come in.

And a year from now, we'll be looking back at much of this and say, oh wow, look at how much it's changed. So I think we're pretty excited about where we are with Airo. Clearly, customers love it, I shared the data points. Clearly, it's adding value for customers. So we're going to keep pushing as hard as we can and moving as quickly as we can. And I'm sure there will be competition in all sorts of ways.

Christie Masoner: Our next question comes from the line of Jack Halpert on for Deepak Mathivanan at Cantor Fitzgerald.

Unknown Analyst: I've got 2 for me. Just one on customers. I think you talked about customers spending over $500 a year with 2 or more products have nearly perfect retention. I think you said that before. Is there a way to frame kind of what share of your kind of 20.5 million customers sit in that cohort today and maybe how fast it's growing? I think in the past, maybe in 4Q, it was, you said around 10%, but just curious the trends there. And then the second one, just on kind of operating expenses. Can you talk about how you guys are leveraging AI internally for efficiencies?

Do you view that as like a key lever to offset spend in planned marketing behind Airo? And if not, maybe like kind of what are the other levers that you have to sort of offset that like you talked about in the prepared remarks.

Mark McCaffrey: I'll start with the -- yes, it's about 10% customer group, $500 plus. It is improving, but I think 10% is a good base point as we move forward around that number. And then, Aman, you want to?

Amanpal Bhutani: Yes. When we look at the use of AI internally and our OpEx spend, it comes back to some of the things that we talked about for Airo as well. Of course, AI adoption has moved very quickly at GoDaddy. A large majority of our software is now written with AI tools and with AI. And we have paths to being able to make it more and more efficient, right? We have the ability to route to different models. We have the ability to run it in models in our own data centers. As I said, we are testing actively with open weight models for Airo.

And our priority has always been to put Airo fit with -- to create the best experience for our customers. But all of those capabilities are going to trickle down, I would say, over the next 3 to 6 months into our operations as well. And very likely, you will see GoDaddy employees using more and more and more tokens, but at the same or lower cost.

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

Sang-Jin Byun: This is John Byun for Brent Thill. I had 2 questions and one was similar to another one earlier, but maybe a different way, but the A&C revenue, given you expect faster bookings, I mean does that mean we should expect the A&C revenues to rebound after we end this year? And then second question is the international growth was a little bit weaker than U.S. Was there anything to explain that?

Mark McCaffrey: On the A&C revenue, obviously, we are excited about the bookings trajectory of what we're seeing related to Airo and momentum around it. Just a reminder, we're now adding different elements and levers into our revenue models today. So the timing of that revenue may shift from period to period, depending on things like the usage of the tokens, the subscriptions when they start. So again, we're in a good spot. We like the momentum. We like the trajectory. On the international growth, nothing to call out. I think in prior quarters, we've had Aftermarket transactions that were international this quarter. Most of the Aftermarket transactions were domestic in the U.S. So that just explains the variation there.

Christie Masoner: Our next question comes from the line of Chris Zhang from UBS. Chris, are you there? We will move on to Elizabeth Porter from Morgan Stanley.

Elizabeth Elliott: Yes. Thanks so much for the question. I wanted to ask around domain pricing. And I believe we have a Verisign price increase coming soon. And just given the industry has been more competitive or sensitive to prices recently. How are you thinking about working through the latest Verisign price increase?

Amanpal Bhutani: Thanks Elizabeth. So even if we look back the last few years, we tend to take price based on our pricing and bundling initiative versus when partner may take pricing. So you'll actually see that we're looking at our overall set of metrics, whether it be bookings or retention rate or actually a slew of other metrics to take a price increase versus now. And that includes competitive behavior as well.

So I think, generally speaking, we are sort of quite on top of understanding how we want to handle that price increase, and we have a plan, and it's all already rolled up into what Mark talks about, and we usually come to that very early in the process when we come to know about it itself. So we feel comfortable with our approach there, and we'll likely continue the same approach going into the next few years.

Mark McCaffrey: Yes. And I'll just add, just a reminder, the price increases are done on the renewals, not on the new, and they show up over a period of time as people renew.

Elizabeth Elliott: Great. And then just as a follow-up, I wanted to circle back on some of the OpEx efficiency that you guys are looking to deliver. And you have been pretty efficient business for a long time. So just wondering if you could put a finer point on where some of those incremental opportunities are.

Mark McCaffrey: Yes. I'll start. Elizabeth, couple of years ago in our Investor Day, we talked about the tailwinds that we had around OpEx. The growth of A&C at higher margin profile, access to global talent and obviously, the efficiencies we got through some of the actions we had taken in 2023 and going into 2024. All those continue to provide us a tailwind as we go forward at different levels, but they continue to provide that tailwind and then on top of that now, you have the efficiencies around productivity gains within our operating expenses that are really starting to show up, I would say, up and down the P&L.

Now remember, when I talked about our 33% target a couple of years ago when we reaffirmed today, the productivity gains were not a part of that equation when we did that. So they are becoming incremental to our operating leverage as we speak here today. and also giving us an opportunity to make choices about where we invest those savings. Aman talked about the Airo and the costs associated with Airo but it also comes into play around marketing, when we get behind marketing for Airo. And obviously, as we continue our innovation, our ability to make sure that we're seeing all the jobs to be done in creating that operating system that we want for the micro businesses.

So I'd love to call out one big item in our operating expense, but frankly, you could go from legal to accounting to tax, to HR to right down the line and you're seeing the productivity gains amongst the whole organization right now.

Amanpal Bhutani: Yes. I think Mark you covered it well, and we will definitely touch on this at the Investor night as well. But one other item, and I think Mark just briefly touched on it, but I'll say a few bits more, is that the product evolution that we see with our strategy of the Agentic operating system should lead to efficiencies over time. Right? As an example, with Websites + Marketing, it's not that, Websites + Marketing has completely gone away. It is still there. We have a lot of customers on Websites + Marketing, but we have replaced it for the most part in new now.

And customers that would have moved to an AI-based product, many of them are moving to Airo, right? But being able to have a platform like Airo, where we can add the next job to be done, and the next thing and the next thing, the cost of us doing that is appreciably less than what it would be to add something new after Websites + Marketing. And we'll talk a little bit more about that at the Investor night. But those are some of the things outside of what you see as the core operations of the company, it's really the product strategy of the company is evolving as well.

Mark McCaffrey: And I would be remiss if I didn't talk about the productivity gains that we have in care as well. So I'll just add that to the list.

Christie Masoner: Your next question comes from the line of Ygal Arounian from Wedbush.

Ygal Arounian: Maybe I'll -- I guess, sorry if this has been asked or you addressed on the call, just bouncing around, a lot happening tonight. Just on the ANS, I know you mentioned it, but there's obviously a lot more happening in the Agentic world -- still early but becoming more mature and security elements around that and domain is becoming more -- greater focus. And if you -- are you getting closer to being clear on the monetization opportunity? Are you seeing any early signs of that? Can you just give us an update on where you are and what we can expect to start to see it hit the financials?

Amanpal Bhutani: Yes. We're pretty excited about the Agentic open web. And really when it comes down to on the Agentic open web is that we have -- we as, the world has to decide whether we are going to treat agents as humans or as machines. On the internet today, humans are anonymous, they have anonymity, but machines don't, machines have IP addresses and you can trace them and our thought process behind ANS is that agents should have identity. We should be able to identify them. And the reason that's important is because identity builds trust, and trust enables engagement. It enables commerce and all the engagement in commerce create opportunity, right?

And that opportunity can be a tailwind for every industry as agents become sort of the bigger and bigger part of the internet. So we're still pretty excited about it. I talked about it a little bit. We just did a big demonstration of how agents could transact on the open web and have identity and be trusted as part of that demonstration, we also showed how 2 agents that have never engaged before can complete a transaction, but also rogue agents can be rejected because of how the open standards are evolving. And we think that's a tremendous opportunity. It is still a long-term play while we have some of the best companies in the world engaged on it.

We continue to sort of wait for that moment where we can truly break through on it and make it very, very large. So pretty excited about ANS, but it continues to be a long-term opportunity.

Mark McCaffrey: And it's not in any of our numbers as they exist today, just FYI.

Ygal Arounian: And then as a second on sort of the competitive pricing environment you guys are talking about here. I guess, a, do you think that there could be a prolonged pricing environment as the competitive ecosystem continues to evolve here? And can you talk a little bit more about what you're seeing in the credit packs and particularly in the upgrade packs in terms of conversion? Are customers less price sensitive at that point? What are you seeing when people are hitting that wall? Is it too early to tell? Or just any early signals around that?

Amanpal Bhutani: Yes. I think on discounting or pricing, I think what is going to happen is in every iteration of products being -- coming out to customers with new technology, you have to increase the value for customers and then find ways to monetize that and create margin for shareholders and the company, right? And I think we're going through that cycle. This is where we're pretty excited about some of the new bundles that we're going to test over the next 3 to 6 months because we think they address some of these exact things that we're talking about and have us be very, very competitive on them.

And on the credit packs, I don't know if there's more to be added versus what you already said, Mark?

Mark McCaffrey: No. No, there's nothing to call out at this juncture. I mean we're seeing healthy attach of the credit packs. We're seeing customers coming back for more. We're seeing power users of credit packs and then we're seeing regular users. But it's too early to really say, hey, this is a pattern we can call out as permanent given the newness of the introduction?

Amanpal Bhutani: Yes. I think the one comment I made is this is all very dynamic space with improvement in LLMs, improvement in agents, open weight models, like I would say this is an early, a very dynamic thing and let's see how it progresses over time.

Christie Masoner: We will try again for Chris Zhang. Chris Zhang from UBS, are you there?

Chao Zhang: Yes, I'm here. Can you hear me now?

Christie Masoner: We can. Thank you.

Chao Zhang: I also have 2 questions, if I could. The first one, also on ANS just because the recent development in the market and also the chain of trust demonstration appears very fascinating. Just wanted to think more conceptually understanding that it's not in the numbers. I don't think anyone is actually present for immediate direct monetization. But thinking about the roll of ANS longer term, especially in the commerce transaction, I think there can be a lot of collaboration with what the card networks can -- are doing or can be doing and maybe there's some overlap. But overall, I think it's more of a part of the ecosystem.

But on the other hand, in terms of monetization, I feel like maybe more of the monetization is going to be done through the payments ecosystem with the benefit accruing to them with the Agentic network tokens and trusted agent protocols by the card networks. So is it fair to understand that ANS is more of a longer-term indirect driver for domain subscription growth? Or is there any other scenario you could potentially monetize ANS? And compared to this, what's the incremental investment you see needed in the years to come?

Amanpal Bhutani: Yes, I'll be super quick because we're almost at time. We do think ANS is a great tailwind for domains and continue to keep domains at the heart and DNS at the heart of the Agentic open web. You listed out a number of use cases. We actually believe that there are many use cases in terms of ANS monetization, we are pursuing a couple of them. We're excited about them, but there's a lot to prove out with it, I would say, over the next few months and years. And I think you had a second question, if you want.

Mark McCaffrey: Incremental investment, and I'll just really quick say, listen, we have built out the infrastructure around DNS and this will be on top of the DNS and an evolution of that structure. There probably is some stuff, but we are not there yet. Right? We still are looking for adoption. We're still looking at how this would roll out and making sure people agree with the concept and where we're going. That's the most important part right now.

Chao Zhang: Second one, I'll be quick on the second one. I think for 70% of the Airo customers that have at least 2 paid products. Maybe can you just recap again, what -- kind of bring to life what the 70% looks like. And outside of the 70%, are the customers mainly using just the domains plus like a free Airo tier? Or if you can just give us a sense of the products the customers are using or not using?

Mark McCaffrey: Yes. We're right at the end. I'll give you a couple of data points. The 70% is based on paid products. That doesn't include any free products within that metric. Most of the time, it relates to domain, then e-mail is probably the next place they go, and that seems to be the makeup of the attaches that exists today.

Amanpal Bhutani: And just to clarify, all the 70% is out of all Airo customers that are near.

Mark McCaffrey: Airo customers. Yes.

Amanpal Bhutani: So there is no domain only here. We're taking a cohort of new Airo customers that don't have other products and what's the second product they attached. And that percentage is higher than our average which is another good reason to say Airo is very exciting.

Christie Masoner: That concludes our questions. I'll turn it back over to you, Aman, to close the call out.

Amanpal Bhutani: Thank you all for joining. Very quickly, a big thanks to all GoDaddy employees, and we're looking forward to seeing many of our shareholders at our Investor night.

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