GoDaddy Aktie

All right. Good morning. Happy to kick off our TMT Conference with GoDaddy CFO, Mark McCaffrey and VP of Investor Relations, Christie Masoner. Thanks so much for being here. Welcome to San Francisco.

Yes. Thanks for having us.

You guys had quite a day yesterday, and maybe it's true to say that you've been on the AI roller coaster as much as any of us. So maybe we could start there with just some questions about AI transformation.

Yes, it's a great place to start. Top of mind. Yes.

So you framed the AI transformation narrative at GoDaddy around, I think, 3 pillars. So you've got your AI native products like Airo AI Builder, Agent Name Service and then using AI for internal efficiency. If we come back 12 months from now, what would be some key ways you want to sort of measure your progress over the past -- over the prior 12 months?

Yes. So definitively, we're going through a transformation. We're becoming an AI-native company, and we're well on our way. When we look at the launch of Airo AI Builder, which we talked about coming out of Q1, which had been in the market for just several weeks, we've seen great momentum, great engagement by our customers. They're signing up for the higher plans. It's very -- it's organic. We haven't put marketing around driving people to Airo.ai right now. And we're seeing them come in and buy not only the premium packages, but once they get through their token, they're consuming more tokens on top of that. So the progress or the momentum from the initial launch is fantastic. And now as we get that into market, we start to put marketing behind it, we start to drive traffic to Airo.ai. We look at that as something that will help propel us going into 2027.

Most importantly, we also feel it meets a customer need. Remember, our customers are the micro businesses, the entrepreneurs. They very much are looking to run a business a side hustle, sometimes out of the garage, sometimes it's a mom-and-pop shop type of environment. So their jobs to be done and the tools that we're providing, including now our AI builder is just fulfilling what we believe is supporting the entrepreneur and our customer base. ANS in and of itself, and maybe, Christie, do you want to jump in on ANS? And then I'll come back to the operations part of it.

Yes. So on the ANS piece of it, when we think about as the Internet evolves into an agentic future, what ANS is doing is helping to propel the use case of how agents can be used across the Internet. So ANS is building trust in how the Internet and agents can be used across the Internet [indiscernible] that when you think about the early days of DNS as an example for domains, until we got to a spot where we could register domains and have provenance of domains and have an ability to verify who the ownership of the domains were, that's when the Internet took off. That's when commerce on the Internet took off.

We view ANS as the same way. It's instantly scalable. It's adoptable. It is an infrastructure that already exists for the last 30 years that is extremely elegant. And so when we look at ways to solve the agentic traffic and continue to propel advancement there, ANS has a solution that we're pretty excited by. It keeps the Internet open...

And then from the operating model, when we put out the 33% normalized EBITDA target a few years back, it was pre knowing about some of the efficiencies we're going to gain by adopting AI internally within our organization. As we sit here today, we feel we are in a great position because not only are we seeing those benefits of the AI making us more efficient in our operations, we're able to use that efficiency and reinvest in things like Airo.ai. We're able to reinvest to continue to innovate for our customers. So as we sit here today and we look at the 33% margin, I feel very comfortable saying, hey, we're on target for that 33%, and we're launching products. And we're looking at the momentum that we're building towards 2027.

And bringing this all together because I want to come back to your exact question on where do we want to be 12 months from now. We want to be still at the forefront of serving our customers and doing it in a way that meets their needs. Our model works because we focus on building for our customer. And our customer is a unique distribution. We have over 20 million of them. And our ability to serve them, know them, have that relationship through our care organization allows us to always achieve our North Star. Our North Star is free cash flow per share and our ability to drive that North Star starts with our ability to get that first product to our customers, get them to attach a second product, get to that retention rate, get to them spending $500 or more with us in a year. And that drives our free cash flow, which in Q1, our free cash flow per share, we grew by 27%.

And that was through a combination not only of driving our free cash flow, but also applying our capital allocation strategy around share buybacks. Why is that important? What we do around AI and becoming an AI-native company fits within the model very well that we've propelled for years and allows us to continue to grow and continue to move towards that North Star. So 12 years from now, I want to be talking about -- 12 years -- sorry, 12 months from now. I want to be talking about how we're continuing to drive our North Star, how we're continuing to serve our customers, how we're continuing to innovate with AI native tools and how we're continuing to drive shareholder value and return through our capital allocation strategy.

Great. There's a question of how you monitor for AI disruption and whether that's something you could potentially monitor for within the current customer base. And then as you look at your prospects, your funnel, what are you looking for? I'm sure everybody is trying to look around the corner and see are there any hints that the business is being disrupted. What are the signs that you're looking for internally of that one way or the other?

Yes. So we continue to follow a lot of data. There's no doubt about it. We've been around for 30 years. We have 14 million interactions with our customers per year through our care organization. We get 1.9 billion signals from our technology stack around our customers' activity. So -- every single day. So we monitor a lot. We monitor the top of the funnel. We monitor our strategy around how our customers are buying in the purchase path and attaching and most importantly, activating the products and getting value out of those products. Now that dynamic has remained stable. And that dynamic continues to drive a very strong top of the funnel.

And like I said, we -- when we get to that second product, that third product, the faster we get, which our Airo platform has been allowing to do with our customers, we get to that high retention rate and that LTV. So this is a great time. Innovation, when it's happening all around you, just raises the bar to what you need to do and how you need to service your customers. There is no doubt we are in an age of a lot of innovation, a lot of things coming out quickly. Our key here, our moat is to focus on our customer base. And when you're talking the mom-and-pop shop versus, I would say, going enterprise level, you're talking about a specific need, which we've done great for a long time, and we'll continue to do.

Yes. The core need state of micro small businesses remains consistent. They're looking to bring an idea to market, converse with our customers sell to their customers and accept payment for those tools, and they want to do it in a simple one-stop shop solution. And with our distribution channel, our strong brand awareness, GoDaddy is uniquely situated to be able to deliver for these micro small business customers.

Got it. I think stepping back a bit, there's a sense that we've seen more elevated growth in domains in the market generally. And there's that question of, well, I think you participated in it in Q4, right? But more generally, should GoDaddy have a bigger piece of that on an ongoing basis. And so is that customer that you see coming into the market today, they're experimenting with vibe coding. Are they not the traditional GoDaddy customers, some of this incremental growth that you're seeing in the market? What's your view on that?

So when we talk about the incremental growth in domains, you have to take a step back and look at it from a broad view. There is no doubt that where we are today with AI and innovation that it is drawing more people online than we've seen in the past. We saw that in Q1. Other companies have talked about seeing it as well. One, I will point out, we are still the largest domain player out there. We were in Q4. We are in Q1.

Our percentage of share of that is absolutely the same, and we continue to focus on that. We do focus on high-intent customers, not just domain customers. There are other elements in those numbers. Like you said, there probably is some people coming online and experimenting with some other areas. There are also investors coming into the market, and they're buying bulk domain names now, right, because they're speculating that these domains will gain value. I think the important part to note is coming out of Q4, a lot of people were questioning whether the domain was going to remain relevant in the new AI world.

And I think what we're seeing now, it's not only remaining relevant, it's becoming a priority because the agents still have to act and be able to go places and go get content and you need your real estate on the Internet and that real estate is owned by the domain name itself. So now what we're seeing is a pivot to the domain is becoming an important top of the funnel. And that's exactly what we do. I mean that's the company we built, and we've been around for 30 years doing. We know the domain space, and we'll continue to focus on that.

I will say that some of the statistics you do have to take in its broad sense and then take it down to who are the customers you're really going after, who are the customers that we want within our funnel, how are we getting to that high-intent customer that's going to convert and stay with us for a long period of time. And we feel we are very well designed to do that not only now but going into the future.

Got it. I think [ Aman ] made a comment, I think it was on the Q1 call about some pressure top of funnel from AIO or AI mode or some of the things going on in the market, but an offset from conversion. I was wondering if you could talk a little bit more about that dynamic. And then particularly, I think that some of my experience is maybe AI seems to almost concentrate the possibilities of who's link you're likely to click on. So I mean, are you seeing that share of voice become more consolidated, GoDaddy maybe being a beneficiary of that? And then maybe if you could talk through the conversion gains that you're seeing as well as sort of offsetting the volume hurdle.

Yes. So I'll start, and I know Christie has some thoughts around this, so I'll let her go as well. On the conversion part of it, we are definitely seeing higher conversion, as Aman said, at the top of the funnel because we are continuing to go after that high-intent customer. So when we get to that high-intent customer, there's no doubt that our strategy is working. When it comes to how customers are getting or how high-intent customers are getting to us, there's definitely change. I mean we have the part of 60% of our traffic comes to us naturally right to GoDaddy, not through any other sources because of our brand in the domain space. So we always start at a very advantageous point within the market. But there's no doubt that other 40% is changing and shifting through different sources right now. This happened when Google Search came as well.

You had to shift and modify how you handled search and how you market it and what terms you used in order to make sure you were the beneficiary of traffic that was coming in. And today, we're continuing to do that. It's through different sources, through different LLMs, but you have to be able to monitor what those systems are picking up, how they're attracting those customers, what is getting presented and then you have to make sure you're doing -- what you do on your part to make sure that, that doesn't change. In -5 years ago with Google, you had to monitor how that search was working. And if Google changes something, you had to adjust your search algorithm in order to make sure that you continue to get the traffic. It's the same thing with the LLMs today. You have to make sure that how you are presenting your bundles, your packages, what your buy lines are is getting picked up in the most advantageous ways by the LLM. And then if something shifts out there, you have to be able to notice it shifting, look at the downstream impact and then adjust.

I think this is something the industry has done very well for a number of years now and will continue to do well. And I expect people will continue to adjust accordingly to make sure that they're getting to the right traffic, right? Not all traffic, but the right traffic. And that's the key here with us is we want to make sure that our algorithms are getting to the right traffic and not necessarily just all the traffic.

Yes. I mean I think you summed it up -- you said it well, and I'll just sum it up, we benefit from having the largest brand awareness in the space and the technology or the ways in which you attract traffic to your funnel has and always will continue to evolve. And when we can continue to optimize to drive that traffic to our website, that's just the nature of being a technology company, and that's what we focus on.

Got it. I wanted to ask you a little bit about from a marketing perspective, brand share voice perspective, how you're sort of bridging a general gap maybe. I mean, GoDaddy, of course, is top of mind in advance for people my age. Maybe that's evolving. But for Gen Z, for Gen Y creators, Gen Z creators, how is that evolving? Are you seeing that the brand is enduring and you have as much share of voice as you did in previous generations?

Yes, absolutely. So our marketing campaigns do actually focus on the changing perceptions or the changing ways in which all users are engaging with the traffic. It's kind of along the lines of what we were just talking about in the last question, right? So trying to optimize for the traffic and high-intent customers is top of mind for us and expand the generations of the need to, of course, is still the same. I want to get an idea to market. I want to talk to customers. I want to collect payments for it.

And there are specific marketing campaigns that we have in market that are intended to attract different types of generations, Gen Z, Gen and Gen Y, or all different -- the iterations of generations that exist out there that are looking to bring their ideas to market. So you see some more of that with things like in social for the younger generations, so things that are in Instagram and TikTok and YouTube. So see us participate in all of those types of areas that attract those younger audiences.

And more to come, right? We are refining our marketing campaign. We continue to look at what's going to attract, again, the right customers and the right volume in there. And I think as you suggested, we have really benefited from a strong brand for a number of years, but we also recognize we need to continue to evolve and continue to be a company that's at the forefront of everybody's mind.

Got it. So I want to go back to Airo AI Builder and the ramp that you're doing, number one, the launch, the ramp that you're doing now, you're supporting that with some paid marketing. So what's the strategy ultimately, whether or not to bring that into the sort of main GoDaddy funnel in a bigger way that decision...

So thanks because it's a distinction that I don't think lands all the time with investors that we have godaddy.com, which is our traditional purchase path. but Airo AI Builder sits on Airo.ai. It's not in the purchase path today in godaddy.com. Now you can get to Airo.ai from godaddy.com, but it's not something that's presented to you in the checkout process or along those lines. Right now, we're focused on organic traffic to Airo.ai and engagement and buying the premium packages on Airo.ai and people activating, using it and consuming the tokens, which we've seen great and paying for the token, great momentum. At some point, when we feel comfortable, we will introduce Airo AI Builder into godaddy.com as part of the purchase path.

We want to do it pragmatically and purposely. We want to make sure that we're getting the best customer experience because any time you introduce something new into the purchase path, you have to be very conscious of what the customer is going to choose at that point in time. And is there a decision point between maybe websites plus marketing, and we've talked about we're upgrading that product as well and make sure that we're doing and knowing what the customer behavior is so we can optimize for that traffic path. We're not there yet. We're focused on Airo.ai. The marketing we talked about is to drive traffic to Airo.ai. We'll do that for the remainder of the year. We'll see how the engagement, how the premium plans are working, what customer benefits are getting to, and then we'll look to launch that at some point onto the godaddy.com when it makes sense.

I was going to ask David, but you mentioned a couple of times, tokens and how it based off. Yes. So that's an irresistible topic. So -- gross margin, I think famously for some of the vibe coding, the next-generation [indiscernible] solutions has been negative, maybe positive if you squint and eliminate the token costs associated with new customer acquisition. But how are you managing that?

I know you talked about or Aman talked about utilizing model routing, AWS, bedrock and some of those solutions. Are you continuing to see that cost curve bend down? I think there's sort of active debate about the frontier models become more commoditized and the cost curve continues to sort of bend down? Or does -- are the harness and the model so closely coupled that it's going to be harder to sort of generate efficiencies through model routing and things like that? What's your opinion?

So I'll start with when we launched Airo.ai Builder, from day 1, it's been profitable for us. We're doing it in a manner that we are trying to match the consumption even on the token basis to what our customers are paying and do things very thoughtfully to not get ahead of ourselves and not jump into the market where we don't understand the dynamics of how it's going to affect our P&L, what ultimately that's going to look like. We are in a very beneficial spot that our consolidated technology stack, which sits on top of our LLM usage allows us to monitor and control not only the volume that goes to the LLMs, but also which LLM is used for what purpose and match it up to the pricing that we've put out into the market. The idea being you don't always need the best LLM to provide every service. Some services can be provided at a lower price using a different LLM.

We also have the benefit of a lot of data ourselves that we use within the statistics I talked about the 20 million customers, the 14 million interactions, the 1.2 billion signals we get daily, it does create a proprietary data point for us, which allows us to monitor what is really needed externally and make sure that we're using our proprietary data first to provide whatever need is out there for our customers before having to ping into an LLM right off the bat. So that all has been set up for a number of years for us. As a matter of fact, we've been talking about this for years. When we talked about consolidating our technology stack several years ago, it wasn't with the foresight that AI would come into play this quickly in 2026. But the fact that we did it allows us to control our environment very thoroughly and be very efficient.

So as we look out into the future, and I'm not talking about 2027 just yet, but we will, at some point, we look at our ability to utilize not only the internal operations and the benefits we're getting but use that to make sure that we're staying ahead of ourselves on the cost basis. Comes back to the 33% we talked about. We didn't know this was going to be upon us in '26 when we set out that marker, but even in 2024. But now that, that marker is out there, we feel very comfortable even with the launch of Airo AI Builder coming into 2026 that we're able to be profitable and put that into market and look at how the premium packages are working and look at the data usage that's there. Again, it's something that needs constant monitoring. I'm not saying it isn't something that is evolving over time, but we feel really good about our ability to control it and control it within our environment. It's also good to recognize our customer base, right?

And again, this sometimes gets lost in the conversation. A lot of the other players are going into enterprise where the people who use their products aren't the people who actually cut the check on the back end. Our customers actually use the product and have to pay the bill, right? So they are seeing the benefit they're getting versus what's getting charged to their credit card, and they're matching it up and making sure that it makes sense for them. And in that dynamic, we feel really good about our ability to make sure that we're keeping that unit profitability in line with our customer needs because it's a very unique customer base in and of itself.

I think one other thing I'll add, too, is what you've long seen from us is cost and P&L discipline, and that's something that we have we'll continue to have a strong focus.

Okay. I guess there's -- it has to be this balancing act do you give people enough of a taste of what the capabilities are, what it can do for them versus what it costs. Do you feel like you have that balance right now?

Right now, yes. But I will say this is where the uniqueness of having the relationship with your customer is important because you have to monitor that customer behavior and acknowledge what they're getting the value for versus what they're willing to spend. And I've said repeatedly, 2 things in the technology industry, you have to continue to have in order to get ahead of the curve. You have to be able to innovate and you have to have the customer relationship. If you understand your customers' needs and you have the ability to innovate, you continue to stay ahead, and that's what we're doing with our AI builder. We're looking at what their needs are, matching the product to what their needs are and then building the cost structure around it to make sure it's profitable, but it meets their needs.

So I want to jump back into customer acquisition, the $4.99 offer. And controversial maybe -- I don't know how -- maybe controversial among investors or controversial among myself. But -- so when you looked at the -- it seemed like you were responding to the environment, maybe taking advantage of something you saw opportunistically in the environment in Q4. You pulled back a little bit in Q1. Throughout that, I think, well, in Q4, you really said, okay, these are still customers that are in our wheelhouse of high-intent customers. Did your view change or evolve with respect to that and you decided to sort of be a little bit less promotional or the promotion is still out there, but maybe show it a little bit less frequently or give it a little less play in the channels. So maybe just take us through the narrative, first of all.

Yes, absolutely. So it's almost take it back a year. We identified a high-intent customer that we believe was willing to spend that was incremental to our current traffic, our current customer conversion that was not only willing to spend in a 1-year term, but also willing to attach products faster within that 1-year term. And as we monitor the activation in our experimentation, we saw those customers were the exact customers we're trying to attract. They were coming in. They wanted a 1-year term, but they wanted to attach a second product, a third product very, very fast. And this was incremental to some of the other pricing we had put out there, the 3-year term.

So we decided to experiment and go with the famous $4.99, not the controversial, the famous $4.99, I'd like to say. And it worked. It attracted the customer who wanted the high intent who is activating to that second and third product. So in Q4, we put marketing dollars behind it, and it really worked. It was landing people on that page for the $4.99 discount. Now remember, the $4.99 is only available to a new customer buying their first domain. So if you're an existing customer and you went after the $4.99, you would get kicked into the regular pricing, right? So it worked as designed, but it kicked a lot of people into the 1-year terms. The modification we made in the first quarter was to make sure that when the 1-year term offer for $4.99 was coming up, that existing customers weren't getting kicked into a 1-year term, they were also getting the option to do the normal 3-year term. So now remember, we've had a discounting of a 3-year term for a domain for a number of years.

You get the first year for $0.01. You have to sign up for 3 years, it cost you $45 upfront. Putting that option along with the $4.99 was the balance we were looking for within the front of site. And that allowed us now to make sure that we were not only getting the new customers for the $4.99, existing customers who were clicking into that $4.99 were going back to the usual 3-year terms when they were buying their domains ended up to sell. So that balance, obviously, we talked about the impact in Q1 and how it would roll out through the year. But we looked at it as being very successful, but chose to modify it and make sure that we were making that balance between the 1-year term and the 3-year term was an option for our customers, and there wasn't a default into just one direction they needed to go.

I think one of the things that gets lost is that when we're talking about this offer, one of the things that we've talked about is it's driving strong traffic like Mark talked about. It's driving strong conversion. It's driving strong attach and activation. And all of these are strong indicators that these are high-intent customers, which is great. But the thing I think that gets lost is that means that these -- all of these customers are up for sooner, which is certainly a little bit of a risk, but it's also a pretty big opportunity for areas like pricing and bundling or when you think about Verisign has a new price increase that they're about to do. These customers are now eligible for that price increase 2 years sooner than anyone who's on a 3 year. So there is different opportunities that are often missed in the benefits of the 1-year cohorts.

Well, I'll take us down that conversation. So can you talk about that renewal motion? I think you've talked about in the past, okay, you have a customer that looks at 3 plans among a selection, good, better, best, and they think better and then next year, you move that into good. Can you talk about that renewal motion and any numbers you want to put around that, but just the opportunity that you see around renewal. And interesting that you bring up -- that, that accelerates that opportunity.

Yes. So think about our pricing and bundling initiative and think about our ability to touch our customers and do exactly what you just described. in a 1-year term, we have a quicker ability to get that pricing and bundling opportunity in front of our customer more naturally through the renewal cycle. The other thing very important to acknowledge and Christie said it, and I'll just repeat it because I think it's very, very worthwhile point. Pricing and value delivery for this -- for us, for everybody in this industry is on the renewal, not on the new customer. You want the new customer in, you offer them special pricing to come in. That didn't change with whatever Verisign does.

You have the ability now to raise the prices and get it to where it needs to be in the second year and in the third year. And the more renewal cycles you can hit faster, the more you're going to be able to make sure that, that stays in balance. If you have a 3-year term, the first time you can touch the pricing on that renewal is at the end of the 3-year term. It just takes longer to get there. When you're now in a motion of attaching products faster and you have other products associated with that renewal, you have the ability now to offer up not only pricing and bundling at better value points for them, as we introduce new products into the entrepreneurs wheel, we're having a better natural touch point with that renewal cycle coming faster. And this is where we see a huge incrementality to how we drive the LTV equation going forward. And what you're seeing today is our -- I would say, we're not going to just sit here and watch our customers and try the same thing over and over again.

We're going to continue to be aggressive and go after that high-intent customer and make sure that we're getting the right traffic. We're converting the right customers. We're getting the right products in front of them. They're getting value out of those products. And we will continue to look at different opportunities to push that equation into the future. Why? Because we know when those customers come in and have that behavior, we've talked about it for years, the 1x domain, when we get to that fourth product, it's 83x the LTV. That drives that compounding cash flow over time that drives the value we return to the shareholders. And it's not about trying to get there in 1 quarter. It's about building it over a period of time to make sure that we're continuing to grow the company pragmatically and towards our North Star.

In a sustainable way.

I'll go further down this path just for a moment. So what role is Airo having in the renewal cycle at this point? Is it material in the renewal cycle? Is that you're surfacing for people in a significant way?

So -- and just to clarify, Airo AI Builder because we recently -- yes, yes, is not at that -- having an impact on a renewal cycle. We are seeing people sign up for more tokens, which is great, right? They're burning through their initial tokens, they're getting into packages and then coming back and getting more tokens to consume. So we're very excited about that momentum. Airo in and of itself, the platform...

The capability...

For the GoDaddy customer, we've seen the behavior we wanted to see. And to put it in perspective, we got rid of deep discounting at the top of the funnel in the end of 2023. When we go back and measure the customers that were coming in at the beginning of 2024, which is when we launched Airo on the godaddy.com website. When we look at those customers that came in at that point versus the previous customers, we see the higher retention rates that we have talked about. We see them renewing at stronger percentages, doing exactly what we thought they were going to do. They're getting more products. They're building the LTV. They're staying on with us longer. This sometimes gets lost in the data metrics, but we've talked about customers, and we've talked about everything we've done in the past few years to dispose of or end-of-life certain products. And we've obviously talked about the impact on the customer numbers related to that.

We've maintained around 85% retention rate within our customer base, even though we were disposing of business units, even though we were end-of-life in products and making decisions to do that. And you look -- think about that for the last 2 years, our ability to maintain that is because we know that cohort that started coming in, in 2024 is much stronger than the previous cohorts that were coming in pre-Airo.

And Airo is essentially helping getting customers to that second product attach 30% faster than they were pre-Airo, right? So that happens at the new when they're coming in and at renewal, we're able to present a suite of products and solutions to customers in a way that is easy for them to touch, feel and experience what their full build-out one-stop shop can look like if they have more products to attach or something that more closely resembles the goals that they're trying to achieve with their online build, and Airo helps us get there. And to Mark's point, we're able to curate stronger high-intent customer base that is those high LTV customers.

Okay. I want to add another diversion here on end of life. I mean, so talking a little bit about the headwind that you've seen there. And then also, I mean, is there anything else that the candidate for end of life? Or is it just -- you feel like you're done there?

Yes. Nothing to call out at this point. I will say product cycles and evaluation is a constant muscle. I think everybody should have, we definitely have. We will always review the entrepreneurs wheel, the products we're offering and making sure that they meet the customers' needs. And if we don't believe they're meeting their needs, then we will make a decision on whether we need to end of life or do something else at that point in time. And we will allocate resources to where we think we need to be to deliver value to our customers. So that is a muscle that will happen, I would say, as run the business going forward. We did a lot in the last few years. I would say we accelerated a few things based on that new strategy that we put forth in our 2024 plan that we had talked about back then.

From time to time, we may call out that we end of life this or we end of life that and made a decision. We'll be very transparent about it. We feel our ability to make those decisions because we're not playing for the short term. We're playing for the long term, and we know as long as we're making the right decisions and right choices about where we allocate our resources to meet our customers' needs that we'll be able to continue to own that relationship, innovate around it, get to that LTV equation and because I love free cash flow, drive the free cash flow number that we've talked about.

Yes. And we've got about 12, something like 5 minutes left. Just want to check and see if we might have had any questions in the audience.

This is the early morning crew out here. I appreciate this.

Go ahead please.

[indiscernible] Going back to just some of the incremental growth in the domain market. I think it's clear some amount of the incremental growth is for domains attaching to applications. Are you seeing that? Are you seeing that be a tailwind for your business? And is that something you expect to kind of capture on a go-forward basis?

Yes. So it's definitely something -- So the -- I would say you're asking about the reverse attach, right, where people are coming into the applications and attaching the domain versus going for the domain and then attaching product to it. Are we seeing that as a trend? The answer is yes, we're seeing that within Airo AI builder. People start with the interaction around the agentic agent, and that agent brings to them the domain name in and of itself. So that is the muscle within the Airo AI builder in and of itself. Now it's early stage, so I'm not calling it out as a driver going into the rest of 2026 by any means, but it is definitely a behavior that is out there within the Airo AI builder in and of itself, which I would think will continue into the future.

And having your own AI builder prohibit you from picking up some of that business from the other private coder [indiscernible] private competitors out there are [indiscernible] partnership strategy on that vector or you double down on having your own solution...

So I'll start with -- we've never been shy about partnerships. We have some very large partnerships with Microsoft being one of them. So there is no challenge with us and having relationships with third parties. For us, partnerships, though, mean that you have to share the value. And in sharing the value, that means it has to be incremental to our business model and have an ability to drive our business model and our LTV going forward. In other words, we're open to good partnerships. If those are presented, we would always have a conversation, but we're not open just to having partnerships in and of itself for the sake of having them.

I guess that gets back to whether -- the question of whether or not that customer is part of the core or something that you've traditionally seen. So the person who's brewing up something on cloud code and downloading that to a GitHub repository and looking for a host and a domain. I mean maybe it could be part of the customer set at some point. But I'd imagine it's not...

Outside of the micro small business customers that we serve because you're talking about someone who's a lot more sophisticated or technological savvy than our typical micro small business customer. Does that mean that that's not available to us in the future? Of course, we're always looking to expand the user base of who's using our customers, but we remain focused on those micro small business customers and delivering a one-stop shop solution for them. That's super important for as a micro small business customer that wears many hats and every day, their jobs to be done.

There are so many things that they're trying to manage while also just doing their actual passion and what their job is. So handling all of this back-end technology for them is where GoDaddy wins GoDaddy succeeds and it's where we deliver for our customers. And it's why we have strong retention. It's why we have strong loyal customers because they want a single dashboard to manage all of these things, not trying to cobble together a bunch of different solutions.

So we'll try to dig into the numbers a little bit. So you've seen some revenue growth deceleration. Clearly, some transitory headwinds versus maybe some more structural things in the market. I don't know you tell me, but maybe you could talk us through some of the headwinds that you're experiencing that you view as sort of temporary versus what sort of core growth is.

Yes. And we've called these out and they haven't changed from when we're coming out of Q4. There were decisions made around our core platform, [indiscernible] contract, we decided not to go forward with the renewal that we knew it was going to create a headwind. We've always called out the aftermarket. We saw great activity in 2025 on large transactions within the aftermarket. They may or may not return at any point in 2026, but they can always make a little bit of a headwind depending on what quarter we're comping and when some of those deals were recorded for us.

We talked about the $4.99, which we talked about how that would roll out for the remainder of the year. And then we talked about that we were pausing pricing -- on the pricing and bundling websites marketing upgrade. Those are all temporary in our mind. They will flow through in different manners through this year, very much all of them were going to hit the front end of the year and then tail off as we went through the remainder of the year at different rates. Those are ideally where we see it.

Now some of those impact bookings. Some of them do impact revenue a little bit. Some of them bookings, but then the timing of the revenue is just the same because the 1 year -- the upfront cash on the 1 year is less than the upfront cash on the 3-year, but the revenue attributes remain pretty similar absent the discount on the $4.99. So there's different aspects that flow through at different times between our bookings and our revenue.

I always come back to despite all those ins and outs and headwinds, we came forward with $1.8 billion target for our free cash flow for the year. Free cash flow for us is driven by the bookings upfront. And we feel really good about our $1.8 billion and our ability to meet that target. And regardless of all the headwinds on the bookings and the timing of all this, we remain steadfast that we're going to continue to hit that free cash flow number, which translated means that we feel good that this is going to wash out in different periods. But when you look at over a period of time, it remains fairly consistent.

And then I would be remiss if I didn't acknowledge again, that's why we feel good about, hey, we grew free cash flow per share 27% in the first quarter, 27% now. If you break that down in and of itself, even with the $4.99, when you think about that, half of that came from increase in free cash flow, half of that came from buying back shares at an incremental rate. So our ability to get there is being driven by both our business and our capital allocation strategy, which is again working together to make sure we continue this journey well beyond 2026.

So I want to go back to the free cash flow growth in a second. We only have a little bit of time left. But [ A&C ] growth in double digits, it's come down a little bit. just wanted to ask how you feel about the durability of that, maintaining double-digit growth for A&C. Is that something you still feel about?

I don't want to get into the future. We're going to have an investor event later in the year, and we'll start to lay out what the future looks like, but we do feel good about our momentum, and we do feel good about the LTV equation that we've talked about, and we'll continue to push.

So with the free cash flow growth at that -- free cash flow per share growth at that level, you're certainly building cash up. Do you look at a broader array of sort of capital allocation options as that continues to build. Anything else looks attractive to you beyond your own shares obviously return.

Yes. So our strategy and how we apply capital allocation hasn't changed. It remains the same. And I always say that because, one, we look at buying back our shares as a key tool to returning value to our shareholders. And then obviously, everybody will ask, is there M&A opportunities out there? And the answer is there's always opportunities, but it has to fit within our model. It has to be accretive to our model. And what we have found over the last few years is that our ability to innovate internally and come out with products like Airo AI Builder in and of itself has raised the bar on what could work within an M&A situation for us.

We always say it has to be strategic, has to be financially accretive and has to be able to be integrated that comes very efficiently for us for our own innovation cycle right now and our ability to get that value from any M&A, just sometimes the numbers don't work. So it's not that we don't get a lot of calls on different opportunities because we have such a strong balance sheet, but we've been very disciplined that it has to fit within that model, and it has to be able to be something that will continue the LTV journey for us in the future.

Okay. Well, I think we'll -- why don't we wrap it up there. That was great. Thank you very much.

Thanks...

One last thing I would mention, we have marked 5-year anniversary here...

That is right. That is today. I forgot about that.

Congratulations. Happy anniversary. All right. Thanks so much.

Thank you.

Thanks, Robert.

Okay. Hello, everyone, and welcome to JPMorgan Boston TMC Conference. And today, we are delighted to host GoDaddy management team. We've got Mark McCaffrey, CFO. We've got Christie in the audience as well from the Head of IR team. Mark, welcome.

And if I may begin with some high-level micro business health questions, what customer behaviors most reliably signal improving micro business health? And where do you typically see some early changes?

First, thanks, Alexei, for having me up here. It's always good to talk to you. Micro businesses and when we talk about small businesses, we really refer to micro businesses and entrepreneurs. And to put a little distinction, some people classify small businesses as 100 people. Generally, our customer base and who we deal with is a couple of people, mom-and-pop shop, an entrepreneur that maybe has multiple different endeavors going at once. So it really gets to what I would say that true rigor, somebody who has a lot of passion about what they're doing because they have choices of what they can do and can't do and they choose to do whatever endeavor they're on. And that's what we continue to see.

This group, despite the fact there are a lot of concerns about the macro environment and a lot of inflationary pressures being put on them, especially in the micro business area, they feel really good about their prospects to launch a business, create a business. And when we surveyed them, more of them -- most of them believe they're going to make more money this year than they did last year at their endeavor. And that's despite the fact that they have to pay out or maybe being impacted by the inflationary pressure that exists today.

So we're definitely seeing what I would call a healthy, passionate, very durable group out there. And we're seeing the behaviors within our own funnel that are very similar to that. We're seeing a lot more ideation. We're seeing a lot more demand for the domain in and of itself. We're seeing a lot more people wanting to be online and get to more markets. We're seeing a lot more attach of products. The one-stop shop is definitely well received within our customer group. The simplicity of being able to get online and get to a transaction faster than you ever could. Even availability of markets that in the past were not available to them. These are the positive signs that this group is really feeling good about their prospect going forward, knowing that there's a very volatile environment they're dealing with in and of itself.

Great. No, that's good to hear. And we understand that discovery is now shifting in AI-first world. And from that perspective, as more customer journeys begin inside AI interfaces, what changes, if any, are you seeing in terms of traffic patterns and conversion paths?

Yes. So we're blessed in that our brand has been so strong for so many years that when it comes to the domain being the place where you start to ideate that people come to GoDaddy just naturally. So a lot of our traffic is based on just our brand in and of itself. Now there is search elements to this, and there is no doubt you're seeing a switch from the traditional search metrics to the LLM search metrics. But I think everybody is adapting just like we did to the search when it came out the first time. We're adapting to what terms seem to get picked up, what is the simplicity of the offers you have out there, how do you gear that traffic in. And it's just becoming a natural part, I would say, the cycle in and of itself. So it's not something a lot of companies haven't faced before and are used to optimizing for. And I think what you're seeing today is the optimization around the new search LLMs that are coming into the funnel.

And when it comes to high-intent customer definition, can you maybe help us define and measure this high-intent customer? And specifically, what are early cohort signals most influence how you tune acquisition channels and various offers?

So when we talk about high-intent customers, we're talking about a customer who's coming in with an idea that they want to create or launch or do something online with their online presence. It could also be in-store, but they have an idea. And that's different from what we call maybe partnerships or in and of itself, investors, which we refer to in the domain space as well. Those are different cohorts of customers. We're going after the high-intent customer who not only wants a domain name, but wants a website, wants to -- an e-mail -- professional looking e-mail wants to transact or share content. And that high intent is what we gear our one-stop shop around and take the discovery and engagement and make it easy for them, so to say.

It's also a very profitable cohort because they're adding more products. They have a tendency, they have a higher renewal rate than other customers. They have higher retention rates in and of itself. And our ability to get to that LTV equation exists within that customer cohort in and of itself. We use $500 as a benchmark. I think we've been using that since our IPO. So it's not something that has been discovered recently. But generally, we look at that $500 population, customer who spends $500 with us annually. To get there, you generally have to be purchasing multiple products from us. And that is a good indication of us that you're getting value from our products, and that is the cohort that when they get there, has a near perfect retention rate for us.

So in that respect, when you run promotions, what markers do you watch to ensure that you're not trading long-term value for short-term volume?

So we always look -- we start with the traffic that we're getting into the website, who's going to the offer. We look at the conversion rates. We look at the attach rates immediately. So we take in the initial order size, are they attaching products immediately. And then subsequent to the order size, we look at activation. Activation to us is a clear indicator that a customer will renew when it comes to the renewal cycle. Why? They're using the product in and of itself. That's -- having that data and being able to observe that gave us confidence with our recent offer that we put forth in Q4 that, that 1-year cohort would renew at an effective retention rate that we've seen in the past from our other 1-year cohorts because we could see the signals around the activation once they came in and accepted that offer.

So those are the things we continue to monitor, and it will also make sure that we stay focused on that high-intent customer. Now the $4.99 offer, just to be clear, was only for new customers buying their first domain. So once we get them into the funnel and they start to maybe get more domains, maybe look at other endeavors, like I said, a lot of our entrepreneurs do multiple endeavors at a time, our ability to keep them within the funnel and attach and keep them within our platform increases.

And from that perspective, what requirements and changes have improved the balance between customer adds and bookings?

Customer adds and bookings. So again, we've seen the ease of use within the Airo platform and now the Airo platform sits on godaddy.com. It allows customers when they're going through the purchase path to attach those products to launch a website immediately to get to those second and third products we often talk about, and that allows us to increase the bookings. Again, customers in and of itself, as long as they're the right customers will drive that LTV equation we have talked about for years that when you go from one product, assuming the one product is a domain, you add an e-mail, you add a website and then you add transactions, goes to 83x over time. And that is what drives our bookings number over time. And we feel really good that, that LTV equation continues to strengthen.

In terms of your decisions around your portfolio, what are the biggest considerations when you're looking at potentially retiring or simply taking out some lower-value products? And when you're managing near-term customer count impacts versus improving cohorts quality, like how do you address that?

So our focus is on the high-intent customer, and our customer remains the center of our focus. No matter what we do, we're looking at the jobs to be done for our customers and our ability to provide those services. That sometimes requires decisions on our part. And we talked a little bit about an end of life of product that in the first quarter. We'll continue to make those decisions. In that case, it was a product that would require cost for us to service, but we weren't seeing growth in the product in and of itself. And quite frankly, we weren't seeing that it really was fitting a customer need today, and it might have fit a customer need in previous years. So we decided to reallocate those resources to make sure that we were putting them towards development of products that are actually meeting the customers' needs today.

And remember, we've been around for a long time. Micro businesses have been around for a long time, but their ability to compete online changes over time as the dynamics change. And we're well positioned to make sure we are meeting those needs of that micro business and allowing them to stay competitive. And that focus on the customer drives our decisions.

You've been talking about modernizing websites and marketing components with some of the AI-native capabilities. Can you talk about some of the success metrics that you need to see before you scale distribution more broadly?

So we -- again, we look at the customer behavior. I am blessed I have a CEO that is well engaged in our product development right now. As a matter of fact, he is talking to customers as we're introducing these new website developer applications, and we talked about Airo AI Builder. And he literally is going back and forth with customers to find out how they are working with our other products, what they're getting value out of, in some cases, what's not working. It's real-time feedback, and that continues to be the driver of how we will launch these products out into the market as we go forward. We talked about Airo AI Builder, which sits on Airo.ai today. We're going to put some marketing around it because we've seen our customers really coming in, demand coming in naturally on its own. Our customers engaging with our products. They're building applications. They're using those applications. They're not only using the tokens that we're giving them in the initial pricing packages, they're coming back for more tokens afterwards. So we're seeing the exact engagement we need.

Now we haven't put Airo application builder on godaddy.com and the purchase path yet, but we will continue to evaluate the traffic that's coming directly to Airo.ai for the application builder and seeing how our customers continue to gauge. Now we will -- at the same time, we've talked about we're upgrading Websites + Marketing and making sure that, that has Agentic AI-native components to it. We're going through that process today. We're seeing how that's integrating within the purchase path within godaddy.com. We feel really good about that progress, and we'll continue to now look at that upgrade as we get throughout the rest of the year.

And which next best actions you're sort of consistently introducing in order to increase the durable multiproduct adoption after the initial entry product?

Yes. So again, ease of use within the Airo platform has been the key to our success in our LTV equation over the past few years, and we continue to look at as the primary driver of customers coming in with the ideation of a business that they want to launch and offering them using our 30 years of history, our data set, we have a great care organization. We get 1.4 billion signals from our technology stack every day. These technologies and this data allows us to turn that into customer insights and allows our customers to anticipate what their needs are going to be, what their next steps are going to be, where they're going to get value, where they can do better, where they can maybe stay away from if it's not being as profitable as they need to be. So that continues to be the primary driver of how we engage with our customers and how we get them through discovery to engagement and ultimately to monetization.

Okay. Perfect. So tying this all together, over time, what do you view as the biggest growth algorithm for A&C growth? Would it be new customer attach or maybe some installed base expansions, pricing and bundling, some AI-native products? And how do you expect this mix to evolve?

Yes, it all evolves. So the primary model of A&C being the second and third product attach stays intact, right? Domains continues to be a great funnel for us and a great bringing in of new customers, and that sits within our Core Platform. Our Core Platform, once they start to attach, that becomes a second and third product. It's a more efficient base for us because we basically already have that customer in the GoDaddy platform in and of itself. That whole -- we evolved that several years ago. We consolidated the technology stack to make that all happen very seamlessly. That puts us in a very efficient place going forward to continue to add products. We can add partnerships into that process.

As we've talked about on some of our calls, we can launch new products, and we can also, in certain cases, end-of-life products if they're not working for our customers. But we can do it all effectively and efficiently. Again, our model is designed to be as efficient as possible, and we continue to see the benefits of that. A&C continues to be the growth driver, although I will say we've been very happy that domain remains a healthy part of the top of the funnel. And we're seeing a lot more micro businesses and entrepreneurs come in with the idea of going online a lot faster, which allows us an opportunity to attach to the second and third products. So as we launch things like Airo AI Builder, that will sit within the A&C segment to the extent of the technology in and of itself.

Now a lot of times when people are building applications through Airo AI Builder, the first thing they're doing is securing their domain name. That remains a part of the Core Platform in and of itself. So you are seeing a little bit of a reverse attach here. Again, early stage, we're in beta. We're excited. We're going to start to put some marketing dollars around driving traffic right to Airo.ai, but the engagement by the customers as of today has continued and the momentum continues to be there for us.

And Mark, you talked a lot about Airo where it drives a lot of durable value today. Maybe talk about where you think the biggest untapped opportunity as functionality expands, is it conversion or some attach activation?

Yes. So we look at the markets very broadly. And we look at our opportunity as the jobs that need to be done by our customers increases in the market today as AI becomes more of a commonplace technology that everybody is engaging with, not only the technology companies, we see there's going to be a great opportunity to add more and more tool sets that allow our customers to be successful in the agentic world, where even things like ANS and registering their agents, we think, is a great opportunity to build trust and security, something that exists in the domain space today and broadening that to the agentic space.

We also see great opportunities. We like to talk about AI a lot within the mature markets, but there also is a lot of global markets that are coming online or maturing online. We think there is a great opportunity to expand the maturity and the product base that we have today into maturing markets internationally. So we see a lot of opportunity out there. Everybody likes to focus on the mature markets and how AI is working within the mature markets, but there are a lot of markets out there that are coming online, are starting to transact, and we think it's going to create a great base for us going forward because we are set up to be a very efficient global company.

Mark, obviously, still very early days for Airo and AI monetization. But maybe directionally, how are you thinking about it longer term about the model for agentic experience, do you think it's going to be more subscription tiers or is it going to be credits or consumption based?

Yes. Listen, we're not locked into anything specific. But if you were asking me today, you're going to see a combination of subscription and usage-based tokens. We've started with that. We're seeing not only our customers come into Airo.ai and sign up for the subscriptions, they're using the tokens that they're giving within the pricing plan, they're coming in and buying more tokens today. And that is a great indicator that they're getting value for the price that we're charging, and we'll continue to look at that as a pricing tier.

Like I said, we haven't moved it into the purchase path within godaddy.com yet. That will be the next evolution, and we'll see what makes sense from a pricing standpoint once we put it into the regular purchase path. But I would envision you'll see a combination of multi ways to do this. Again, we will focus on our customer base, what works for them. And remember, our customer base not only gets the benefit of using these tools, but they also have to pay for them because they're the entrepreneur. So they cut the check at the end of the month to make sure they're getting the value of the technology, and we'll make sure that we are sitting within what is reasonable for the value they're getting from what they're getting by using our tools. And that has always been our model. Our ARPU is $240 plus and growing. But that's because we focus on the entrepreneur and their wallet share and their ability to do what they need to do and their ability to get value from our tools.

Perfect. Mark, an important topic, you talked a little about at the end of last year was your ANS strategy. So I'd love to speak to you about the right to win. How do you articulate GoDaddy's right to win in that space? And what needs to happen to reach that critical mass, like are you thinking about some standard alignments or partnerships or developer adoption?

So listen, we're very excited about ANS. And right now, our focus on ANS is adoption. We now operate in an open Internet that sits on the DNS infrastructure. As this becomes more a agentic or agents operating on the Internet, it has to operate within a secure infrastructure that is reliable and trusted. That's what was created around DNS, and that is what is going to evolve around ANS.

We are at that maturing infrastructure phase right now where people are starting to think about this and starting to think about the concept of an open Internet remaining. And you're seeing people make announcements with us that are saying, yes, they believe ANS will be the infrastructure for the Agentic Internet going forward. Right now, that is our sole focus.

Now as the largest domain player out there worldwide, we acknowledge our infrastructure is very much geared on the DNS infrastructure, and therefore, ANS maturing over the DNS infrastructure does create an advantage for someone like us. Having said that, it is open to everybody. And to us, the most important thing is to get adoption around the ANS infrastructure because we believe for micro businesses to be successful, the Internet needs to remain open. And everybody needs to have access to the Internet and be able to transact where they want to transact, whether using agents or the human element going forward.

And in terms of monetization, as adoption hopefully grows, what principles will guide that sort of packaging and pricing, so you can see the ecosystem while also capturing that long-term value?

Yes. So we've seen the economics around the domain space. And I'm not saying this will replicate it exactly, but the idea sits in ANS as well. If you -- like today, you have to register a domain name, you own that domain name, you renew it, it's yours. It's your real estate spot on the Internet. With agents, it would be a similar functionality. You have to register your agent, so people know it's authenticated so that people can trust it. If you have multiple agents, you would have to register multiple agents. Now you could do that under domain names, you can do it under subdomain names. There's a lot of things that have to be worked out and agreed to on the infrastructure in and of itself. And once it is, the economics around it will be apparent. But if we use DNS as kind of the blueprint of how ANS is going to work, you can kind of get to the sizing of what the value that can be received by just having trusted secure agents out there today.

Perfect. Well, I think this is a good time to see if there are any questions in the room. If you have a question, please raise your hand and you'll get a mic. Anyone? Perfect. I wanted to, Mark, ask about your care because obviously, it's both a cost and also a growth engine for you.

That is right.

So how do you decide which care workflows are here to automate versus keep human-led? And what metrics matter most as you scale your AI-powered support function?

We look -- first of all, care is an important element of what we do, especially within our customer base, and I can't emphasize it enough. We're about helping our customers succeed and having -- giving them access to whether human or agentic responses within our care organization remains a key part of our business going forward. Today, we are using AI more and more within our care organization. It's creating efficiencies. We look at statistics around resolution time to problems. We look at statistics around call time. We look at care guide productivity. We are now looking at agent productivity within our care organization and our ability to respond.

What we believe is AI will help our agents even more get to right resolutions of problems and even more effectively get to solutioning attach to our customers that help them be successful. So we're in early stages of rolling this out. We talked about a little bit coming out of our Q1 earnings. It will take some time to roll out globally, but we definitely see the efficiencies within the organization that we will be able to obtain without giving up our ability for that to be a pipeline to selling to our customers because our customers still come in with a need.

And through this all, we will always have a human element. There is always the use case that says someone needs to talk to somebody to get some help, and that is something we will always make sure our customers have available to them. More and more people are getting comfortable using agents to solve certain problems, but there's always an element that you want to call and talk to somebody.

I was laughing. I tried to move back my dinner reservation 15 minutes the other night, and then it took me 20 minutes just to get to somebody to move that back. We have to make sure we're not frustrating our customers. Again, our customer base is unique. When something is not working on their website or they're not able to transact, it impacts them immediately, and our care organization is there to help.

Perfect. And also I also wanted to talk to you a bit more about your capital allocation strategy. And obviously...

Yes, we have a strategy.

This has been a pretty significant area of focus for a lot of people. So I would just like to hear like how do you prioritize between buybacks versus some incremental AI and product investments as well as the M&A opportunity, would you need to change for that priority to shift?

Yes. So I think the important thing here is how we look at it and prioritize and the structure we've used around capital allocation has not changed. We still look at it using the same structure. We still look at buybacks as a key way to return value to our shareholders. We've used 95% of our free cash flow over the past years and put that back into buybacks. And at the same time, we still invest in innovation. We feel we are in a great spot. We have a strong balance sheet. We still generate a lot of free cash flow. We reiterated our target of $1.8 billion for the year. And we continue to look at what are we going to get for the return of deploying that free cash flow and where we want to deploy it.

We, no doubt, get a lot of calls on a lot of M&A, but our efficiency of innovation to do it organically has become so high that the bar for M&A has become even larger for us. So for something to be accretive to our model, it really has to hit that bar of being strategic, financially accretive and something we can integrate within the core technology stack. And as although those principles remain the same, as time has gone on, the bar around those principles gets higher and higher because of what we've been able to do and achieve internally.

So we feel, number one, our capital allocation is not an or, it's an and. We've been doing this with investing in our AI products. We're starting to see some of the metrics that we've put out in Q1 around the results of that innovation. We feel good, we have a very strong balance sheet and an ability to deploy if we see an opportunity out there if something makes sense. And we have the ability to continue to return value to our shareholders right now in the form of doing share buybacks, and we will continue to apply those consistently going forward. I always say I don't want to give away the future, but if you look at our past history, that will give you an indication of how we go and do all of this and how we've been effective at doing all of it.

And in terms of how you decide to simplify some legacy non-core hosting assets versus continuing to operate them as cash-generating businesses, like how do you think about that?

Yes, we always evaluate. We -- I think every period of time, we are looking at not only our customers' needs, what makes sense from an infrastructure standpoint for us. We talked about some of the things we did in 2023 that benefited our profitability in '24 and '25 and onward. Those were a lot of disposing of assets, in some cases, end-of-life-ing products that didn't make sense for our customers going forward. We'll continue to look at that from an evaluation. There's nothing to call out today that we're going to do differently.

The assets we have even outside of the core godaddy.com platform, some other brands are very profitable. They generate a lot of free cash flow. Our customers are very strong there. They may not be the growth engine of the business in and of itself, but we still see value in those assets. If that changes, and we believe there is another pivot we need to make around that or any of the dynamics were to shift, we know we have the ability to execute very fast and effectively to make sure that we stay on track for growing the business. We stay on track for our North Star. We continue to generate our free cash flow very profitable. I'd be remiss if I didn't say we were very happy that we grew our free cash flow per share 27% in the first quarter, and that continues to be our North Star of what we try to make sure we're on track to deliver.

Mark, it's been 30 minutes, and I haven't asked you about AI competition. What do you see as the most credible competitive threats at the moment? Maybe some specialists versus some platforms? Where is GoDaddy structurally much more advantaged given your integrated platform?

Yes. So my answer to this will always come back to the customer. While other companies out there are entering the space, they're looking at enterprises. As I've always said, some of the bigger players are designed to sell 1,000 seats to one customer. We're designed to sell 1 seat to 1,000 customers. That is our competitive advantage. We know the market we're in. We know our customers. We know their needs. We will continue to focus on our customer needs at the price points that work within their wallet share. This is a market we've been in for 30 years. This is a customer base we know better than anybody. This is where I always laugh that our CEO, Aman, is sitting out there right now texting with customers on what's working, what's not working, and they're texting him back. And our ability to stay in tune with that customer base is where our technology stack is geared towards and will continue to gear towards and why we feel really good about our future.

How about the AI cost governance? That's definitely something I'm sure you're focused a lot on. So how do you govern those AI costs? Do you do model routing or some vendor strategy, internal models, like what unit economics determine whether AI features they get shipped more broadly?

Yes. So we've set it up very disciplined from the beginning as we even launched into this several periods ago. We -- everything -- we have a consolidated technology stack. So our ability to use LLMs is regulated within our technology stack in and of itself. Think of we have one pipe that we can turn on and off, but it can go and be directed to any LLM out there depending on the value, the cost and what we need. And then we regulate it. We -- again, everybody understands that you can't run crazy and just start using this inconsistently. We stay focused on our priorities, what we're trying to develop. We know what the cost build-out is around that. We know what the product need is around that. We stay focused within that strategy and making sure we're not getting to the point where we're just building for the sake of building. It has to fit within our strategic alignment as a company. As a leadership team, we feel very strongly about that. We monitor that very closely. Obviously, as a CFO, I pay very good attention to it.

So we feel we've set up, I would say, the framework and the structure internally to make sure we're going places with purpose and not ending up somewhere where we hadn't anticipated. So we feel good about, hey, I put out there that we're on track for our 33% normalized EBITDA margin for the year. That's something we put out several years ago. Even though the dynamics around a lot of costs have changed, we feel very confident that we can maintain that profitability and still stick within that structure that we had set to investors several years ago.

Perfect. And finally, Mark, payment strategy. How do you think about Payments as a product that can drive monetization over time? Like do you look at retention rates, data attach or some ecosystem lock in? And what differentiates your approach versus your peers and Payments?

Payments has been great for us. We launched it several years ago as I would say, the next evolution of what we could offer for our customers for the one-stop shop. And in many regards, it's bucked a trend of us being able to convert our existing customer base over to a new product. And I say that many times, it's very hard to convert existing customers once they're using another product over to your product. But in Payments, we've seen great success in converting payment transactions from our customers using an existing vendor over to customers using ours. We've seen that in the growth of our GPV. We continue to be very competitive.

The attraction to our customer base is the one-stop shop, right, where you're transacting on your website, you can be transacting online, offline, you can be transacting in multiple different locations on multiple different surfaces, but it all operates within one platform for our customers. So if there is analysis that needs to be done, if there is data they need to see, if the transaction for any reason didn't go through, they have the ability to work within one care organization versus multiple care organizations, and our customers actually see that as a huge benefit for them.

So it continues to grow. It continues to grow at a good size. We continue to be on track. We think our biggest opportunity in front of us remains our existing customer base because that is customers who are already transacting at a certain level and converting that GPV over to our system is a lot of what's driving the growth within the Payments processing for us. And then as new customers come in, they're starting fresh. So their transaction level is usually a little bit lower, but they continue to grow over time and be able to transact that becomes the future base of the growth of our payments. So we feel really good that, that is all interoperating, and we feel really good about the decisions to add payments and that the growth in the GPV continues to be on track to what we have talked about for several periods now.

Mark, thank you very much for joining. Appreciate your time.

All right. Thank you.

Welcome to GoDaddy's First 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. Following prepared remarks, we will open up the call for your questions. [Operator Instructions]

On today's call, we will 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 to 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 statements that we make on this call are based on assumptions as of today, April 30, 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 happy to introduce Aman.

Good afternoon, and thank you for joining us. At GoDaddy, our purpose is to make opportunity more inclusive for all. We serve over 20 million customers globally, helping them establish their identity, build their presence and grow their business. We do this through an integrated platform that brings these capabilities together in a seamless AI-powered experience helping customers move from their idea to execution quickly and at a compelling value.

Starting with Q1 results. We delivered revenue growth of 6%. This performance, combined with continued operational execution and structural leverage drove meaningful expansion in normalized EBITDA margin to 33%, up over 200 basis points. This underscores the durability of our model and continued progress towards our financial north star generating strong free cash flow growth of 15%, while remaining committed to delivering long-term shareholder returns.

As AI-driven innovation accelerates, customer expectations for speed, simplicity and measurable outcomes are rising. Customers are increasingly using LLM across their workflows and getting familiar with chat-based interfaces. We are leaning into this shift, positioning GoDaddy as the platform that helps entrepreneurs turn intent into action through AI-powered experiences and outcomes. Our AI transformation builds on our core strengths of a trusted global brand leadership in domains, scaled infrastructure, proprietary data, strong engineering talent and a world-class care organization. Together, these form a differentiated platform that allows us to deliver a seamless one-stop shop solution for entrepreneurs.

We are moving quickly and intentionally with focus on delivering measurable outcomes for entrepreneurs. The positive impact of our AI transformation is clear in 3 areas: first, the adoption and monetization of our AI native products; second, the expansion of Agent Name Service as a new identity layer for the Agentic Open internet; and third, the use of AI to drive operational efficiency.

First, we are making strong progress on our AI-native products. Airo AI Builder introduced last quarter on Airo.ai is an AI-native experience that enables customers to move from idea to execution in minutes, automatically creating websites, applications and core business capabilities across identity, presence and commerce. I work directly with customers using Airo AI Builder on a weekly basis and the customer feedback is shaping our road map and accelerating development. Our customers are looking for simple integrated solutions for their core jobs to be done, and we are delivering that through Airo AI Builder. It is delivering strong early adoption and monetization is already scaling with customers.

This new Airo AI Builder product offering has rapidly scaled to $10 million plus in annualized bookings run rate within weeks of its beta launch. While still early, the pace of adoption and quality of customer interaction is strong. Customers are building, publishing and purchasing incremental credits as they deepen their use of the product. Momentum continues to build week after week as we expand Airo AI Builder's functionality and distribution. We are expanding distribution of Airo AI Builder on godaddy.com and have begun selling it through Care. In Care, we drive higher adoption of premium plans compared to our online channels and receive direct customer feedback, both positive and constructive to improve the product. As a next step, we are ramping targeted trade marketing in May, funded through efficiencies elsewhere in the business. We are thoughtfully monitoring the mix between new and existing products as we scale, with a focus on optimizing overall customer value and maintaining margin discipline.

The second major product initiative we introduced last quarter is the upgrade of Websites + Marketing, bringing AI native capabilities into the product while maintaining strong cost discipline for both customers and GoDaddy. This upgrade combines AI-driven capabilities with a powerful editor enabling customers to create and manage their presence more efficiently. The domains funnel remains our largest distribution lever for new customers. And in this quarter, we tested the upgraded product within that path. Early results exceeded our expectations and validated the direction of the product. We are excited to get the upgraded functionality in front of all our customers and are using experimentation to inform improvements on the experience.

Our teams have embraced an AI-native approach across our customer products, and we are making meaningful progress delivering customer value. We are expanding these capabilities at a rapid pace while maintaining disciplined investment as we scale distribution and marketing, we are confident in our ability to compete effectively.

The second component of our AI transformation is Agent Name Service or ANS. We are working with large players and seeing continued interest in this technology. ANS extends the role of domains as a digital identity provider in an Agentic Open Web. We signed a couple of partnerships over the last quarter with real-world use cases and are working hard on aligning key players on the open standard and the use of domain name service or DNS for agent identity and discovery. Championing the open standard and partnerships are key to getting to critical mass of support of the open standard and we are encouraged by early results. Non-GoDaddy agents in GoDaddy's ANS implementation now number in the thousands. DNS is the foundation of identity on today's Internet, and domains are uniquely positioned to play a role in agent identity and trust extending domain relevance into the future.

Third, we are transforming GoDaddy into an AI-native company by deploying AI across our operations to improve speed, efficiency and customer outcomes. We are driving the most immediate impact in software development where AI is enabling the rapid creation of customer-facing applications with fewer dedicated teams. We are also testing the replacement of smaller third-party SaaS tools with internally built solutions on Airo AI Builder, particularly across corporate functions with the goal of reducing both cost and operational complexity.

In Care, we are advancing to the next phase of AI-powered automation. In Q1, we achieved key proof points across both support and sales. On the support side, we launched Airo Care, a new AI native support technology across voice and chat that handles a wide range of customer queries. We validated it against our existing offering, delivering strong improvements in resolution rates. Our first test improved resolution rate by approximately 50%. Subsequent tests demonstrated that Airo Care can equalize the resolution rates between English and non-English markets improving performance in non-English markets by over 150% and strengthening Care as a global competitive advantage. Airo Care is now rolled out to more than 50 markets and 20 languages. We will continue to expand use cases each month while maintaining a strong focus on customer satisfaction, resolution rate, sales and cost.

On the sales side, our AI-native commerce Airo sales agent makes voice calls and handles the entire commerce sales experience without human intervention. We have optimized the agent over the last few months and last quarter, it delivered conversion rates comparable to human-assisted sales for smaller leads. These are exciting milestones, and we plan to scale these capabilities throughout the year. Alongside these AI transformation initiatives, we continue to execute on pricing and bundling, seamless experience and commerce. These programs continue to drive improvements in conversion, attach and renewal rates.

I want to briefly revisit the promotional offer we discussed last quarter. We refined the program to better balance customer acquisition and bookings, and these efforts are delivering results. the promotions drove strong gross customer adds and resulted in new domain registrations accelerating by 6% for independent and partner customer populations. Our strategy remains consistent. We are focused on attracting high-intent customers who attach, convert and grow over time, optimizing for long-term value. Towards this end, we also took the opportunity to remove a lower-value product offering this quarter. This partially offset the customer growth from the promotional offer, but did not materially impact bookings.

In closing, we are operating in a dynamic environment with rapid change and leaning into our strengths. We serve more than 20 million customers globally, our domains business and our unwavering focus on micro business customers remains foundational, supported by our scaled integrated platform that connects identity, presence and commerce. This combination of global reach, proprietary data, seamless technology and our Care organization creates deep customer insight and consistent execution.

Our model is built around attracting high-intent customers and helping entrepreneurs start and grow their ventures over time. This drives durable growth and expanding margin and strong compounding free cash flow. We continue to execute with discipline. And as we look ahead, our path forward is clear. We have a large market opportunity, a strong competitive position and the financial flexibility to continue investing to deliver enduring shareholder value.

With that, here's Mark.

Thanks, Aman, and good afternoon, everyone. In the first quarter, our model continued to demonstrate its durability, driving operating leverage, expanding margin and generating attractive compounding free cash flow. Supported by a strong balance sheet, we have the flexibility to invest in innovation, while still maintaining a disciplined capital allocation framework. We delivered revenue at the high end of our guidance while expanding our normalized EBITDA margin by over 200 basis points.

At the same time, we generated strong free cash flow of $474 million, bringing our trailing 12-month free cash flow to $1.68 billion. We deployed capital through share repurchases, reducing fully diluted shares outstanding to 133 million. Our focus remains on consistent execution and delivering solid financial results as we continue to advance our AI transformation.

For the quarter, total revenue grew 6% on both a reported and constant currency basis to $1.3 billion, and ARR grew 6% to $4.3 billion. International revenue grew 7% to $416 million. For our high-margin A&C segment, we drove 12% growth in revenue to $0.5 billion on continued solid attach of our subscription-based solutions. A&C ARR grew 10%, and this segment now represents approximately 40% of our total business.

Segment EBITDA margin improved 110 basis points to 45% on product mix. Our Core Platform segment delivered revenue growth of 3% to $769 million, on 5% growth in primary domains with a stronger mix towards higher-priced non-.com TLDs. This was partially offset by softness in noncore GoDaddy hosting, the dotco registered contract expiration and tougher compares in aftermarket. Segment EBITDA margin expanded 150 basis points to 33% on product mix. Total bookings grew 3% to $1.5 billion, reflecting a few points of impact from our promotional offer we shared last quarter, the dotco registry contract expiration and lapping of prior year aftermarket strength. A&C bookings grew 9% and core platform bookings declined 1%. As we outlined in February, this quarter reflects the peak impact of both these dynamics, and excluding any FX impact, we expect bookings and revenue growth rates to be at or above parity for the remainder of the year.

Our focus on attracting and growing high-intent customers combined with conversion improvements is driving durable growth and higher customer quality. We are driving increased conversion into primary domains and higher attach through Airo. At the same time, we continue to deliberately manage our product portfolio, exiting lower-value offerings and reallocating resources towards higher value opportunities. And our newer Airo cohorts are demonstrating that higher value with second product attach accelerating 30% faster relative to non-Airo cohorts. These cohorts are contributing to the increase in the number of customers spending more than $500 annually, which represents approximately 10% of our customer base. Higher attach and retention rates above 85% drove ARPU growth of 9% to $246.

As we look ahead, Airo AI Builder is beginning to contribute directly to bookings. As Aman noted, this offering is already generating millions of dollars in annualized run rate organically and without dedicated marketing support. In parallel, ANS extends our leadership in a digital identity, positioning us to participate in the next evolution of the Internet infrastructure. As the architecture of the Internet evolves, our current strengths remain as relevant as ever, and our AI transformation positions us to consistently deliver profitable growth and capture value going forward.

Turning to margins and free cash flow. Normalized EBITDA grew 13% to $414 million, delivering 210 basis points of margin expansion to 33% and exceeding our guide for the quarter. Operational execution, supported by AI-driven efficiencies and favorable product mix continues to drive margin expansion. Our expanded margin reflects the efficiency of our model and gives us the flexibility to invest in our AI transformation while maintaining a strong balance sheet and a durable free cash flow profile.

Free cash flow grew 15% to $474 million, with a normalized EBITDA to free cash flow conversion of greater than 1:1. We exited the quarter with $1.3 billion in cash and total liquidity of $2.3 billion. Net debt was $2.6 billion representing net leverage of 1.4x on a trailing 12-month basis and within our target range.

On shareholder returns, we repurchased 3 million shares during the quarter, totaling $280 million. Since 2022, our share repurchase programs have resulted in a gross reduction in fully diluted shares outstanding of over 31%. And we ended the quarter with 133 million shares outstanding.

Turning to outlook. We are reaffirming our full year 2026 guidance provided in February and expect total revenue to be within a range of $5.195 billion to $5.275 billion, representing growth of 6% at the midpoint of the range. As a reminder, our full year revenue guide incorporates just over 200 basis points of cumulative impact from the expiration of the dotco registry contract, our consistent exclusion of high-value aftermarket transactions and the impacts of our product evolution and our promotional offer.

For Q2, we are targeting total revenue of $1.285 billion to $1.305 billion, representing 6% growth at the midpoint of the range. For both the second quarter and the full year, we expect A&C revenue growth in the low double digits and Core Platform growth in the low single digits.

For Q2, we are projecting a normalized EBITDA margin of approximately 33%, and we are reaffirming our target of over 33% for the full year. This reflects our ability to drive continued operational leverage and AI-driven productivity gains while increasing our investments in our AI native products, marketing and compute costs.

For the full year, we expect normalized EBITDA to maintain a greater than 1:1 conversion to free cash flow, and we reaffirm our full year free cash flow target of approximately $1.8 billion. We continue to be on track to exceed our free cash flow North Star CAGR of 20%.

On capital allocation. We operate within a disciplined, return-based framework and have deployed greater than 95% of our free cash flow over the last 4 years towards share repurchases. Our continued commitment to returning capital is a clear expression of confidence and the strength of our cash flow and the long-term value we are creating. We remain focused on allocating capital to its highest value users with a priority on driving long-term shareholder returns.

In closing, the fundamentals of our business remain strong with consistent engagement and durable drivers of ARPU supporting our long-term trajectory. As we move forward, we remain focused on disciplined execution and continued progress toward our North Star. We look forward to talking about these and other updates at our investor event later this year.

I'll now turn it over to Christie to open the line up for questions. Thank you.

Thanks, Mark. [Operator Instructions] Our first question comes from the line of Vik Kesavabhotla from Baird.

Can you hear me okay?

We can.

Yes.

Great. So my first one is on the customer base. And I'm curious, as you navigate all these changes in the product portfolio and in your go-to-market strategy, how do you ensure that you're attracting the right type of customer to the platform? And I think you mentioned in the prepared remarks that customer quality is increasing be great if you could elaborate some more on how you measure customer quality and what you're observing in the behavior of some of these recent cohorts that's informing your confidence in the strategy right now?

And then separate from that, my second question is on -- you talked about all these ways that you're using AI internally across the company's operations and some of the proof points that you're seeing already. As you continue to scale those initiatives, how should we think about the opportunity for those efficiencies to flow through to EBITDA and free cash flow in the near term versus being reinvested back into the business to support your product and marketing needs. And I realize it's probably a tough question to answer in a ton of detail quantitatively, but it'd be great to hear your philosophy around how you're balancing those dynamics during what seems like a pretty significant period of change for the business.

Vik, let me take the first one, and Mark can take the second. On the cohorts that we're attracting, look, our strategy is to attract high-intent customers. And the way we define high intent is looking at the traffic coming in by channel and then looking at the activation and attach to other products. And what we know from years and years of data across our 20 million customers, is that if we see that activation and attach to other products, we are going to see good renewal at the end of the 1-year term.

So that's what really gives us confidence. That's what we're looking for. And when we make these trade-offs and the decision in the business, to attract new customers with end-of-life certain products or retire certain cohorts. What we're looking for is the quality of those, the intent of those customers and measuring it through the activation of the other products that they have.

And then on the operations, Mark?

Yes. On the operations, we are balancing several different factors here. One, we have the ability to expand our margins. We have for the past few years. We're continuing to see operational efficiencies by the adoption of AI internally. And then we're playing the -- or paying our attention to the disciplined approach we've had in the past around investing in innovation, but using data points that show our path to return on those data points before we invest. So we're taking a very disciplined framework approach. And I would say we're balancing it with what we think the long-term return is going to be when we make those investments.

For example, we have talked about we were going to increase marketing around AI builder through the remainder of the year is because we are seeing the data points that are showing that return. And while those returns will be immaterial for the current year, we do know the potential to drive future growth for us as there and that makes that return appropriate.

Yes. I think maybe just to add -- the areas that we're looking at, whether it's software development or Care or our use of applications or marketing, all of these areas are accelerated with AI and we see great opportunity to deliver a better outcome for our customers at a lower cost this year and into the future.

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

Can you guys hear me?

Yes.

Yes.

Fantastic. First question, on the $10 million plus of Airo Builder ARR a lot of your kind of stand-alone AI builder platform, we've seen them scale up extremely fast. And I realize it's super early, but what's the right way to think about kind of what this business or this product could potentially grow to?

Yes. Ken, when we talk about the $10 million run rate, what we're really talking about is annualized bookings. And you're right, it's very early data. This includes both subscriptions and credits or tokens. And what we see is customers come in by a subscription, engage with the product, love the product, and they keep coming back and improving the website or whatever actions, whatever job they're trying to complete with the AI builder. I am directly engaged with a few customers. I actually work with customers every week now, sessions with live customers.

And what's magical about the Airo AI Builder and our customers that our customers have lots of ideas, but it's very hard for them to go through menus and templates and figure it out. So if they can just in natural language explain or just say, I would like this, Airo AI Builder goes and does it for them and it's sort of a magical amazing experience for that. So what happens is the same subscriber ends up using it more and more publishing, republishing and buying more credits. And that's the run rate we're looking at.

In terms of what it could be, it's super early. We're very excited about this early adoption, as I shared in the prepared remarks. We just started selling it in Care. We're going to add paid marketing to it starting this month. So there's a lot of things for us to do. And of course, we have the giant funnel we have with domains or website pads, which we haven't touched yet either. So there is a lot to do to get to what we think the long-term run rate can be, but we're excited about where we started. And we're also keeping an eye on how customers use this product. And does it change how they use our other products because that mix is going to be important for us, too.

I appreciate the color there. And then just a follow-up also on AI opportunities. You mentioned ANS opening new infrastructure opportunities. And now with Airo AI Builder pushed in your back end beyond websites, is there the potential to potentially utilize GoDaddy's hosting capacity for additional workload, AI workloads, given the market scarcity there. I mean we're sort of having a moment in hosting all of a sudden. And it seems like that's an area you guys could potentially capitalize on?

Yes. Actually, Airo AI Builder does use GoDaddy hosting. It's one of our competitive differentiators. We can provide a whole thing at scale, that's secure, that's at a great cost. And so there's definitely sort of excitement from our side to be able to take something like Airo AI Builder and power it with our hosting solution. We also have some plans to do more with hosting directly in our -- for our customers, but we're not looking to go out and do something that's for enterprises or something like that.

We are very focused on our customer base, the solutions that our customers need. We feel that we serve a unique customer, a lot of the new entrants in the AI space are serving enterprises, and we have this unique relationship with this type of customer. So we're really leaning into that relationship and the needs of that customer.

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

Great. First one for Mark. On your comments on bookings growth at or above parity with rev growth or the balance of the year, is there a particular shape of the bookings curve to be mindful of? 1Q implicitly the low point, but will 2Q step all the way back up to where rev growth is and 2H bookings a bit above that? Or is 2Q going to be maybe a tad ahead because it has an easier compare?

And then second one on capital allocation, buybacks here in 1Q well below free cash flow generation and the 95% payout stat that you've given. Meanwhile, cash at kind of the highest level since middle of '21, if I'm not mistaken. Just any updated thoughts on capital allocation and buyback appetite with the stock at current levels? And in lieu of buybacks, any updated thoughts on M&A?

Right. Thanks, Trevor. On the first, on the bookings, growth rates should be on par or above. We're looking in that both quarter on an annual basis for the remainder of the 9 months. So it should give you a sense of the momentum we're starting to gain as we go out throughout the year.

On capital allocation, what I always say is don't look at any particular quarter. I look at our history, our history is a good indicator of how we approach this. We look at the quarter going forward, we make determinations and buybacks are still a strong way or a strong lever for us to return value to our shareholders. So again, look at our track record, our history of what we've done. And it will give you a good idea of how we continue to approach it and the way we look at it hasn't changed.

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

You just closed $10 million in annualized bookings, the run rate for Airo AI Builder within -- it sounds like weeks of beta. Can you break down the unit economics there? Like what's the average transaction size? How much of that earn rates coming from credit top-ups versus the initial plan purchase. And what's the margin profile relative to legacy W+M?

Yes, Mark, overall, we remain committed to what we have shared in the past that we are building a product that serves our customer but comes at a gross margin and a price point that works for our customer and for GoDaddy. So from the very first day, we have continued to look at this product as a gross margin positive product, as a product that can continue to grow and deliver the economics for the company.

In terms of what is subscription and what is credit. We're so early like this has to bake, this has to grow, that there are going to be, I think, so many ups and downs as we enter marketing as we open the channels as we drive more traffic even from godaddy.com to this product. So it's too early to talk about sort of the more detailed pieces of how -- of what's happening here.

In terms of the comparison to websites marketing, as we had shared in the prepared remarks and last quarter as well, we haven't upgraded our website plus marketing going out this year. That product focuses more on exactly that need for that customer and the economics that would be needed to make it successful. We did test that product, and it all works together. It's all together with Airo. It's not like going to be something different when it comes out. When we tested that experience, and it did quite well in the test. But as I said last quarter, Websites + Marketing, the current version is an established champion, it is going to take a little while to test challenger, Websites + Marketing the new version, and we expect to do that this year as we roll through the year, we're going to test sort of the new product, new version a couple of times, and we expect it to win sometime this year.

Got it. And maybe a follow-up then on the upgrade that W+M upgrade, being tested now in the domains funnel, and it sounds like you're having some really solid early results there. Just curious when we should expect pricing to be reimplemented at Websites + Marketing, specifically and whether you can quantify how much of the historical ARPU accretion that you've witnessed from pricing and bundling has been attributable to W+M versus other products?

Yes, I can take the first part, and Mark, if you can take the second. On the pricing initiative around Websites + Marketing, because this is a very significant upgrade and there's a lot of moving parts. We're moving from a solution that is template first and uses AI to a solution that balances editor capabilities and AI capabilities. And frankly, it just comes with a different set of COGS and profile that we're working with.

Any sort of pricing change would have to wait until we get to parity on the customer experience and metrics like published rates. So that we can be certain that the product is -- the new version is delivering what customers expect. And once we've done that, then we can look at any sort of pricing initiative.

Yes. And on the contribution to ARPU, we don't get into distinguishing between products because it gets very difficult with the concept of bundling because multiple products are involved. But I will highlight that the pricing that we talked about is specific to this area and not to the other bundling aspects that we've had. So there's still contribution in our ARPU related to our pricing and bundling is just not to this one specifically.

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

I'm Willow on for Arjun Bhatia. Can you unpack A&C bookings growth? Was it largely impacted from the recent promotional activity in the quarter? Or is there anything else to call out? I'm just trying to appreciate the [ decel ] and the time line to inflected growth from initiatives like Airo and then pricing bundling historically.

Yes. Thanks, Willow. Nothing to call out different than what we talked about last quarter. There are various aspects across our bookings that were impacted. The 2 specific to A&C are the go-to-market offer. There is an allocation element when we bundle products together in the initial order that will impact A&C. And then what we're just talking about on the pricing aspect, the pricing and bundling related to the upgrade to the website book marketing product. Those are the 2 impacts on A&C bookings. And obviously, as we go throughout the year, we expect some of that to pass. Now on revenue, it's more evened out because of the subscription nature of what we do. But on bookings, that was mostly peaked in Q1.

Our next question comes from the line of John Byun on for Brent Thill at Jefferies.

Can you hear me?

Yes, we can hear you.

Just 2 questions. Again, on the Airo AI Builder. In terms of monetization, is it just the subs and the AI credit with the product itself? Or are you starting to generate anything from upsell or cross-sell by the code products? And then a follow-up would be international revenue growth seemed to slow a little bit to 7% from, I think, last year was mostly within 10% to 14% range. I don't know if there's anything you can call out there.

Yes. Thanks, John. On the run rate for Airo AI Builder, that's just the subscription and credits for ROI builder. We have not baked in sort of attach or other products into that yet. All of that is to come. You will see over the next few weeks this product sort of become a bigger, bigger part of the GoDaddy ecosystem. And as it does that, then we can have additional bookings that relate to those customers. But for now, we're just trying to give you the cleanest picture of this new product so that folks can understand the overall AI story at GoDaddy.

And on the international revenue, the only thing to call out is aftermarket last year with some of the larger transactions hit the aftermarket and contributed to the growth rate overall. We didn't see those type of transactions in Q1, the larger ones. So it's just a tougher compare from aftermarket for Q1.

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 ANS. What do you think is GoDaddy's competitive advantage or right to win as it comes to the ANS, especially versus larger competitors?

So the biggest thing about ANS is that we have put to the world that agents that we believe will be roaming the Internet and were larger in terms of traffic than human traffic soon should be registered on the Internet. And large destinations, whether those are website, systems, platforms, other organizational enterprises should recognize agents that are registered because if they're not registered it is going to be very difficult to trust agents. It's going to be very difficult to transact with agent, it's going to be very difficult. You just know which agents are real and which are fake and we think we can avoid all of that by registering agents using Agent Name Service, which again is backed by an open standard.

The reason Goady has huge right to win here is because within the Agent Name Service open standard, we say that while people should register agents with ANS, they should be -- those agents should be discovered using DNS, which is domain name service. Domain name service is a directory on the Internet that everybody uses. It's one directory. It replicates everywhere. Agent registries are popping up in every company. So how do you bring that together? You bring that together by connecting those registries to the one directory. And if we connect it to the one directory and in that directory, put the agents under the domain name then the domain name becomes core to the identity and trust relationship that agents have now and into the future, which as the world's largest domain registrar, it's obviously good for us if domains plays that role.

And what we're excited about and we're seeing good reaction from the large players. And of course, they want to take their time to understand things. But what we're really offering to the world here at an open standard is a beautifully elegant, scalable solution, and it already exists. Nobody has to recreate it. So hopefully, that helps a little bit to understand why agent name service is so important and why it links back to go to be as the world's largest domain registrar.

That's very clear, Aman. And if I may, a follow-up for the domain business. We're hoping to ask some question -- or a question about your strategic objectives for the domain business. Is your intention to maintain or gain share? Or would you be willing to let some lower LTV domain customers go at the expense of your market share?

So I think we've said that we will let low LTV customers go because our focus is high-intent customers. And if I step back and look at the domains business, we continue to be the world's largest domain registrar by far. Over the last [ 30 ] years, all kinds of competition has come into the world, right? We have seen very low-priced domain registrars. We've seen people use domain as loss leaders. We've seen people who give them for free. We've seen blockchain and the list goes on. And now the new normal includes LLM, the abides and lots of things.

So we are coming to that world with a lot of experience in competing in this business and a lot of tools to compete in this business. But what we have consistently found is that the value is in the high intent customer. The value is in the customer that has good intent, buys a domain and then does other things with it. And by doing those other things, that's what drives LTV for GoDaddy, that's what drives our business.

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

I'm curious, Aman, how much of the traffic are you exposing to the website to the Airo website builder? Is this still something you are testing and iterating or you already kind of rolled it out broadly? So that's one question. The other is just on the app builder. You said, I think the plan is to put some marketing dollars behind it, maybe you're already doing it. How significant is that? And what will it take for you to go from going from sort of testing the orders or kind of putting more or increasing the allocation that you have on marketing trend behind this?

Yes. On the first, Navid, from godaddy.com, we are still sending only a small amount of traffic into this new experience. Our largest funnels on godaddy.com are our domains path and they are our create path, which is the website path. And both those paths currently go into the existing champion version of Websites + Marketing. Over this year, we expect that to evolve, but as that evolves, more and more traffic will go to the new products, and I'm super excited about them, and it will definitely grow the usage of the products, the units on the products and the dollars associated with that. So when we look at godaddy.com, it is still a small amount of traffic, and we have a ways to go in terms of being able to drive more traffic to it.

In terms of the marketing plan for Airo Builder, we expect to spend a significant number of dollars this year, and we are starting in Q2 this year towards that. Now we're going to fund that -- those dollars with other efficiencies in the business. So doesn't have to change any of his plans. But when we look at that, it's the same disciplined approach that we have done in the past. When we look at what we are spending, what the return is and then we increase it and we improve it. And this is core to our evidence-based decision-making culture. You'll start to see us spend more in marketing. And what we're looking for is traffic coming to the product, the engagement with the product, they sign up with the product, people buying it, people publishing sites and then people coming back and engaging with their own buying credits. So that's the whole chain we're looking at. And over the next 2 or 3 quarters, our expectation is to ramp that up.

Yes. And just to reiterate, there's no change in the framework of how we approach this. We'll use the data. And when we see the returns, we'll continue to invest into the marketing.

And maybe just to kind of follow up on that on the Airo app builder, how is pricing evolving? Is it something that's set in stone? Or is that something that you're testing and might change? Give us your thoughts then on that.

We did test a couple of different plans, Naved, and we're happy with the plan we have settled with. That's one of the gates in terms of ramping up marketing spend. So we are happy with the current plans. The current plans include a startup plan that you can get us started with for free with a few credits or just free plan and then a starter and a professional and an ultimate plan and it has a subscription and a credit system with it. So we think we have a good setup here and for the foreseeable future, we're going to stick to it. And there are levers that we can pull over time. But for now, we're just going to focus on scaling it as fast as possible.

Our next question comes from the line of Jack Halpert on for Deepak Mathivanan from Cantor Fitzgerald. Jack, I think you're muted.

There we go. You guys hear me now?

Yes, we can.

Just one for me. You guys mentioned removing a lower value product offering this quarter. Can you just give us some more color on what exactly that product was and maybe how much it impacted customer count, revenue and if there are any other lower value products that you're evaluating in the portfolio?

Yes. Let me take that, and then Mark can jump in. As we talked last quarter, we have taken bold steps in terms of our promotional offers because we are in a dynamic environment, and we need to test faster. We need to move faster. And as part of those promotions, what you saw from us last quarter is we actually saw a significant gain in customer gross adds. In fact, the promotions that we did moved gross adds over 100,000. It brought us over 100,000 new customers. It's a very, very large number for us with a set of promotions.

But when we saw those promos and of course, we optimize -- we decided to optimize those promotions to balance bookings and customer growth because we want to stay with a high intent customer. When we look forward, we're really excited about our ability to do that. But when we bring in that many number of customers, we also take the opportunity to make tough decisions on products that we're going to retire. And that's what we did in this last quarter. The promos that we had did very well in attracting customers. We -- what we did is we decided to tune them to balance bookings and customer count, and then we took the opportunity to retire an old product that actually had an impact on customer count, but I think Mark can confirm little to no impact on bookings.

Yes, that's right. And this is the case of a product that we offered in prior years. It wasn't really generating the value that we needed. So we're just not going to support it anymore, and we're going to reallocate those resources but it didn't have any impact on bookings and did have a slight impact on churn within our customer group. But again, I would look at this, we will continue to evaluate our portfolio because our goal is to optimize for our higher-value offerings and in certain cases, make the choices between that and a lower value offering that may not be getting the return anymore that we need.

Our next question comes from the line of Kishan Patel on for Josh Beck at Raymond James.

This is Kishan Patel on for Josh Beck. As chat bots, AI mode and other AI-native discovery surface continue to gain scale. Have you observed any notable changes in top of funnel traffic patterns, customer acquisition behavior or conversion paths. And how are you thinking about GoDaddy's positioning if more customer journeys begin inside AI interfaces rather than traditional search?

Yes. On the traffic coming to the top of the funnel, I think consistent in the last quarter in terms of what we've talked about before, I think we had shared that we do see some impact to traffic in search because of the move to AI mode, but we were able to offset that impacted traffic by improving conversion on our side. So that same relationship has continued. We haven't seen any further change. in that or the trajectory of that versus what we saw in previous quarters.

In terms of customer journey starting in AI bots or there's lots of new interfaces and sort of new things that we're looking at. The way I look at it is what we are looking for is wherever customers are starting their journey how can we provide them the value that we have. And when we provide them the value, is this an exchange of value for us. Like are we able to build on it. And the simple example of that is that if people, let's say, if we get to a world where everybody has an agent and that agent goes out and does things, we want to make sure that we have the APIs. We have the offering where those agents can work with GoDaddy as successfully as with anybody else because we would slowly developing is the new normal, and that's what we have to compete with. And we've competed over 30 years with lots of companies, with lots of business models, and this is a new one, and we think AI is here to stay. So we're actually excited in organizing our teams to compete in that world.

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

Awesome. This is Katie Keyser for Elizabeth. Just with Airo Care now being rolled out to multiple markets, multiple languages, highlighting kind of improved resolution in those non-English-speaking markets. Does that change your kind of international growth opportunity at all? And I guess, just broadly, how does AI-enabled multilingual Care kind of change or accelerate the approach to entering markets that maybe previously were less attractive because of support or kind of localization costs.

Yes. As you know, Care is so core to our competitive differentiation and so core for the customer. We know our customer needs that support, whether it's through voice or chat that we provide that capability in many markets in 22 languages all over the world, and we just start core line we then translate it in even more. So having Airo Care, which natively provides our ability is definitely going to allow us to compete much better in international markets.

And we're really, really excited about this first data point where by taking AI or Airo Care and using it within our messaging system, actually, that's the test that I talked about in the prepared remarks. That test being able to perform almost equally globally is great news for us because it's so difficult for us to provide that high level of service that we have that huge NPS that we have in smaller markets, in Asian markets where we may not have a big presence. If we can do that with Airo Care, we can definitely be more aggressive in those markets. So we're looking forward to that. And I think it's an exciting opportunity for the future for us.

Thanks, Katie. I'll turn the call back over to Aman for closing remarks.

Thank you, Christie. Thank you all for joining. Super excited to be where we are and a great journey in front of us. A big thank you to all GoDaddy employees for a great quarter, and I'll see you next quarter.

Awesome. Well, I think we can get it started. Thanks, everyone, for being here at the day 1 of Morgan Stanley TMT Conference. My name is Katie Keyser. I'm on the software equity research team here at Morgan Stanley and very excited to be kicking the day off -- the conference off with GoDaddy. We have Christie Masoner here from the IR team stepping in for Mark. Thanks a lot for being here.

Yes, of course. Thanks for having me.

Awesome. So a quick disclosure before we get started. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures.

Awesome. So a lot to dig into on the GoDaddy story here. Maybe we can start at a high level, the kind of topic that's on everyone's minds, framing the AI landscape for GoDaddy. We've heard you talk a lot about kind of evolving Airo from that generative AI experience into more of the agentic operating system for your small business customers. At the same time, right, investors somewhat worried about how AI could disrupt the traditional kind of domain of creation value chain.

So maybe just how you frame the risk versus opportunity for GoDaddy here, where you see the company kind of most uniquely positioned versus some of those disruptive forces?

Yes. Thanks for the question. We're really excited and really bullish about Airo.ai. As you mentioned, it's evolving that generative AI experience into a more agentic experience. And what this is doing, what it's accomplishing for micro small businesses is a set of agents that are carrying out tasks on behalf of the micro small businesses.

So the core jobs to be done for micro small businesses remain the same. They're looking to validate their business idea. They're looking to do -- get the right domain, get the right website for their business. And we expect the evolution of the Internet is going to continually change as it has for the last 30 years. So we think that this tool is going to continue to go into the direction of how the -- or these tools and capabilities of how the evolution of the Internet will go.

We're really excited about it and the customers that are starting to use it, we're seeing a little bit more tech-savvy users that are going into it day in and day out. And we're getting really positive feedback about how it helps them get their jobs to be done that they need to do to run their micro small business because the core like I was saying, the core goals of micro small businesses is they want to establish their identity and a digital presence. They want to get to a place where they can reach their own customers, market to their customers, sell to their customers, accept payments from those customers. So all of those core competencies are going to change even if the tools and interfaces change along the way.

Awesome. We'll definitely dig into those pieces as we go through the conversation. I wanted to shift to kind of Q4 results quickly. One of the key discussion points being the impact from the introduction of the promotional pricing that you guys launched and kind of want to take it from 3 different levels.

Maybe first, just kind of what the strategic rationale was, what you're seeing on the kind of cohort quality of the customers that came in through that promotion and then a little bit on kind of the financial impact.

So maybe first, if you can just walk us through what the strategic rationale for introducing the promotional pricing was at this time, just a kind of deliberate effort to expand the top of funnel? Or was there any competitive kind of macro dynamics that led to that decision?

Yes. So like you said, it was about widening the aperture of the customers that we can reach and getting some of those customers that were interested more in a 1-year offer. And so what we were able to find is -- well, first, the way that we were launching it, there are three important things to understand.

So first, of course, is the price. We did a $4.99 offer and second, how is that purchase path of those customers? How are they being shepherded through our front of site? And third, what is the marketing might that we're putting behind these offers.

At the end of the year, we turned all of these on in full force, and we got a really strong response. So what we found is that there was extraordinarily strong demand that we are reaching for this offer.

And thus you asked about the cohort quality. The cohort quality of customers that came in under this path was pretty similar to other 1-year offers. And what I mean by that, the five things that we measure is, first, what's the traffic coming in? What is the conversion of this traffic as it's coming in? What is the attach of the additional products that they're getting? What's the activation? And those four things are really predictive on the fifth and most important thing of renewal.

And so what we're seeing on the cohort quality is those first four metrics are just as strong as -- almost as strong as our other 1-year cohorts. And with our long history of having extremely strong customer retention and upsell capabilities, we're really excited and we have the confidence that this cohort will perform just as well as other historical cohorts. So it really was about widening the aperture to get more high-intent customers. And that's what we're seeing is that the intent is measured by the attach and attach quality, and we're seeing really strong metrics on that front.

Got it. So kind of no change to the strategic focus of that $500 ARPU kind of customer.

Exactly. Yes, that high-intent customer, what we talked about or you're calling out is customers who spend $500 or more with us continues to grow really impressively, and we still see strength in those customers.

Got it. And then maybe a little bit on the financial impacts of the go-to-market initiative, weighed on bookings a little bit more than revenue just based on kind of contract dynamics, but is impacting both core and A&C. So maybe how should we think about the drag from kind of annual contract mix? And then just kind of outline why a domain-focused promotional flow is kind of going into the A&C side of the business?

Yes. So we're leaning on our core strengths of being the leader of domains, right? GoDaddy is the largest domain provider in the world. And leaning on that strength, we're able to put this offer out there. And like you said, it does have a bookings impact. But what's important to understand is that it's not have or it has a very marginal impact on our revenue, right? These customers like we were just talking about, have really strong metrics of showing all of the markers and signals that they will have really strong renewal.

So then you get -- you just get the bookings at a different time at their renewal as opposed to getting all 3-year book -- all years of the bookings at that first purchase path. So the bookings are the only thing that's really impacted right now with a slight and modest impact to revenue right now.

Got it. And so that's kind of why we're guiding to bookings to trail revenue in Q1, but to kind of catch up.

Yes. This offer we launched at the end of 2025. And then we started to do some tweaking on the amount of marketing might behind it and the purchase path into January and February. So you'll still see these dynamics play out in Q1.

Got it. Awesome. That's helpful. I wanted to shift to kind of the product side for a little bit. Meaningful progress being made around Airo, kind of evolving that from the agentic or the generative experience into something more agentic. I think it's 25 agents live as of Q4, more on the way. Maybe talk us through what fundamentally changes about the customer experience with Airo.ai relative to the original Airo through kind of core GoDaddy.com? And then how are the two initiatives working in tandem across the company?

Sure. So the original or legacy Airo experience is about shepherding customers through all of the products and experiences that GoDaddy has to offer for micro small businesses and presenting for them a one-stop shop solution that helps them to build out their entire online presence. Airo.ai is more of the Agentic experience. So how can we do things on behalf of our customers in a way that is automating tasks for them and doing things for them in the background when they're off doing other things like maybe helping their customers or restocking the shelves of their store or going out to farmers' market, depending on what their products and services are.

So that Agentic experience is really helpful for our customers to be able to do a lot more automation with the things that they're trying to do. We're really excited about it as a multi-agentic experience. It's one of the only ones, if not the only multi-agentic experience designed for micro small businesses to be able to help micro small businesses and tasks that they need to do.

Right. And so what are some of those key use cases that you're running with the Airo.ai agents today? Any kind of areas of the portfolio seeing the most traction kind of early on with this initiative?

Yes. It kind of back for what we were talking about earlier. So it's helping micro small businesses validate their business idea and get the right domain, get their presence started and helping to connect with their customers, to have conversations with their customers and to help even things like marketing research or understanding what is the area that my small business is competing in and what are the things that are important for me to understand about other local businesses in my area so I can have better research about how to do things like price my own products or connect with my own customers.

So all the things that micro small businesses are typically they don't have a lot of experience of running businesses. When you think about solopreneurs or people that don't have a lot of staff, they don't have a lot of experience doing these things. But GoDaddy with nearly 30 years of existence helping this micro small business, we have so much insights and so much data about how micro small businesses operate and what is the next best step that they need to be doing, and we can suggest that.

And by the way, when you're conversing and having these natural language interface conversations with these agents, they can detect and understand when the micro small business or the solopreneur is feeling stuck. And we can have human-guided moments built in the loop automatically to jump in and say, looks like you're having a little bit of difficulty. Let's jump in and help you, and you can talk to Care Guides. And that's one of the core competitive strengths, of course, of GoDaddy is that we have those capabilities to be able to jump in and really partner with micro small businesses to help shepherd them to success.

More about automating those workflows that they're already doing on the day-to-day. Awesome. And then the other interesting kind of product announcement that came out of Q4 was kind of the impending upgrade to the Websites + Marketing product, more of that melding the traditional web builder with AI-powered chat. Maybe some new customers already being opted into the experience there. Any early kind of green shoots? Any early data points you can share about how customers are receiving that experience?

Yes. The customers that are using it, we're getting a lot of really good feedback from it, and we'll roll this out sort of slowly as customers are being opted in, like you mentioned. Like with anything, we do a lot of experimentation and understanding what is the right path for how to introduce these types of things to existing customers. And the new customers, of course, it's a little bit easier to put them down the path that makes sense. But you can start to, at the beginning, split the traffic so that you can understand the engagement and how customers are using the products and over time, get more and more customers to opt into that experience.

We're pretty excited about it. This product, we were expecting to have launched it much later in the year, but the development of it was happened a lot faster than we were anticipating. So we're starting to already roll this product out imminently.

Got it. And I think last year, there were a lot of compelling stats about Airo accelerating website attach. So maybe what are any early expectations of how Airo.ai can kind of further inflect web attach with this new kind of up-leveled Websites + Marketing product?

Yes. Airo, like we were talking about earlier, does do that shepherding of surfacing all of the rest of the products of the GoDaddy portfolio, and that helps to drive and we've seen results of driving higher average order size, higher attach, higher retention and higher renewal. Airo.ai is a little bit different from the perspective that it's more of an Agentic experience that is a natural language Agentic experience. And the customers that have been gravitating towards that now are a little bit more tech savvy. And so they're the customers that are more interested in having those types of Agentic experiences.

So over time, we expect that, that will continue to march forward and to drive more and more adoption. Airo.ai, the way that it's monetized is slightly different than how Airo itself, as you know, is not a SKU. It's just shepherding customers into greater attach. Airo.ai is more as customers are using the products, they're getting surfaced with paywalls as they're advancing into the different types of things that they're trying to carry out.

Right. And to that point, right, we've kind of noted that we're not assuming any contribution from pricing and bundling kind of related to the websites during this transition. So is '26, like do you think that's kind of an upside driver to '26? Do you think you'll start to see some of that benefit flow through more materially beyond '26? Kind of how do you think about timing when you'll see that monetization come through?

Like you said, we haven't built that into our 2026 guide. So we'll have more to share as time goes on.

Got it. Thought I'd try. And then just shifting to ANS for a little bit, introduced the Agentic Name Service kind of as that foundational infrastructure layer for the open Internet. I guess just broadly, what's the strategic vision for ANS in the context of your kind of broader domain infrastructure that you guys have been doing for so many years?

Yes. We're really excited about ANS. So this is an extension of the DNS and SSL framework that helps to build verified identity into how we are using the Internet. And I think we can all agree that the Agentic experience worldwide is going to start getting proliferated everywhere, right? There's going to be lots of agents that are going to be roaming about the Internet. And it's really important, I think, for the end users of these agents to know and understand the provenance of where these agents come from. Like is this a real or a rogue agent? And ANS is intended to say, let's have an organization that says a mechanism to organize these agents to say, this is the identity of this agent. It is who it says it is.

And we're able to leverage the power of DNS, which is proven infrastructure that has been powering the Internet for the last 30 years. It has instant -- it's a very elegant way to have instant adoption and instant ways for all of the partners that we're talking to and some have already been announced to help build out this infrastructure. And so we have a proof of concept out there.

Everyone is pretty excited about it because everyone understands the need for organization of agents and really proving that they are who they say they are. And GoDaddy is uniquely positioned to do this because of our strength with the DNS. That being said, it is an open standard. It's not something that GoDaddy specifically owns. We're proposing this saying, this is the right way for the Internet to evolve. This is how everybody should want to have this open Internet.

Right. And two follow-ups there. I guess on the monetization kind of path, comparing it to domain registration economics, maybe are there any parallels that you can help investors draw on how monetization followed the DNS adoption curve in the past so we can think about how ANS might transpire?

Yes. It would be similar to how you're thinking about you would register your domain and renew it annually. That being said, the agents can have a one-to-many relationship. So you could have many agents tied to a specific domain. So then in those types of instances, you would -- what we would be thinking about is having maybe a tiered approach to how the pricing works. So it wouldn't necessarily be the same pricing for someone who's putting hundreds of agents in the same domain versus one that's putting one agent per domain.

Yes. So an opportunity to more deeply monetize.

That's right. Also like more of like -- you can think about it similar to like a seat model of like something like our e-mail where you can have a subscription to e-mail, but as you hire more employees, you would have more e-mail seats for that subscription.

Got it. And then recently announced the partnership with MuleSoft here, characterized it as kind of a validation point of the framework. I guess what other milestones should investors be watching out for? Is it kind of more partnerships to kind of get excited about the materiality of the ANS framework?

Yes. The adoption is obviously what we're focused on, getting widespread adoption of this technology and this protocol. And because of the simple and elegant way that this can just be turned on overnight, we think that it's really compelling for how to get these agents like I was talking about organized earlier. And to your point, MuleSoft did announce an integration with our ANS. And so we think that getting more and more players to adopt this technology is the most important first step, right? We need to get wide-scale adoption for -- going forward into the future.

Awesome. And then on pricing and bundling, I wanted to hit on that. It's been a multiyear growth driver for GoDaddy, continues to be a multiyear growth driver. I guess as we look into '26, kind of how are you seeing that strategy evolving? Maybe talk to the amount of runway you see to go back into the existing installed base and kind of utilize pricing strategies. Does anything change just because of kind of how dynamic the competitive environment is? How are you thinking about pricing as a lever more broadly?

Sure. So pricing and bundling, you can think of it as more of an evergreen type of initiative. There's going to always be opportunities for us to understand our customer base even better than we already do and for our customers, be able to bundle together a set of products that make sense for what they're trying to accomplish. And so when we can -- and these happen a lot in the renewal path as well as the new customers are coming in to.

And when we can surface for customers and understand how their usage patterns are working and what type of value they're getting from these products, we can continue to offer more and different bundles year in and year out. And as we think about the cohorts of customers that we're serving, we have customers and cohorts that are customers that look similar to each other and what we can do is offer the right bundle for that type of customer, which would be a different bundle for this other type of customer and so on and so forth.

So pricing and bundling continues to be a really strong initiative for the business that continues to show really good growth and pretty much the -- one of the core engines of the growth that you see.

Got it. And how does the pricing and bundling strategy converge with kind of what we were talking about earlier with paywalls via Airo.ai? Is there -- like are these two pricing strategies that are existing alongside each other? Is there any risk of maybe convert cannibalizing, right, like what you can be monetizing between the two? Just how are you thinking about those two pricing initiatives running kind of together?

Yes. I would think of it slightly separate from the perspective that the pricing and bundling is about surfacing for customers, what is the right bundle of products that you should have in your build for what the stage or the journey that you as a micro business are in? What are the things that you're trying to accomplish? And what are the different attached products that make sense for what you're trying to do. On the Airo.ai and paywalls, that's for how you're using that particular product and how you're engaging with that particular component of the product.

Awesome. Helpful. I wanted to spend a couple of minutes on customer count and kind of ARPU dynamics. Emphasize the focus on those high-intent customers and spending $500 annually. Pretty compelling mixed that is now 10% of your customer base, growing low double digits in fiscal '25. So into '26, maybe how are you thinking about the trade-off between customer account growth and ARPU expansion? And then maybe just when we think about how that mix is trending, any data points we can put around what level of mix that can ultimately inflect to in the overall customer base in the next couple of years?

Yes. So both are important, right? Having ARPU expansion and customer growth are important, either of which that we guide to. However, we're really focused on getting customers into -- first and foremost, getting those high-intent customers and getting them to areas in which we can drive better attach of the things that they're getting in their bundle.

The reason we focus so much on this is because we have so much data that shows us that when customers are in a second product, their retention is significantly higher than our already strong 85% customer retention. And when we get customers into that third product, they're near perfect retention. And so when we talk about that $500 line of demarcation, it's sort of a demonstration of showing this customer likely has 2 to 3 products with GoDaddy.

So this is showing you that these are really strong near-perfect customer retention, and that's why we drive that $500 customer or that's why we talk a lot about it, I should say, because it is a demonstration of our efforts working with getting that higher attach, that higher intent customer. And so we are essentially focused on and that kind of talks a little bit about both the growth and the ARPU expansion there.

Right. And I think that's the debate, right? Like if the retention and the ARPU is so strong, do you really need to be so focused on the actual customer count number. But obviously, we benefit from having just that broader pool of customers to drive to those higher-value cohorts. And so I guess like coming back to the promotional activity, like does that -- how does that play into what you're thinking about customer count? Should that be driving positive customer count growth in '26? And then just kind of how do you balance that tension between customer quality and then kind of meeting that growing top of funnel?

I think it's really important to call out that the low price for that offer does not mean low intent. Intent is measured like I was talking about earlier by attach. And so that $4.99 offer was showing extraordinarily strong attach that was almost as good as every other 1-year cohort that we've ever had. So we have a demonstrated track record of not just being able to cross-sell into additional products with our customer base, but also have those customers renew.

So when we did this offer, what it does is it broadens the aperture for the customers that we can get. Not every customer is interested in having 3 years as their starting point. A lot of customers are interested in having a 1 year as a starting point. And we're perfectly happy with broadening the aperture to get those that are interested in 1 year and those that are interested in 3-year offers. So I don't know that they're in as direct conflict as what the question might suggest. I think that it's additive. It's not an or, it's an and.

Right. Got it. That makes sense. Just broadening that funnel.

And we did see the only thing I'll add to that, too, is we did see a lot of really strong take for that offer, right? And so we did see -- we started at the end of the year. But even going into the beginning of the year, we're seeing such strong adoption or strong take of that offer that it's kind of to that point of, yes, that new customers are coming in to take on that offer.

Right. Got it. I wanted to kind of run through the two revenue segments quickly and kind of see how you're thinking about those into '26. I mean A&C has definitely been the growth baton growing kind of in that mid-teens range. You're guiding to low double digits for next year. I guess we've kind of heard that there's a number of drivers that aren't being embedded within the guide, whether it's Airo.ai cohort monetization, pricing and bundling around the new Websites + Marketing product.

I guess kind of what are those key growth drivers that you're thinking about for A&C into '26? And if there's anything you can kind of give texture around the bookings trajectory just because kind of comps are less of a big deal than they have been in the past. So anything on kind of A&C growth trajectory would be great.

Yes. Importantly, we do have pricing and bundling on A&C, just not on that one product. But there is various other products that exist within A&C that are subject to pricing and bundling. So we have an offer out there for Managed WordPress for hosting that is doing really well and various other ones, too, for our e-mail and productivity offering as well. It's just not for that specific piece of Websites + Marketing. So that helps to drive it.

And then, of course, Airo itself as being the shepherd of getting customers to that second product third product. And that's typically, an A&C is usually the highest beneficiary of that Airo shepherding customers through those additional product suite. We're pretty excited about the -- obviously, A&C is that high-margin part of our business that continues to grow quite nicely. And it helps customers have more of that fulsome one-stop shop experience.

And again, when you think about the micro small business and the tools and services that they need to have that one-stop shop, it's a very compelling value proposition for them to have a single dashboard to manage all of these things and A&C is usually the products where they're getting everything else on top of that. So we're pretty bullish about A&C. We're pretty excited about the forward trajectory for it.

Awesome. And then in the core kind of growing or guiding for a little bit of a slowdown from '25 to '26. There's a number of dynamics at play there, right? We have expiration of the DotCO contract, not really embedding aftermarket in there just based on the volatility of that business and then some of the impacts from the promotional pricing that we talked about at the top. I guess, is low single-digit growth, is that the right way to kind of structurally think about the core platform? Or is this more of a kind of one-off year just because of some of those headwinds?

Well, we've been guiding to low single digits for core platform for a very long time. It's been outperforming. So we have -- and the biggest outperformer you called out was aftermarket. So when we think about aftermarket, we have been guiding to low single digits and the large part of aftermarket, which, by the way, is a validation of the strength of the domains and the value of that asset in and of itself.

When we think about aftermarket grew 12% last year, and we expect it to be low single digits. That is 9 points of outperformance -- 9 to 10 points of outperformance for aftermarket. That is a tough thing to grow on top of. So we don't have that built into the guide. But I think it's important to understand and acknowledge we do expect that large aftermarket deals are going to happen. We just don't put them into our guide because of the volatility like you mentioned. And there's also the DotCO expiration that you talked about, too. So we ended that contract in October of last year. And so we still have about 50 bps of headwind from the expiration of being the registry for DotCO. We are still the registrar for DotCO. So that part of the business remains intact.

Perfect. Moving to margins for a little bit before we open it up for questions. The pace of margin expansion has been very impressive, right? I think 1,000 basis points over the past 5 years, 32% in 2025, and you're guiding for '26 to kind of exceed that Investor Day target of 33%. Maybe first, you can kind of outline the key initiatives that have gotten you there. Where do you find the most kind of OpEx leverage? How does mix play into it? Talk a little bit about the journey.

Thank you for noticing. You're right, 1,000 bps of margin expansion is no small feat, and we've been very successful there. The top 3 areas that have gotten that margin expansion for us is infrastructure simplification. So we did a lot of work in the last couple of years to get our platform onto a single place where we can have sort of all of the data and all of the platform in an area where we can leverage our data a lot better, leverage our offerings to customers a lot easier.

The second one is from having the access to global talent. So we're able to -- even with the power of having a strengthened platform, we can -- and the power of AI, we can give better insights to new employees as they're coming into the business. And so it helps us to leverage talent in other areas that it doesn't have to necessarily be U.S.-based.

And then the third, like you mentioned, it's the product mix, the A&C tailwind. So A&C is growing a lot faster than core, which has the lower margin. And so the segment margin for A&C is just significantly higher than core platform. So all 3 of those play into the -- what we have enjoyed as really strong margin expansion and what we expect to continue to enjoy. So we're -- like you said, we've guided to 33% for our Investor Day target 2 years ago. We're on pace to exceed that for this year.

Yes. And I think that gets that kind of the follow-up question, right? How much room is left to go on margins just because what you've achieved thus far. When you look forward, like does anything change about your approach? Or is it kind of continuing to drive forward that similar playbook?

Yes, that plus operational efficiency, and there is efficiency and leverage to be found in AI, but we'll tell you more about beyond '26 when we guide there.

Awesome. Any questions in the room before I keep going? Alright.

Nothing specific to call out. I think that when we think about who our customers are, those micro small businesses and the core competencies that they need, the competitive advantages that GoDaddy enjoys is having the strongest brand awareness in the space. So that drives a lot of traffic to the GoDaddy.com website. We have over 60% of traffic that is direct navigation to GoDaddy. So that is really strong of having that powerful brand.

And then having the scale that GoDaddy has enables us to operate efficiently globally all over the world. And then the third competitive advantage is the products that we have that are seamlessly built to have that one-stop shop that micro small businesses need. And I think not to be underappreciated, of course, is the Care model that GoDaddy has so that we can partner with our customers to help and that keeps that retention and renewal really strong.

And by the way, Care drives 9% of our bookings, which on a $5.4 billion business, 9% of bookings is really powerful. So the competitive landscape in the Internet space has always been intense, right? Everybody is competing in the Internet space. So there isn't anything to call out specifically of really different about the competitive landscape. It's always been a really intense competitive environment.

I think it's extraordinarily strong. Like I was just mentioning that -- and so the question in case it didn't get caught on Mike is how important is the brand in an Agentic world.

Because micro small businesses know GoDaddy is the place to go to get online and especially if I want to be running a micro small business and have a partner that powers all of the things that I need to do, customers start out with going to godaddy.com directly. We get more than 60% of our traffic because micro small businesses know GoDaddy is the place to go. So brand is extraordinarily important. We are a B2B business, but we operate as B2C. And our end user in micro small businesses needs our tools and capability. Brand awareness is extraordinarily important.

Maybe just a couple of questions. Maybe could you contextualize kind of the rate at which you're attaching websites on to your customers and how that's kind of been changing as you brought out new products? And then secondly, I think you mentioned when you've used Airo.ai, the customers are the more tech-savvy customers so far. How do you think about the marketing strategy to bring that such that more customers are comfortable with understanding what the product is and driving that attach as well?

Sure. The way we've talked about attach is the amount of our customer base that has more than one product with us. So greater than 50% of our customers have at least a second product with us, which is pretty remarkable when you think about GoDaddy having a scale of over 20 million customers. And that number continues to go up.

And on top of that, the velocity of getting customers to that second product attach has been going up. So customers are getting to that second product 30% faster. And to your question about Airo.ai and how do you market that, that's a constantly evolving engine and something that we're extraordinarily experienced in almost 30 years of operating in this business and on the Internet.

So the ways in which we reach out to customers, of course, all the traditional ways that you would expect for new customers, right? You're doing things like YouTube, you're doing direct marketing channels, direct targeting, that type of stuff.

There is also like over-the-top type of advertising that you do for even like TV advertisement. But existing customers, it's different. The motion is different because you can have direct conversations with those customers.

And so when we have the relationship that GoDaddy has with micro small businesses, that helps to drive even to the earlier point of when we said that Care driving 9% of bookings. Those are happening through empathetic conversations that we have with existing customers that drives additional cross-sell and attach. So the marketing and the way that we get these other products in front of existing customers happens to those types of channels as well.

Awesome. If I could just squeeze in one more on capital allocation. You guys have been heavy deployers of the buyback. Should we expect that to continue going forward? And then does anything change about kind of your view on M&A just because there's kind of also some dislocation in external assets as well?

Yes. You're bringing up a really important point. GoDaddy has an extraordinarily strong balance sheet. And we have a lot of opportunities because of the strong cash generation that we have, that we have a lot of options. And we get asked a lot about being at the table for M&A. Our criteria for M&A is the same, right? It needs to strategically fit. It needs to financially make sense, and it needs to be something that we can integrate into the platform.

We have done a lot of work with simplifying our tech stack and having any sort of acquisition that would be difficult to integrate would be not preferred, right? And by the way, we continue to drive so much innovation and launching more and different products internally that, that too raises the bar for what makes sense strategically for us to purchase. That said, you're right, we have been really strong deployers of share buybacks. In fact, in 2025, 100% of our free cash flow was deployed through cash -- or sorry, through stock buybacks. And so I think that probably it will end on our strategy is the same.

Awesome. That brings us to our time. Thanks so much, Christie.

Yes. Thanks for having me. And Mark sends his apologies. He got very sick last night. So I'm filling in on a pinch. So thank you for your grace.

Awesome.

Welcome to GoDaddy's Fourth Quarter and Full Year 2025 Earnings Call. Thank you for joining us. I'm Christie Masoner, VP of Investor Relations. And with me today are Amanpal Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we will open up the call for your questions.

[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.oti.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 statements that we make on this call are based on assumptions as of today, February 24, 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 happy to introduce Amanpal.

Good afternoon, and thank you for joining us. At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive for all. We serve millions of micro businesses around the world who rely on us to power their digital presence. By seamlessly connecting identity presence and commerce into a unified technology platform at a compelling value, we give entrepreneurs the infrastructure they need to manage their ventures. .

Starting with 2025 results, we delivered bookings growth of 7% and expanded normalized EBITDA margin to 32% for the full year. This margin expansion reflects ongoing operational execution, reduced cycle times and improved structural leverage, driving strong free cash flow growth of 19%. Importantly, we achieved this while continuing to embrace and develop AI tools and innovative solutions for our customers.

These results demonstrate the strong earnings power of our integrated platform and the progress we are making towards our financial North Star. As we look ahead, the pace of change driven by AI continues to accelerate. AI is reshaping how businesses are built and run.

Customer expectations around speed, automation and integration are unprecedented. Our global brand, domain leadership platform scale, engineering talent, velocity of execution and care organization provide competitive advantages that will continue to differentiate us as the landscape evolves. GoDaddy is adapting with a sharpened and deliberate strategy that builds on these competitive advantages and drive long-term shareholder value.

Typically, I walked through our initiatives, including pricing and bundling, seamless experience and commerce. We continue to execute well on these priorities, and they remain foundational to how we run and grow the business every day.

Today, I am focusing the conversation on the forces reshaping the world, including our AI journey, our competitive positioning and why we believe GoDaddy is positioned to win. We have accelerated our path to offering the best AI native products and experiences for our current and future customers. Over the last quarter, we have made strong progress on the following 3 components of our AI journey.

First, evolving Airo to be the Agentic operating system for small businesses brought to life on Airo.ai; second, driving efficiency by leveraging AI adoption across all functions. And third, powering AI agents on the Agentic Open Internet with agent named service. Beginning with Airo, we have made meaningful progress evolving Airo from a generative AI experience into an agentic operating system for small businesses.

Our team is building agentic AI experiences that feel like magic, by effortlessly handling customers as jobs to be done, then suggesting the next best action it can take for them. Airo.ai brings this to life. We launched Airo.ai in beta late last year and are ramping traffic this quarter.

Airo.ai already has 25 agents live and more are on the way. These agents autonomously perform tasks across the entrepreneurs wheel, including business idea validation, domain registration, website building, application building, marketing tools, compliance and much more.

What differentiates GoDaddy is our more than 20 million customers, decades of proprietary behavioral data and deep relationships across identity, presence and commerce, and we are uniquely positioned to train, refine and scale these agents in ways that are grounded in real customer needs. Our distribution at the top of the funnel, combined with an integrated platform and 24/7 care uniquely positions us to deploy agenetic capabilities at scale while maintaining trust and reliability. Creating and optimizing this experience is a meaningful part of the opportunity at GoDaddy, and we are capturing value through paywalls within the experience. Engagement continues to build and as adoption scales and monetization becomes more meaningful, we will provide greater visibility into the underlying performance metrics.

Second, as we embed AI across the company, we are reducing cycle times and improving how work gets done. AI tools are now generating the majority of our code. New code bases are almost entirely AI-generated shipping new features at breathtaking velocity and multiple experiments on agent-only dev teams are underway.

In our operations, we are excited about our internal AI sales agent, which handles one of the most complex sales use cases without human intervention. In the first 6 weeks of 2026, the sales agent handled thousands of voice calls and text chats with healthy conversion rates and very high engagement rates.

As we scale this, we expect to build on the leverage we have already seen in care over the last few years and create new opportunities for sales as well. We have also built AI agents to handle test spanning from financial planning to compliance to marketing reviews and much more. As these examples demonstrate, AI adoption gives us confidence that we can drive further efficiencies in our business that will build on the margin improvement we have delivered over the last few years.

The third update builds on our global domain leadership to extend digital identity into the Agentic era through agent name service or ANS. ANS is designed to anchor agent identity to the global and public domain-based infrastructure called Domain Name System or DNS.

This is a unique aspect of our solution that provides multiple benefits and leverages existing Internet infrastructure by linking agents to domain-based identity, ANS introduces a verifiable layer of trust in an increasingly automated environment.

And because ANS publishes to DNS, verified agent identities are discoverable worldwide within seconds using infrastructure that already supports identity and authentication across the Internet today. We are pleased to announce that last week, MuleSoft, a Salesforce company and GoDaddy launched an integration between MuleSoft, Agentic Fabric and GoDaddy ANS. This represents an important step in validating the framework and extending ANS into enterprise-grade workflows. ANS has the potential to create monetization similar to domain registration, extending GoDaddy's infrastructure leadership into the genetic economy while reinforcing our position at the center of digital identity.

I also want to share a couple of updates on our evolving go-to-market and product efforts. Domains has been and will continue to be GoDaddy's strong, durable cash-generative engine serving as a long-term funnel to drive GoDaddy's growth. To further build on this resilient foundation and bring more quality customers onto the platform.

This quarter, we expanded our go-to-market approach with a streamlined purchase experience for new domain customers. Our objective is to broaden the top of the funnel, while strengthening the long-term opportunity for lifetime value expansion.

We activated our marketing channels on the streamlined experience and introduced a promotional price for com domains with a 1-year term. The approach successfully increased new customer volume that purchased domain units with 1-year terms. But the demand for this offer was greater than we expected. And the shift in term mix, combined with the promotional price reduced upfront bookings and near-term revenue. Mark will cover the numbers on this in his section.

This new cohort of customers had solid attach behavior and post-purchase activation close to our other 1-year cohorts. This early data and our history of strong cross-sell capabilities and customer retention gives us confidence that with iteration, we can optimize this path.

We are refining our approach in a manner that balances increased acquisition of new high-intent customers on one side with longer term and higher attach on the other, creating overall greater long-term value. In February, we saw improvement with this effort, and our team is focused on unlocking this value.

On the product side, we are excited to share a significant upgrade to Websites + Marketing with a new website builder that brings together powerful AI features and a powerful editor as well. The experience starts with a fully built website based on a description and then allows easy editing with an expanded set of design options in the editor or if the customer prefers, they can continue with an AI-powered chat-based interface. Optimized for GoDaddy customers, the new builder creates design-led sites with amazing ease and at a cost that meets our and our customers' expectations.

I am excited to share that new customers are already being opted into this experience. We plan to move fast on this transition. But given the scale of websites plus marketing, we expect it to take a few months. I look forward to sharing a broader update on this next quarter.

In closing, we are executing a sharpened and deliberate strategy in a period of rapid technological change, leveraging the trust we have built with more than 20 million customers. we are leaning into our competitive strengths of domain leadership, global brand awareness, platform scale, engineering talent, velocity of execution and care.

We are advancing our AI journey evolving our go-to-market engine and scaling innovation in our products with measurable proof points and financial discipline. As we look to 2026 and beyond, our path forward is clear. The market opportunity is significant. Our competitive position is strong, and we have the financial flexibility to win. With that, here's Mark.

Thanks, Aman, and good afternoon, everyone. As Aman mentioned, we are operating from a position of strength. We have a business with strong operating leverage that drives meaningful compounding free cash flow. This foundation provides us with the flexibility to invest in high conviction opportunities while continuing to expand margins.

And our fourth quarter results demonstrate that. We delivered revenue at the high end of our guidance and exceeded our normalized EBITDA margin and free cash flow targets. Our new 1-year domain offer is driving strong subscription unit growth and solid attach. At the same time, we are building AI tools that enable customers to thrive in the genic world.

While small, relative to our overall business, Airo.ai is already monetized with growing adoption. Through ANS, we are expanding our existing digital identity infrastructure for the long term. We believe this creates an opportunity for GoDaddy to expand our infrastructure offerings beyond hosting and the primary and secondary domain markets. With that, let me first cover our financial results. Beginning with Q4 results. total revenue grew 7% on a reported and constant currency basis to $1.3 billion, coming in at the high end of our guided range. International revenue grew 10% to $420 million and ARR grew 7% to $4.3 billion.

For the Applications & Commerce segment, we drove 13% growth in revenue to $498 million on continued solid adoption and attach of our subscription-based solutions. And EBITDA margin improved 40 basis points to 47%. ANC ARR grew 12%.

Our core platform segment delivered revenue growth of 3% to $776 million, driven by the continued strength in aftermarket, up 8% and as well as 5% growth in primary domains, partially offset by the softness in non-core GoDaddy hosting.

Segment EBITDA margin expanded 70 basis points to 35%. We drove normalized EBITDA growth of 12% in the fourth quarter to $431 million and delivered an expanded margin of 34%, up 160 basis points and exceeding our guide.

Continued operational execution aided by AI-driven efficiencies were the main drivers of expansion. Total bookings grew 5% to $1.3 billion largely reflecting the headwinds from Dotco and the mix shift towards shorter initial contract terms. ANC bookings grew 11% and core platform bookings grew 1% and free cash flow grew 8% to $370 million. Moving on to our annual financial results.

We delivered approximately $5 billion in revenue. representing growth of 8% on our reported and constant currency basis. International revenue grew 11% to $1.6 billion. ANC revenue grew 14% to $1.9 billion, and core platform revenue grew 5% to $3.1 billion.

Total bookings grew 7% on both a reported and a constant currency basis. Growth spanned across our business, reflecting continued solid adoption of our solutions as well as strength in primary domains and strong aftermarket performance.

Driving this growth is stronger customer engagement across our products, including productivity and websites Domains remain the front door to our platform, attracting high-intent customers at a pivotal moment in their journey.

Airo personalizes the experience that follows accelerating discovery and increasing attach across identity, presence and commerce. Since its launch, the cumulative annual spend from Airo cohorts has grown in the high teens. Additionally, the velocity of a second product attach accelerated by nearly 30% relative non-aero cohorts. This dynamic is expanding lifetime value across our customer base.

We see this most clearly in our highest value cohorts who spend more than $500 annually, which grew 11% and that represent approximately 10% of our total base. These customers have meaningfully higher second and third product attach rates and near perfect retention. The result is compounding value creation with ARPU increasing 10% to $242 and overall retention rates rising above 85%. Turning to margin and free cash flow.

Our performance reflects the health of our model. Full year normalized EBITDA grew 14% to $1.6 billion and a margin of 32%, representing 150 basis points of expansion over the prior year.

Over the past 5 years, cumulative margin expansion of 1,000 basis points reflects our ability to scale efficiently while continuing to invest in the business. This margin expansion flows through directly to cash generation. Free cash flow grew a robust 19% to $1.6 billion with a normalized EBITDA to free cash flow conversion of greater than 1:1. We exited the year with $1.1 billion in cash and total liquidity of $2.1 billion. Net debt was $2.7 billion, representing net leverage of 1.6x on a trailing 12-month basis and within our target range. On shareholder returns, we remain active and opportunistic.

In 2025, we deployed 100% of our free cash flow, repurchasing 10.2 million shares totaling $1.6 billion, while maintaining our balance sheet strength. Since 2021, our share repurchase programs have resulted in a gross reduction in fully diluted shares outstanding of approximately 33% and we ended the year with 136 million shares outstanding.

Before turning to detailed guidance, let me outline the impact of the go-to-market and product evolution we spoke about earlier. The evolved go-to-market approach increased the mix of 1-year contract terms and reduced initial order sizes for the new cohort.

This created a near-term trade-off in our bookings and revenue that carries into our 2026 outlook. As a result, we expect bookings growth rates to trail revenue growth rates in the first quarter by a few points from the combined effect of this go-to-market evolution, the Dotco contract termination and tough compare on strong aftermarket performance last year. For the full year, we expect bookings and revenue growth rates to be relatively on par. We also anticipate a modest impact on reported revenue growth rates for the year in both core platform and ANC segments as the promotional price is allocated to all products included in the initial purchase.

Importantly, total bookings dollars are expected to remain ahead of total revenue dollars throughout the year. With this, our full year revenue outlook incorporates just over 200 basis points of cumulative impact from the expiration of the Dotco registry contract, the continued exclusion of high-value aftermarket transactions and the go-to-market and product evolution we spoke about.

The dotco and aftermarket impacts represent approximately 2/3 of this amount, while 1/3 is from the go-to-market and product evolution. For the full year, we expect total revenue to be within a range of $5.19 billion to $5.275 billion, representing growth of approximately 6% at the midpoint with AMC revenue growth in the low double digits and core platform growth in the low single digits. We expect normalized EBITDA margin to exceed our Investor Day target of approximately 33%. This reflects continued operational efficiencies and AI-driven productivity gains, slightly offset by increased [indiscernible]. We expect to drive free cash flow of approximately $1.8 billion. maintaining greater than a 1:1 conversion for the full year.

The model continues to demonstrate structural cash generation strength and we continue to be on track to exceed our Investor Day North Star CAGR of 20%. For Q1 2026, we expect total revenue of $1.25 billion to $1.27 billion, representing approximately 6% growth at the midpoint of the range, with ANC growth in the low double digits and core platform growth in the low single digits.

We project a Q1 normalized EBITDA margin of approximately 32%, an expansion of about 150 basis points over the prior year. On capital allocation, we maintain our returns-based framework, and we'll carefully evaluate all opportunities to drive shareholder return. In closing, let me reinforce 3 key points.

First, we operate a durable cash-generative model, supported by strong customer cohorts expanding ARPU and consistently high customer retention. We are ahead of the financial North Star target CAGR we laid out at our last Investor Day. Second, the near-term impact on bookings reflects deliberate decisions. The underlying engagement metrics remain strong. and the structural advantages of our integrated platform position us well for sustained growth.

Third, we are executing from a position of financial strength. We are expanding margins, generating robust compounding free cash flow with a strong balance sheet that creates long-term value for shareholders. We look forward to talking about these and other updates at an investor event later this year. With that, I'll turn it back to Christie for Q&A.

[Operator Instructions] Our first question comes from the line of Vik Kesavabhotla from Baird.

My first one is on this promotional offer with dot-com. Can you talk more about why you decided to make that change in your go-to-market strategy? And you referenced seeing some improvements in February. Could you talk more about what you're seeing there. And I guess from a higher level, do you think this was a onetime headwind to bookings in 2026? Or is there a potential for this change in the strategy to weigh on bookings as we move beyond this year?

And then my second question is on AI costs. As you look at the user behavior recently as well as your product road map that you have planned ahead, how would you characterize your visibility into AI costs at this stage? And how should investors think about the impact to your gross and EBITDA margins as the product evolves.

Thanks, Vik [indiscernible]. Let me take the go-to-market. I'll turn it to Mark for the 2026 comment, and then I'll come back for the AI cost structure. So the go-to-market evolution is really about opening up the top of the funnel and is attracting a lot more high-intent customers.

And it's more than just an offer. It's a path and optimized path that allows customers to come in and convert at a much, much higher rate. So there are 3 core components to it. There's the new path, the optimized path, the offer and the marketing channels that we enable to sort of drive traffic into it. Overall, we're very happy with the results. It attracted a lot of new customers. It was a bit more successful than we thought.

So Mark can talk again. some of the financial impact of it. But the improvement that you asked about in February is us optimizing that path and the marketing channels and making sure that we're sort of routing customers to the right places.

So that everyone isn't just going into the offer or into a 1-year term, and then we get sort of back to the more expanded view. The other area that we're continuing to work is that these customers, these new cohorts that bought with the offer, they had really good attach rates comparable to our sort of 1 year -- other 1-year cohort. But we think we can do more there.

We think we can attach better than what we did over the last couple of months. And as that gets better and better, it means more and more lifetime value.

I'll turn to Mark.

Yes, absolutely, Vikram. A couple of things going on here. Number one, the -- let's look at it from the multiyear terms to the annual terms. This is impacting our bookings, but has relatively little impact on revenue itself because the timing of the revenue recognition stays consistent. So that's 1 aspect of it.

The other is there is a reduction in our average order size at initiation related to the discount that gets allocated amongst all the products, that does have a little bit of impact on revenue in and itself. As time goes on, volume picks up, we get better at the softer.

We think the major impact is going to be at the end of this year and going into Q1, but we expect that bookings to be in parity for the most part with revenue by the time we get to the end of the year. So we are looking at this as a cumulative improvement as the year goes on.

On the AI costs, I'll start, maybe and you can finish. We're very disciplined on the AI cost end of it. We look at where we're spending the money and where we have proof points so that we'll see the return of those monies, whether that's in the innovation cycle or in the product cycle in and of itself. So we feel very good about our visibility and our ability to hit our margins that we set out there for 2026.

Yes. And I think we've been ahead on the margin over the last 2-plus years, right? And it's because we have a disciplined process internally on it. And even as we look to invest in AI over the AI products, as we talked today, we have a couple of exciting product launches powered by AI all of those sort of followed 2 core things.

One, all the AI costs go through 1 interface so that we are able to stay on top of it very, very closely. It doesn't matter if that's a developer. It doesn't matter if it's one of the products that our customers are using. And two, we are very focused on solving for the objective function where we create products that are at a cost that works for our customers.

So what you'll continually see in our products is an already optimized AI solution that then leads to lower cost than what you might see at some other companies. So those 2 things together, the visibility and the operational focus on it and the technological difference of just optimizing for that right within the product is what gives us confidence that we can continue to maintain the margin guidance that Mark has talked about while continuing to fund more and more use of AI, both within the company and with our products.

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

One question that we've been getting in our inbox on this new go-to-market change, was it necessitated by any changes you saw in your pre-existing pipeline, whether it was just pipeline build, conversion? Or is this just really you guys kind of trying to open the funnel a little bit and pursuing a different customer type.

I think, Ken, both things are true. The world is changing very, very quickly, and I don't think anyone is insulated from it. The idea was to improve our go-to-market approach to expand that approach, but we sort of conscious of what's changing in the world. When I think about the key metrics that we look at we're looking at traffic. We're looking at conversion.

We're looking at attach. We're looking at product activation and we're looking at renewals. And we're very, very strong across those metrics, right? We have strong experimentation muscle in the company that if I go backwards, puts a lot of attention on renewals and activation on attach and conversion. But expanding the top of the funnel in a fast-changing world, gives us more levers as things evolve.

As an example, I think a lot of companies are facing challenges of traffic from search. When you look at GoDaddy, we continue to have a healthy graphic funnel because, one, we're able to go into other channels to drive traffic and two, we're constantly able to improve conversion as we do that. So we're constantly looking at those 5 things in the context of what's happening in the world.

Yes. our strategy around attracting high-intent customers hasn't changed. We are seeing these customers come in. They're attaching to a second product, similar to other 1-year terms that we had out there. And that gives us a lot more stickiness within that client base that we feel we have the ability to go after.

The great news was the offer me a demand cycle that was higher than we expected, and we were able to bring those customers in. So it was a good thing.

Fantastic. Really appreciate the insights there. And then, Mark, just some clarity on the bookings commentary. So you mentioned lagging in Q1 relative to revenue. Revenue is fairly consistent from 1Q to 4Q and if it ends up at parity for the year, is it fair to assume that the bookings should outpace revenue as we exit the year? Is that the right interpretation of some of those moving pieces? .

Yes, that's right, Ken. We expect to see that the bookings will get stronger throughout the year. on a couple of different elements, right? One, we start to add more volume based on this offer. So we're seeing the increase in that.

We're also starting to see better attach and the elements that drive our long-term valuation model. So that should improve through the year, and you're looking at it correctly.

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

Great. So Mark, you said that there was a little bit of a reduction in AOS in this GTM, the new go-to-market, which had some impact on revenue. So is that then fair for me to say that the trade-off between volume versus the average order sizes, you're getting more volume but not necessarily making up in revenue in year 1.

And then what gives you the confidence that this new streamline experience is then the right trade-off for a higher LTV?

Yes. And Naved, thanks for the question. Just to start, is the shift in terms that we called out, it impacts bookings, right, and not necessarily impacts revenue because of the timing of revenue is pretty consistent regardless of whether -- when you get the cash upfront. There is a slight impact on the AOS, like you mentioned, that will impact us going forward, but that should work itself out as we get to the more volumes and the higher attach that we talked about.

Yes. And overall, Naved, what gives us confidence about the long term, of course, we'll really know when they renew, right? But we have a number of markers along the way in terms of how customers attach post purchase what do they buy in the purchase and how they activate products. And those are the data points that we're looking at. And across those data points, when they look very similar to other customers, right? We know exactly sort of what we have to tweak or make work to get these customers to be just as part of the high intent cost -- the bundle of high-intent customers we have, right? So those are the metrics we are looking at.

These customers look very good to us. We think we can do a lot more and actually get the best of both worlds where we get a lot more new customers and we get them to renew at good rates as well.

And then maybe just to kind of build on that. So are you also experimenting with the LLM for customer acquisition? What are you doing on that front?

Yes. So part of what we did with this chain is when I talked about the optimized path, it allowed LMs to review some of our merchandising inflows much better. That's going to be an ongoing work stream. We expect that, that will continue to evolve over time, the LLM don't switch all of a sudden. But by giving them a clearer path through GoDaddy, we think over time, that will help us as well. But right now, we're not sort of baking any of that in. We want to provide this sort of consistent optimized experience to our customers and the LLM should pick it up over time.

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

Just maybe a follow-up on the underlying ANC bookings growth, which is a slight decel in fourth quarter. Can you just maybe differentiate between pricing and bundling versus perhaps GPV impact that you saw on ANC bookings growth. .

And then my second question is around KPIs with Airo.ai, beta test. Just hoping you could maybe share some there and perhaps relative ARPU that you're seeing. And then when do you expect to formally GA Airo.ai for websites, plus marketing managed work for us and application development. And could that perhaps bring some incrementality to ANC bookings growth this year?

Yes. Thanks, Mark. I'll take the first part. On the ANC growth, Think about it this way. We offer the discount there. to the discount was specific to the domain because a large amount of the initial orders also contain product attached that are in the ANC, we have to allocate that discount to both ANC product as well as the domain. So what you're seeing in Q4 bookings as a lot of that taking place, and that's the large contributor to where we ended up for bookings in ANC.

And in terms of Airo.ai, taking that to GA and having the new website to marketing, website builder within it as well. you're actually going to start seeing the product come in very, very quickly, just so you'll see a change, I think, earlier next week in terms of the website builder. And you'll see it evolve a little bit after that. In terms of GA, we're just waiting to get some data in terms of product market fit. We just want to ramp the traffic to a certain amount organically before we call it general release and start driving traffic externally as well. sorry, to the last part, you asked about incrementality.

I don't know I can quickly take that market. We haven't built that much for sort of erode obviously, it's all completely new. It went into beta just very, very late last year. But any sort of wins with the new website builder or with Aero.AI would be incremental to what Mark is guiding.

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

First one, just on active customers. Second quarter in a row here with modest sequential growth, but still trending down year-on-year. As we look into '26, should we expect momentum to build here? And will this be the year in which year-on-year growth turns positive? Is this an important metric in your view? And with the 1-year domain promo be a tailwind to that -- that's my first question.

Yes. Trevor, thanks. And yes, we saw a sequential growth in the customers quarter-over-quarter. We continue to like our ability to attract high intent customers and our strategy around that hasn't changed.

We're really going after the high intent customer. the customer that's going to get us to annually spending around $500 with us because that's when that second product and third product get attached.

That's when we get to that near perfect retention rate. So while we're very happy with our progress on adding customers and being positive and doing that incrementally, our goal remains the same. We want the high intent customer.

And it does -- the new sort of expanded go-to-market approach does become a tailwind. But just again, I always want to reiterate, we're optimizing it for that high-intent customers so that we're getting the attacking the long life the larger lifetime value.

That makes sense. And then, Mark, in your prepared remarks, I think you noted bookings were impacted by shorter initial contract terms. Was that specific to core platform and the new 1-year domain dynamic? Or is that more broadly that you're seeing shorter contract commitments for other products?

It has a flow-over effect into our other attached products because what happens is the domain signed on for 1 year generally, the attached products are going to be signed on for 1 year as well. So there is a little bit of a carryover effect to our other products that are included in the initial order size as well in the initial order that the customer makes.

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

This is Ella on for Alex Google. Maybe first for Aman. Aman, you alluded to this in your prepared remarks. Given GoDaddy was founded over 30 years ago and has drove the proprietary data, what advantage might this provide you versus newer entrants in the ecosystem?

Yes. Our competitive advantage is, of course, start with our brand. It started with our domains funnel, the scale of our platform and the data we have about interaction with our customers, whether it's like $1.7 billion, almost 2 billion data points selected on a daily basis, all the way from interaction on the site to customers calling and chat transcripts and all of that. And we have that data globally. So a ton of that data is available for us to tune agents to get agents to perform sort of in news way down to the customer agreement.

That, of course, is one of the amazing value that AI brings is that when companies are no longer looking at segments of customers you're looking down to this customer, what do they need and AI can part to the data for that customer and provide them with sort of valuable insight or whatever next best action they should be doing.

When I think about GoDaddy, our -- why -- our focus is to move towards a agentic to be AI native to build products that are AI first and other companies that may have started there have to get to all the things that we have. right? And we're excited about the position we have and to get to the new space where we're able to adopt AI, and we're able to build these products and use the rest of our competitive advantages.

There is no doubt that GoDaddy is starting in a great position. And AI is the type of technology that it actually is easy to bring into a company like GoDaddy given the capabilities we already have. At the end of the day, what we are bringing forward to the world is and is demonstrated by Airo.ai, is that experience and it's an AI chat-based experience on Aero.ai that brings all the capabilities to the customer, where the customer doesn't have to go to web page after web page or call in or chat to do various things. They can do it all in one place and GoDaddy brings them all those services right there.

And it doesn't even have to be the things that GoDaddy builds alone. We're bringing our partnerships into Airo.ai as well. And it's actually much easier to integrate a partner into Airo.ai than it is to integrate into the funnels because just it's the interaction models could be different.

Very clear. And for a follow-up, could you quantify how much of your customer care and cogeneration is AI-driven versus employee-driven today? And how do you anticipate that evolving over time?

Yes. So I shared a little bit. Majority of our code is now AI-driven, AI-generated. We had set a target out that I talked about the 70% of the code. The world is moving so quickly that the algorithm we have, it's like majority -- like large majority well core bases are now AI driven. That metric is sort of becoming less relevant now because what you're finding is that 1 engineer can have a team of 5 agents that are all developing.

And the way we used to think about coding, it's not the same way anymore. So I would just say, we are well down the path of AI generating all of our code. The next evolution is agents creating code. And along with agents creating code agents automating the software development life cycle and then the product development life cycle.

Those are the areas where we're going into, as an exam, a new website builder that we showed you a little slip of that brings together a very powerful editor and a very powerful AI-based chat bot. That's based on learnings we got from the AI builder we have built.

And it has been built very, very quickly and well ahead of our expectation. I mean one of the reasons we're talking about it today in a manner that, hey, this is coming, and it's going to be a big change for websites plus marketing. I think if you had asked me 3 months ago, I would have thought about it later in the year, but it's actually coming up ahead of a lot of other things, like we have pricing and bundling initiatives that are going to have to wait because this new AI-based website builder is just ready to go. So we're going to launch it and get it going.

Our next question comes from the line of John Byun on for Brent Thill at Jefferies.

Just 2 questions. On the ANC, there was a question earlier on some of the deceleration. Obviously, you have seen it go from mid-teens to low teens the last few quarters. Understand that there's a little bit of impact from the domain promo.

But is this kind of like what should be the new level that we should expect given the scale that you're at now in terms of kind of low teens growth or could we potentially see some acceleration as this top of funnel go-to-market get settled in?

John. A couple of things to call out. We talked about the fourth quarter and the impact that had on the new offering that we had out there. But as Aman mentioned a few minutes ago, we are also rolling out the upgraded websites and marketing experience, right?

And we are not assuming any contribution from pricing and bundling related to the websites as we go through this transition. After that, we'll obviously see on the other side, how we continue with the momentum going into 2027.

But those are really the -- what's impacting the ANC growth, not only coming out of this year but going into next year.

Okay. Great. And this might be related, but any update on the pricing and bundling test that you usually discuss in a quarter? That's a [indiscernible].

We continue to execute well on pricing and bundling. Interestingly, one of the things for 20 I'll give a couple of examples. One is our managed hosting for WordPress doing very well for 2026. You might remember a couple of years ago, we invested heavily built a new platform sort of expand it to reach a little bit bigger customer. And now we're seeing good growth in units, with good growth in bookings on that product.

So the new pricing, new bundle that's coming out. And maybe the other one I'll mention is that the LLC formation bundle is growing. We're still mostly cross-selling it within Aero. That's where a majority of that is coming. But very soon, you will see some bundles around that as well. So we're pretty excited about that one, too.

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

Just maybe going back to the go-to-market changes. And I'm trying to maybe [indiscernible] in with the broader competitive dynamics because obviously, we've seen the new entrants in the space come in over the last year. So I'm curious, just as you looked at your old funnel, was there anything that sort of was indicating that the competitive intensity was increasing, especially from some of the big coating players out there.

And man, I think you touched on the moat there a little bit, but I'm curious how the new motion will maybe help you sort of defend against some of the competitors that are coming into the space?

When I look at the competitors in the AI space, we still continue to see a lot of that focus being on enterprise employees, like product managers, people that work within enterprises or people that are a little bit sort of working for agencies or companies like that. We see less of that behavior with our direct customer, the person who is the roof or the clean out of the micro business owner. So we see less of that. Our expansion of go-to-market is really about being able to bring more high-intent customers into the domains funnel, which is our largest funnel and then attached to it very well.

Like that is the primary motion at our company, and we want to continue to reinforce that more and more. I'm not suggesting that we are immune to what's happening in the world, we just have not seen very large impact of that in our funnel at or at this time.

Okay. Understood. That's very helpful. And then just one thing. I know you mentioned that just in the forecast for 2026, Airo.ai is not contemplated. But if you are able to sort of get it to be generally available shortly here. Is there a potential upside? Like could it have an impact in a handful of months? Or how do you think about the ramp once it's out and generally available?

Yes. I'll take it first, and Mark can comment on it again. Overall, it's very similar to how I talk about the go-to-market approach. Airo.ai has to find product market fit the same way. It has to be about traffic. It has to be a conversion. It has to be able to attach activation of the product and then some renewal.

Of course, renewal goes back -- goes back a bit, but the other 4 were able to see pretty quickly. Now it's still early. We're getting what is relatively still, I would say, a smaller amount of traffic given the large amount of traffic we get at godaddy.com, in that small traffic, the metrics look good, but you don't really know the metrics until you get to a certain scale.

So that's what we'd like to get to. And when I talk to Martin, my view is, let's get to that minimum threshold of scale where we can see all these metrics perform and then it makes more sense to include in the financials.

That's right. Now we haven't included any contribution from it this year. While we're seeing monetization relatively small compared to our size. So without including it, yes, any progress we would make on that would be upside. Having said that, we'll keep updating everybody as we go throughout the year to what we're seeing, what are those metrics and how we think it will impact us going into the future.

Our next question comes from the line of Jamesmichael Sherman-Lewis from Citi.

Two if I may. You noted Airo drove a nearly 30% lift in product attach. So what offerings are seeing the greatest uptick? And how is the typical path different for an acquired Airo customer versus other cohorts? And then I have a follow-up.

Yes. Aero as an experience really goes to being a vehicle that attaches mostly to the domain customer. And over the last couple of years, as a result, we saw higher attach, higher average order size. And a couple of years into the aero cohort, we can tell you with high confidence as we see very good renewal. I think Mark, good in his remarks, customer retention continues to improve in a nice way, and those are cohorts are performing for us. The products that are attached to the most over the last couple of years had been -- like the biggest product catch was still websites and then e-mail. But now more recently, we see some of the new products, for example, the LLC formation starting to attach well, too.

Helpful. And then on ANS, I understood it's early days, but how has feedback been from partners in the developer community? Could you revisit the broader opportunity and how you'll drive adoption with modernization similar to domain registration.

On Asian -- did I hear on ANS, just to clarify?

Yes, ANS.

Yes, we continue to work with a number of companies on ANS, Super excited to have the integration with MuleSoft, which is a sales force company. But there's a lot more to do. Agent name services, it's a simple scalable, very elegant solution to what I believe is going to be a very large problem world, which is how do we know who owns what agents and how do we trust those agents.

And ANS solves that problem using the DNS infrastructure that the Internet already relies on. So we do see some sort of good reactions from folks that understand, but just like when the Internet came along, it took a little while for D&S to work for people to realize that it really powered it.

I think we're committed to that same level of effort to go and sort of explain to people why this is the easiest way to do it across the world. And why it has so many benefits for the open Internet for everyone.

Our next question comes from the line of Kishan Patel on for Brad Erickson.

This is Kish Patel on for Josh Beck. Just one from us. How are you thinking about the long-term monetization model for genetic experiences? And what factors would lead you toward subscription, usage, outcome-based or high approach?

Yes. We have an opportunity to think about this a lot. We continue to lean towards the hybrid approach where there is an upfront subscription model that it unlocks a certain number of credits, and there is a model to add credits.

You'll see some of that come into Airo.ai, especially with our Airobuilder, but we're just going to roll those things out slowly. We want to be able to have one monetization path, which we already have for subscription, and then we'll add more layers to it.

Our next question comes from the line of Katie Kaiser on for Elizabeth quarter at Morgan Stanley.

Awesome. This is Katie on for Elizabeth. A bit of a higher-level question, maybe a 2-parter. Mark, we've heard you talk about kind of what the SMB wallet looks like in the past, how GoDaddy's ARPUs are positioned within that you guys are delivering a high caliber of innovation that should enable that broader wallet share capture to move up over time.

I guess how are you thinking about levels that this can ultimately inflect to can the entirety of the customer base kind of reach that a sweet spot. And I think also I'd heard you speak to a bit of green shoots of Aero.ai bringing a bit of a different customer persona onto the funnel, one that's a bit more sophisticated. So are there any kind of structural differences you're thinking about in capturing wallet share of those 2 groups, that would be great.

Yes. Let me touch on those pieces and Mark can fill in whatever I miss. So just starting with the first, on Aero. AI, we see completely different interaction model customers not only do the chat base, they really go after the suggestions that come back from the we're seeing, as an example, in Airo.ai through a partnership, we've introduced customers being able to create a privacy policy or an end user license agreement.

And customers are finding that and buying it. And it's not something that we even sell on the website today. And if we had to sell it on the website today, it would be a very complex thing to add to the current path. The the testing required. We introduced that in adding that friction, but taking friction out somewhere else, be pretty complicated.

But within this chat interface, it has fit seamlessly. And so when we see -- when we get learnings like that, it really is sort of opening up our mind on what is truly the one-stop shop and how broad that one-stop shop can be because it's really, really low friction for the customer.

I think on the wallet side, and I'm sure Mark wants to jump in on this and customers reaching $500. Are customers have continued to grow with us, right? You've seen the improvement in ARPU over the last few years. And of course, we want more and more of these customers like Mark said, they have great attach rates on second and third products. They have new perfect retention rates.

And ultimately, it demonstrates a customer that's not just successful with GoDaddy, they're successful in their venture. So obviously, we want more and more of those. And that's why our go-to-market continues to focus on high-intent customers because those are folks that have the best chance to get there.

And I think that's right. We've often talked about the durability of the model, the fact that we get high intent customers our ability to attach when they get to the second and third product where retention rates go to new or perfect the drive LTV ultimately drives the compounding free cash flow that we generate year after year. .

And we believe our ability to cross-sell into that customer base because we focus on the micro business is stronger and getting stronger as we introduce these new products as we introduce these new agents. So we feel really good about our progress moving forward and our ability to continue to look at that $500-plus customer.

Yes. And just the strong retention just drives the lifetime value at the end of the day. We make obviously, a lot more money when customers stay with us over the long term, and that's the magic of the model.

That concludes our Q&A. I'll hand it back to you for closing marks. .

Well, I'll just say thank you, everyone, for joining, and a big thank you, as always, to all GoDaddy employees. A lot of exciting stuff coming out from products and marketing across the board, a lot on our AI journey and a lot more in front of us, excited for 2026.

Good morning, everyone. My name is Trevor Young. I'm one of the Internet analyst here at Barclays. I am pleased to be hosting the GoDaddy team, Mark McCaffrey, CFO; Christie Masoner, VP of Investor Relations. Thanks for joining us. I think this is at least 3 or 4 years in a row now. So I appreciate the continued support.

That's right. And I always like coming back because this was my first conference that I attended, when I joined GoDaddy. So it's like an anniversary for me when I'm back up...

First and best conference.

That's right.

That's right. We'll go ahead and get started. Obviously, being a tech conference we have to hit on AI first and foremost.

I would be disappointed if we did.

Well, lots of new AI product initiatives come together recently. Let's start with Airo.ai. It's a new surface that you recently launched. It's in beta right now. highlights some of the new Agentic AI product suite that you've rolled out, I think, over the last month or so in the it's coming -- what can you share on early engagement with some of these new tools? Do any of the features stand out more than any of the others? And are new to GoDaddy customers engaging more or less with this surface?

Yes. So we have just launched it, and we haven't put any efforts around driving traffic. So what we're seeing now is people are naturally coming to Airo.ai. And what we love about it is, hey, we built some agenda agents that are sitting in there helping our -- meet our customer needs. And in each of the cases, we're seeing that we are meeting our customers exactly where they are and where their needs are. So for an example, we have a version of it that is for the sole entrepreneur, who just wants everything up and running instantly. They will see when they type in what they are looking to do, that created almost instantly for them.

Now you may have a handyman who's trying to do a business wants to do bookings, wants to create things as they go, want to play with the agent a little bit more interact with the agent, we have the ability to do that as well. So they can see how this is being developed, how their businesses are getting developed, what are the important aspects of it? Do they need a booking calendar? How are they going to charge for certain services the Airo.ai brings that to them very seamlessly and allows them to get up and running very quickly.

And then you have the ability to meet the pro, right? The pro is going to have a whole different requirement. They're going to need a statement of work. They're going to need a business plan. They're going to want to engage with their customers at a different level. And in each case, in Airo.ai, it allows them to move depending on what that customer needs are to get them to the outcome they need to go very, very quickly, very seamlessly. I come back to -- and I always talk about the entrepreneurs wheel still is our major focus.

What are the jobs to be done by our customers and how do we provide that to them in a manner that they may not know where they want to do or what they want to do or where they want to go, but it presented to them so they can get up and running and do what they do even better. Remember, we're micro businesses, mom-and-pop shops. They're not sitting there going, I want to code. They're not sitting there going, I want to create this elaborate functionality if they want to sell soap at a flea market, they want to get there fast, and they want to be able to announce it online, and that's what we provide -- that's the service we provide.

And that Airo.ai is a new surface for us to engage with these customers and have rapid experimentation and deployment of additional agents. When we did our initial launch right before earnings, there was 5 agents that we launched. And now there's more than 2 dozen agents that are rapidly being deployed. And with this new surface, what we're able to do is understand the usage patterns of customers.

What is the conversion? How are -- how is the orchestration of all of these agents working together to deliver like Mark was saying, these jobs to be done for our customers that help them have a fulsome experience business in a box solution.

Got it. And it sounds like -- so kind of 3 key takes there. One, new surface with rapid experimentation and expansion of kind of use cases. Two, continued innovation and going from 5 agents to 2 dozen and presumably more to come. And then the third piece being really being outcome-driven. That was something that I think I heard you hammer on, but it's not, hey, let's build new tools and find a use case. It's more let's solve a problem for that customer.

And that is -- listen, we've said this time and time again. We've had AI out in the market for almost 2 years -- I think it's about 2 years now. Our continued focus is how to use the AI to get the jobs to be done by our customer done. And that's what we focus on.

Got it. And obviously, with this just being in market roughly a month. It's obviously just the start in terms of the breadth of agents that will become available. What are some of the improvements that the team is building in the feature set? What are maybe some of the pain points that you're trying to solve for those SMB customers?

Yes. So I think this -- right now, we're very focused and it's a concept that we've started to speak about in the open Internet and ANS right? And if you think about how the Internet operates today on a DNS infrastructure, the evolution of the Internet now will go to ANS, agent named services, right? Agents have to be registered, they have to be validated, and they have to be basically marked as a good actor for lack of a better term.

As agents start to get introduced into that environment, the improvements will come with the ability to operate and collaborate with agents outside the existing environment. So for example, while we do a lot of jobs to be done for our customers in certain aspects, there are certain jobs to be done that we don't do. For example, we do not prepare their tax returns.

Think about a world now that will take one of our agents and go reach out to an agent outside of our platform to get that job to be done with our customer and be able to do that in an efficient manner that our customers, this micro business, doesn't even see that happening. That's where the next improvements will start to happen is our ability to operate with other agents outside of our platform and technology. So that job now is being done in collaboration with somebody else.

I think it's just that orchestration of what Mark was saying is these jobs to be done by micro small businesses. They have a lot of needs in having that simple, seamless solution that is frictionless to be able to carry out the tasks that they need to do, not only to get started and build their website, but also run their business and grow their business. And converse with their customers and market to their customers, to social media.

So all of these things sort of work together to -- and instead of saying like pain points is that more of that less experience and carrying out those jobs to be done for customers.

That makes a lot of sense. And you outlined kind of 3 distinct use cases when folks go to Airo.ai can you help investors understand the differences between these 3 experiences? And in particular, how does the customer find themselves pushed into one funnel versus another when maybe they don't know what they need.

Yes. I think that's the key is customers coming in, engaging and then ultimately, seeing what they want and how they interact. So it is an experiment phase. And I will say we are trying different approaches as to how we identify each of those types of customers.

Right now, as they come in based on the prompt that is there and what the input will direct it to the experience they will get because it will immediately say, okay, I'm a pro. I need a project plan to present to my client that is a bigger. And immediately, it will identify that person as a pro. Chances are it will go into a managed work press type of environment. It's a more complex environment, managed WordPress. It had a lot of plug-ins that creates a -- has a certain requirement within Airo.ai versus, hey, I'm a handyman, I want to start a business, then it will start to give you prompts and based on how you start to interact with it, it will say, okay, here's where I'm going out.

Now remember those agents maybe have to pull a map from another platform and bring it in. But you'll see the ability for it to do it, you'll also see, and it's really fun to watch. The agent sometimes has to go somewhere and where it's going isn't available. It will come back and say, I can't get that right now, right? We'll try again later. Where I'm going to go off and do this while I'm trying to do that. The agent actually starts to interact with that person because it realizes the way they are instructing it that they have the ability to kind of work within that type of framework.

And further to that point, too, one of the things that is identifying in those -- as the agent is orchestrating those tasks is it looks like you as the end user is getting stuck. Let's build human in the loop, and let's get care immediately involved in this and help you continue to build out this the solution for you and carry out the things that you're trying to get done and how can we do that better for you.

And think about it, the technology creates active links for you sometimes you'll hit on that link. It may not work. You can type in right away. This link isn't working, what's the problem. It will go in and diagnose the problem. And it will come back, okay, we need to do this are you okay with -- and you have that interaction going back and forth. But it's a very seamless kind of natural interaction versus having to understand how to set up a link on a website to get to where you need it going, it's taking care of it for you.

Right? So it solves a lot of problems for the laymen?

Yes, that's right. And that's why I always come back to it works in our customer base because that is our customer base, the micro business and the entrepreneur -- they're not necessarily the program or the technician that understands how to do that, how to fix a link or how to move forward very quickly.

And further to that point, too, it's what's embedded into this experience to is what is the next best action that these micro small businesses need to do. And so micro small businesses, we all can know and understand that they often don't know what they don't know.

So when we say this is the next thing that you as this particular vertical in this type of community, this is the next thing you should do. You should, like Mark was saying, should build a map showing your service area. You should have some social media tools and let us help you draft a log or a host and let's help drive traffic to your site. So having those next best actions get them there sooner.

And prompting that for them because they don't know. Got it.

How should we think about monetization of this? I realize it's very early days, probably a lot of experimentation going on. But how should we think about that, the types of paywalls that you could introduce -- and how should we measure success from here from a financial perspective, the P&L impact maybe a year or 2 from now?

Yes. So I'm going to take you back a little bit and then you can kind of get an idea of where this is heading. We've been in market with AI now for 2 years. And 2 years ago, when we launched Airo, we said this was going to filter through in our model in a number of ways. We're going to see better attach. We're going to see average order size going up. We're going to have customers coming in with higher intent.

We're going to see the cohort around $500 plus start to increase over time. And those will filter through our P&L. Now remember, and I remiss if I don't say we focus on free cash flow, and we focus on free cash flow per share. Those are North Star, and we continue to operate our model in that manner. And you're starting to see that show up within our model today after we launched Airo.ai -- sorry, Airo for the first time. Now as we're launching Airo.ai, we have the ability to look at what's happened in the past couple of years. what's worked to see where the premium services are attractive, see where the subscriptions and premium subscriptions we can put into play. We know how the paywalls work within that environment. We know when to put that paywall in that a customer wants to launch something or put something out there or publish it.

We know what the cost around providing that services to our customers because we've had the experience with the LLM, we also know that we don't have to build solutions for perfection we can build solutions that get our customers' jobs done, and we can build that into our model naturally. So more to come, obviously, as we talk about how this over evolves. But when you look at what we've done, we're building on the 2 years of history we have around launching AI into the marketplace and meeting our customers' needs and now evolving that to be even better as we go forward.

And I think the good way to think about it, too, is Airo itself has both an indirect monetization like Mark described, average order size up, better retention, better renewals. And then there's that direct monetization path that is essentially where does the right place to put those paywalls and where do we pay or have our customers enter into maybe higher tiers of service for enhanced services like Mark was talking about.

Got it. You've also launched agent name service, which is a totally different offering from Airo.ai. Just at a high level, can you walk us through how it works and the problems that this is going to solve. And what kinds of new opportunities this could open up and maybe just illustrate an example.

So this is the belief in the open Internet. We have built the opening -- well, I shouldn't say we built it, but we have contributed to the building of the open Internet, which now works on DNS, right? It's the technology and think about it when you go somewhere on the Internet, you want to know that the name you're typing in the domain name you're typing in that's taking you there is valid and taking you to the right place when you're giving over your information, you want to make sure you're giving it in a secure site. That's how people operate today. Now think about this from a world of agents. People will no longer be doing these tasks. Agents will be doing these tasks for you.

That infrastructure that exists for DNS now evolves into what we call ANS, right? In other words, an agent -- we'll go to an agent to perform a task, but you want to make sure that the information that's being passed between those 2 agents is correct. You're giving that over into a secure environment, you're not giving your social security number over to something that is not a or a rogue agent or something along those lines. So how does that work, right?

It works similar to how a domain works. So you today register domain, you pay an annual fee for it. That becomes your valid domain and everything around that domain that you build on the domain to get sent to you and it's authenticated. Now that will happen with ANS, right? You will register an agent. This agent is yours. It will be validated. You will own that agent, and that agent will do that task that you define on top of that the technology of the agent.

So when you know your agents reaching out to do that task, it's going to a secure environment. that infrastructure already exists today. It was built under DNS. This is the extension of that. And we believe the open Internet is going to be what evolves or what agents evolve into is operating on the open Internet. We gave a demo last week. We don't do jingles just so everybody understands this.

We do not create jingles for our customers is not a job to be done that we've identified. But we did a demo that shows our agent when our customer wanted to jingle on their website, went out to another agent that created jingle that is outside of our platform got that jingle created, brought it back in and put it up on the website for our customer.

That agent had to know that, that agent it was going to was registered and authenticated and a good actor that actually was there to perform that task versus just being somebody who's going to take the information right of it all. So that's why we say the open Internet will evolve into ANS, but it's a natural progression of moving from DNS to ANS. And obviously, we are a very big player in the DNS world. We already have the infrastructure in place to do this. That is not something that just happened overnight and someone just launched the infrastructure around the Internet in and of itself has been around for a while, but took a while to get in place right -- so leverage what's out there to establish a new standard for...

Eventually, yes, it is the proposal is the continuation of this open standards like we're talking about it. And so the monetization like Mark was alluding to, is the registration, those that are publishers of agents will want to register and have certificates of trust attached to those agents so that others know that these are agents that can be trusted and it gives a way for those agents to be discovered and to be utilized in this space.

And if you believe that agents are going to proliferate on the Internet, which we do, then there needs to be a trusted security system built into it. And that's sort of when DNS was established and adopted, that's when you saw the rapid commercialization of the Internet. We think that the same rapid innovation can happen in the agent space.

You have a standard.

And GoDaddy is obviously uniquely positioned here. Like Mark said, of course, we are a major player in CNS, but we also have certificate or status so that we can offer and the security layers for these agents also.

Yes. And we're -- to be clear, we're not saying that GoDaddy will own the Internet in any way, shape or form. This is an open standard. It will be -- everybody will be able to access it. Obviously, we feel we're in a good spot from an infrastructure standpoint to support that standard. And we do believe in the open Internet is the natural course of where everything will go.

That will be interesting to see how that evolves and see how adoption goes. Let's shift gears a little bit hit on customer trends and macro. You've now returned to positive customer growth sequentially this past quarter. What product areas or funnel changes contribute contributed most of that shift? And how much of that growth is tied to the rollout of Airo and your newer AI assisted onboarding flows?

Yes. So we feel really good about what we see in the demand funnel, and I've said this for a while. We've seen a consistent strong top of funnel. We've seen our strategy around getting to higher-intent customers working. We've seen the average order size go up, the $500-plus customers go up. We -- the great thing about it is every customer's journey within our platform is different. So we don't see -- it always comes in and goes domain to e-mail to website to transactions.

It can go different places. It can go domain to logo, to e-mail, to transaction -- every customer is taking a bit of a different journey. And as Airo is becoming more of the interaction or is the interaction today. Those interactions can happen almost instant it's up to the person engaging to go and make the choices very quickly what they want. And sometimes, they're right on top of each other.

When you think about an experience. I want an e-mail I want a website, I want to transact. It happens so fast within our environment now. It's almost impossible to say this is just the normal route. So we feel really good about some of the top of the funnel. We still have a great brand name in domains, which is a large part of the funnel and a lot of 60% of our traffic comes to us naturally.

And that is still a big, big part of it. We feel good about our -- that we're getting to higher-intent customers, which we had talked about being our strategy. We're feeling good that the attach rates are going up. We're feeling good that the retention now statistics we put out there at the end of Q3 is that when we get a customer to $500 plus, our retention of that customer is nearly perfect. And that is ultimately one to go. And that continued strength is evolving. Airo.ai will continue to evolve that journey.

Okay. And as we head into '26, what are you seeing in terms of the top of funnel trends in SMB demand signals in the U.S.? How would you kind of characterize the state of SMB right now?

Resilient and healthy and...

And they we survey our customers and we publish our survey work quarterly. And what the survey work tells us is that micro small businesses continue to be very optimistic about their business and their revenue prospects over the 6 months future from that survey point.

They are more optimistic about their business than they are about the overall economy, and that's what matters for our ability to service these customers when they continue to be more optimistic about their business and their prospects. That we are buying our products from us. That means they're using our products. They're out there hustling and trying to find new customers trying to find new revenue, and we're enabling them to those things with the simplified business and box solutions that here's your next back section that you should do. Let us help you build your marketing funnel, let us help you converse with your customers and convert more sales for you.

And we collect and share those stats with our customers, too, that they can learn how to market their business even better, right? So all of these things with what we find is that, again, micro-small businesses continue to be more optimistic about their prospects than the overall economy.

So they sound pretty resilient despite some uncertainty. Okay. That's right. And I can't emphasize enough. This is a customer group that also cherishes the care organization within GoDaddy because when they need help or they need to fix something, they want somebody who's going to be on their side that's going to try to get that solution.

We really pride ourselves in our care organization's ability to need that even using new technology being able to meet the needs of this customer base because they just want to do what they're passionate about. They don't want to worry about the back end. They want to be out there selling their products. They want to sell their products in many places as they can. They want to compete with the bigger players out there. They want to make sure their pipeline secured.

Our average customer base, maybe we have some customers that go up to 10 employees. On average, you're talking about maybe 2 or 3 and a whole bunch of them as sole entrepreneurs. And that passion is because that is a unique individual that wants to be out there selling and doing something on their own.

And GoDaddy is a true partner for them to be able to access like Mark was saying. sometimes they want someone to talk through their challenges.

That makes sense. Competitive dynamics, how should we think about the competitive set today, particularly given the emergence of a genetic coding tools, natural language interface, AI website build tools, live coating, how do you think about how competition is evolving here and how you stack up versus them?

Yes. Remember, we pride ourselves on being a one-stop shop. So we provide multiple solutions and provide multiple products that focus on our customer base and the jobs to be done by our customer base. They're competitive natures to every single 1 of our products out there from the domain to the payment processor. No doubt about it. Our view and our focus continues to be focus on our customer.

This is a unique customer set. We've been doing it for almost 30 years. We know this customer. It is a customer that has specific needs and therefore, our ability to create that platform in that one-stop shop for them works in our environment. We're not trying to look at what A or B or C are doing. We're looking at what our customer needs are, and we know if we continue to meet our customer needs. We will continue to be successful as a company and our model continues to work over the long term.

So just focus on that customer need work back from that rather than that's interesting tools and then find...

Yes. We're not trying to come up with tools and then define a use case. We know what the use cases are. We're trying to meet those needs of our customers.

That makes a lot of sense. On pricing and bundling, how is your appetite to flex that pricing lever? And as well as the overall pricing and bundling strategy overall. How has that evolved as some of these new AI-enabled competition pops up?

Does it matter? Do consumers have changing appetite to absorb price increases? Is it not even on their radar.

So the way we look at it is our average customer is going to spend anywhere between $1,000 to $2,000 being online. So we always say $1,500 is the average wallet size for a difficult customer for us being online. Our ARPU was around $230. We have a lot of room to move up, meeting our customer needs to get better share of that wallet.

And if we continue to provide value that continues to allow us to look at pricing and bundling where we can take some of that value back to us because our customers are getting more value out of the products that we are there. We -- our strategy and how we've designed all of this is around -- I always talk about everybody likes to go to [ P times Q ].

The [ Q ] for us is really better retention. More product attached to our existing customers and the new customers coming into the top of the funnel. Those are very important elements of how we drive the cut part of the equation, and the P has evolved from blood pricing to generally now, we do value-based pricing based on a cohort, the value they're getting out of it.

We try to keep those as equal contributors to our model, to our growth because we know when we balance that out, it not only sets us up well for today, but it sets us up well for the future. We pride ourselves that our North Star is free cash flow and free cash flow per share. And the way we compound that is by trying to keep balance of how we grow the business without getting too far ahead on either part of that because that can set that equation off in and of itself.

Got it. Before we run out of time, I want to make sure we hit on the kind of the cost side of the house. We did a lot on product as well as top line. As you continue to build out some of the new AI tools that we had talked about, where should we see the cost layering in most -- how do you think you're maybe differentiated on the cost side versus what we're seeing from some competitors that are signaling like higher inference cost is going to pressure margins. How does that impact GoDaddy?

So without getting into what our future model looks like, some things are not changing for us. We focused on normalized EBITDA, and we focus on expanding normalized EBITDA. We've done a great job over the past years of doing that. I think, what is it, like 1,000 basis points over the last 5 years. We've also created an environment where our normalized EBITDA converts to free cash flow on almost a 1:1 basis. Again, that was by design. And that thesis continues for us going forward.

And what it allows us to do is look at where we continue to get leverage in our model and then we continue to use that leverage to invest and in certain cases, return value to our shareholders. We feel we're a unique company. We have the ability to return significant value to our shareholders, which we've done through buybacks. But at the same time, use our profitability to reinvest in innovation to make sure we're meeting our customer needs.

And that is by design, and we feel very strongly that, that model continues to work in this environment. We continue to get better and more efficient. We continue to invest in innovation. We continue to be able to control both ends of the equation. We understand the cost structure because of how we've set up our consolidated technology stack, how we use the LOMs. And we understand where to put the payrolls for our customer base.

So we can balance the equation and continue to evaluate it up and down the line -- and our ability to focus on free cash flow as our North Star, everything else is a lever within that environment, right? And that's why we always come back to -- we will manage the free cash flow, make sure that we are compounding that, and then everything else works as a lever for us to be able to continue to do that.

And I will say, too, we have a structural data advantage, having 30 years of history and having, like Mark said, that simplify technology stack and getting 1.7 billion signals every single day from our customers and how they're using our products, engaging on our website, et cetera. So not every task has to go out to an LLM and this means that we can have that structural cost advantage to deliver solutions for our customers that matter for their specific use cases. in a way that is differentiated from maybe some new players that are built 100% on top of the whole line.

So it's very much within your control. Yes, yes. Since you mentioned free cash flow, a great way to segue into capital allocation. You've had a healthy amount of share repurchases year-to-date, particularly in the last quarter. with your strong balance sheet, continued strong free cash flow generation, how should we think about other uses of cash from here, M&A versus continued buybacks?

Our disciplined approach around this has remained unchanged. We still look at buybacks as a lever to return value to our shareholders. But we evaluate everything that's in front of us. We are very -- we have a very strong balance sheet, and that's by design. And we apply the same criteria that I've been talking about for years. If anything we look at from a capital allocation point of view, it has to be on strategy, it has to work within our financial model. It has to be integrated within our consolidated technology stack.

The issue we find sometimes is we've gotten so good at this internally that bar keeps going up to what we would look at for a potential M&A or something along those lines because we are doing this very, very efficiently internally today. So nothing to call out, but our approach and how we view it remains unchanged. And yes, a lot of things come across our plate, but it has to meet those criteria.

And we I always say we've launched these agentic agents that -- a lot of people have seen an Airo.ai. Now, we didn't hire anybody to do that. We did that internally through our own engineering core. we can do this. We feel really good about our ability to introduce the products that meet our customer needs using our own technology, our own history and our engineering talent within the existing environment today without having to really plug in any holes down the road.

Great. I see we are out of time. So we'll wrap it there. Thank you very much. I appreciate it.

That was great. Good to see you.

Let's get going, afternoon session. I'm Brad Erickson. I cover Internet here at RBC. Very pleased today to be joined by members of the management team from GoDaddy, straight from Phoenix, Arizona and the Bay Area, obviously. CFO, Mark McCaffrey, on the left; and Chief Business Officer, Gourav Pani. Thanks for being here. Nice to have you guys.

Thank you for having us.

Yes, of course, of course.

Great New York weather.

Of course. Yes. No, it's bonding, right? It's just like Phoenix or the Bay Area. Cool. Well, I got my usual laundry list of questions, and we want to talk product today. Really, really excited to have Gourav here. Not that you're not great.

I get it. I get it. He's popular.

Yes. Yes. No, it's really nice. Certainly, a lot to talk about in AI. And so you're kind of -- you're the hot commodity. Anyone who has questions, feel free to raise your hand, and we'll obviously try and elevate those as we go through.

But I guess to start, just high level, just kind of walk us through the pillars. You guys have a lot of a lot of announcements, frankly, along with AI, but you've got the product family within Airo, you've got Airo.ai. I want to talk about ANS a little bit. Just -- but on that three pillars of AI, kind of walk us through the high-level strategy, and then we'll kind of get into it from there.

Certainly. If you look at the three pillars, the first pillar is our AI pillar that is Airo, and that is consumer-facing. We started off with a generative AI approach in 2023, and now we have transformed it into an agentic approach.

And in that process, we've launched Airo.ai as a brand-new interface to acquire customers and actually simplify their onboarding and growth through agentic technology. So that's thing number one.

Pillar #2 is what we are doing internally within the company. And obviously, we've spent a lot of time educating people on the power of using AI. And the output there is, if you look, for example, any new platform that we've built in the last year, about 90% of that code is written by AI.

And then based on -- obviously, we're almost 30-year-old company, and we have a lot of legacy code. So if we look across the board at all the code written at GoDaddy, in October of this year, 46% of all code was written by AI. That includes legacy platforms over 13 years old that are being completely tested by AI. And AI is finding new patterns to validate test strategies that we've never done with people. So those are -- that's pillar #2.

And pillar #3 is what we are giving back to the tech platform and the community through ANS, which is agentic named service. It is how we champion the open Internet. What DNS did for websites, ANS is going to do for agents. And so that's been our three-pronged approach.

Got it. And so yes, let's start with the consumer side of it, obviously. Airo has been out for a couple of years now, right? And it's obviously morphed into the agentic landscape and all. But to date, what are you -- I guess, with your SMB customers and especially you're obviously always testing with everybody, where are you seeing kind of like the most value add and addressing something that was most underserved with those customers?

I would say that the most underserved segment is about to get supported within the next 2 weeks. And what we are going to release to market is a co-founder agent. And the purpose of the co-founder agent is to allow anybody to come and ask a question around a venture or business idea that they have.

And the co-founder agent goes and does market analysis, looks at the competitive lens for that business in the geography where the person wants to start their business, gives them pros and cons of starting the business, risks, pricing strategies, et cetera, and a whole -- creates an entire business plan for the individual.

And then what's interesting about that is for the aspects that GoDaddy can enable of the business plan like building an entire online presence, building a brand book, et cetera, all -- the agent will ask the person, "Would you like me to take care of some of these things for you?" And if you answer yes, that agent now delegates responsibility to a website agent, a domain agent, a logo agent, a bunch of aspects for commerce, et cetera, and just builds the business right there organically for the customer.

And I feel, that level of simplification where the customer actually doesn't need to even know what to call their brand, just have an idea in their mind and everything gets created for them; I believe that is the most underserved aspect, and we're about to serve it.

Yes. It's great because it's actually meeting now customers at a funnel level that we hadn't met them before. Before they even think about the idea, they just think about what they may want to do. And then the ideation becomes live almost instantaneously. So you talk about the health of the front of the funnel, this is really potentially a game changer for us.

Yes. Yes, absolutely. Maybe help us distinguish between that and Airo, right? Because I mean, Airo was a big leap forward, right, just in terms of automation and reducing some of that friction. This sounds like yet again, but where does Airo -- kind of as we think about what Airo was maybe a year ago or 18 months ago, where does that sit in the road map relative to this co-founder product?

So Airo, obviously, was an experience that helped customers attach to their core business. So it helped us with getting customers to purchase more units, spend more dollars with us, and it also increased the retention rate. So that was the core contribution of Airo.

Airo still continues to exist. But what we've built with the Agentic experience is to take Airo to a whole different level. We're still using elements of Airo, but this whole Agentic experience is bundled under Airo Plus. So customers don't actually have to understand each aspect of it as an individual SKU and figure out what they need to purchase. All they get is Airo Plus. And with it comes an assortment of agents that help them solve their jobs to be done.

And it's not just about taking care of a blank slate problem, which is what Airo solved for, just don't ever start with a blank screen, have something to go off of. This actually predicts what will set them up for success and builds out the entire experience.

And another thing that makes it different is unlike most other products in the market that are reliant heavily on just third-party LLMs, we have built a next best action model using our own data that actually gives customers an insight into what they should be doing next so that they don't have to think about 20 things to do. This is just the one thing they have to do next.

And as they go through the one step and the one step and the one step, we believe that type of an experience will take them further in their journey.

Yes. And what -- when you think about the customer acquisition of these products, how do you think about this relative to the main channel? Like what will the kind of usage characteristics look like, I think, customer LTV? Talk through that.

It's hard to tell what the LTV would be because we have to still collect more information on the types of customers we get. But what we have seen organically, the customers that are coming in are very different from the customers we have acquired before.

So godaddy.com will continue to acquire the customers that we have traditionally acquired. And Airo.ai seems to be acquiring a different cohort of customers. And I think that makes it highly incremental. For instance, we see -- when we look at the prompts that are coming into the App Builder product, which is one of the capabilities of Airo.ai, that audience is very sophisticated. We have also seen interesting things like...

What does that mean?

It is actually a more technical audience. It's not an audience that is a micro business audience that needs a drag-and-drop product. They're more than willing to engage with it.

For instance, we saw someone solve the problem of building an entire website in Arabic with right to left text. We didn't even know that was possible. And lo and behold, someone was using it. And so now we are optimizing for it to figure out how to build it the right way.

And we have an employee who speaks Egyptian Arabic, and she was pressure testing it. And she said it was actually -- it met her bar of what it would take to build a commerce site in Arabic for the Egyptian market. Now that's not a priority market, the possibilities are endless. So it just opens up a lot of doors.

Got it. Okay. So I mean, I guess then the question becomes how -- I mean, market size, right? We know how many SMBs are in the world. We know how many domains you have, 1/4 of the world. What do we think about the size of this opportunity if it's such a distinct customer?

Yes. So early stage, and we're -- we just launched this, and we're starting to see the interactions, which Gourav has talked to, which is great. But you use the word, this is all incremental to what we're doing on godaddy.com. If you think about Airo, it launched 2 years ago and the results it's now showing within our cohort.

And we talk about that cohort a lot, the customer paying $500 to us every year. And you see that the average order size is going up, you're seeing the attach is coming faster, you're seeing the retention almost your perfection at that level.

And now you think about this being launched into that environment and the incrementality that will provide on a long-term basis, obviously, we'll talk about as we get more information, but it only helps that analysis we always talked about. If you assume a domain is 1x and a customer goes from a domain to a website to an e-mail to commerce, that becomes 83x in that LTV equation. This is going to be incremental to that 83x.

Yes, yes. And I guess just where are we in this rollout? I get it, it's very new, and I'm asking you all sorts of leading questions.

It's exciting.

But talk us through what you can in terms of the road map. I don't want to steal any thunder from the dinner in 2 weeks.

Yes. We have the dinner in 2 weeks. Thanks for promoting it right now. I'll let you talk about the product a little bit, but we couldn't be more excited at -- we've launched it. We haven't put money behind driving traffic there, but yet we're seeing people come to it on their own and discover it.

So when we talk about the roadmap here, I think the only thing that is slowing us down is we have to focus on quality to make sure we're not overwhelming our customers. And Gourav, you can talk about that. But this is all out there. These agents are out there, they're in market, they are working.

We are doing this within our existing model today, where we're obviously generating a lot of free cash flow and growing the business, but it's all within the parameters, and yet we're able to introduce these agents into market now.

And how -- I mean, you said it's an incremental customer, kind of a distinct customer. You're not putting any marketing force behind it. Where are these folks coming from?

It's tough to tell. I think the two areas where we have mentioned there Airo.ai are social and through PR. So for whatever reason, we believe one of those two or both of them are working. Obviously, the #1 priority for us right now is not about just getting traffic, it's about creating a seamless experience for our customers.

Specifically, when we went live and announced it in our earnings statement on October 30, we had 6 agents live, 5 core functional agents and 1 orchestrator. And within -- in the 2.5 weeks since then, we have launched 5 more agents. And in the next 2 weeks, we'll launch 11 more agents. So roughly in 2 weeks' time, so effectively a month from when we first went live, we'd have 22 agents.

And every agent is essentially a job to be done for our customers. So it's an [ atomic ] unit of work that gets done end-to-end for small businesses.

Now that number 22 actually could be double. And there's a reason why it's not double. It's not because we can't build features fast enough. It's because we have raised the bar internally to say, there is no feature we're going to ship that doesn't have a seamless experience for our customers. We cannot ship our org chart. We can't ship products. We should be shipping entire experiences for customers.

And when we've done user studies, that's the feedback we get from customers, "Looks really polished. It's fantastic, but I wish it didn't make me think when I went from thing A to thing B." And so customer expectations on the cognitive load being lower is a priority for us.

And once we have that dialed in -- and obviously, we haven't dialed in for 22 agents. I think by investor dinner, you'll see a much bigger number than that. And once we get there, then we can actually think about investing behind marketing.

Got it. And funnel-wise, obviously, you always -- I mean, you have a structural advantage just objectively because of owning 1/4 of the world's domains. I mean, is that where you go after first? Or do you go broader than this? And we haven't -- no one's actually said the word vibe coding in the room quite yet. I think that's -- we're not sure if a good word or a bad word still or whatever. But yes, how do you think about that as you kind of bring it to market?

I mean we will solve problems for existing customers. So for example, there are customers who will have dated websites, and we can improve those using agents, agents are able to take a hint from an existing asset and create a whole new variant of it. That's one option.

The other one is obviously improving their social media presence and marketing, e-mail marketing, blogging, all of those capabilities, the blog agent is actually live already. So there's a lot of good value that we can create.

It's vital that we don't create what we call internally as AI slop. AI slop is just like churning out generic information that is thrown out by an LLM. What we have to do is to enrich that information with hints from our own data set.

So our data that we have collected over almost 3 decades actually helps us fine-tune the content that we will show to customers based on verticals. And so that is the main strategy that we're going to go after, is how do we think about verticalizing, how do we think about expanding these capabilities, but not going so fast that we have a drop-off in quality.

Talk about just the ability to customize the LLM because obviously, I think that's like a really important point here. You've spun this up fairly quickly, right? We were only talking about -- I mean, I remember talking to Aman just probably 2 years ago about initial usage of ChatGPT expanding to other models when Sam got fired and -- for the weekend and things like that.

So 2 years, we're here and you already have like the custom ready to go. How hard was that, right? What's the barrier there for others doing it?

Well, for starters, if you don't have the data, you simply cannot do it. And I think that's the biggest barrier. I'd say the advantage we have is the amount of information we have within our walls. And also, we've made it very easily accessible within our walls. So it's one thing to have data. It's another thing to have data in accessible formats.

I think those two are the foundational things that will stop anyone from taking advantage of this at scale. It's -- you'll see a lot of things pop up and companies come up with brand-new ideas and look very interesting, but they have a plateau because they simply cannot continue to spend into using third-party LLMs with no enrichment of their own.

This is an important fact for us. We're doing this within our existing model, right? We are creating the efficiencies and the operating leverage. We're using that leverage to reinvest back in the business, but it's not changing our overall goals of, "Hey, we're targeting 33% by the end of the year for next year, for the full year." We're doing that under an environment that we're investing in AI and these agents and getting them to market.

And I'll give credit to Gourav and the team. Their key is they're laser-focused on the jobs to be done by our customers, and that brings in our ability to get more efficient, and that brings in our ability to meet their needs, and that keeps the LTV part of the equation going.

Yes. No, it's amazing. What -- maybe give an example or two of your existing customer base. Like is it completely greenfield to sort of implement agents with these -- with existing customers, so the existing small and kind of micro businesses that you guys serve so well?

And maybe just give an example or two of how you could go in and enhance somebody's business that is functioning fine today, but they don't realize the efficiency that you get out of it, just so we can sort of centralize.

I think for most existing businesses, if you ask a small business owner, they'll say the #1 problem they want to solve is to get more customers. And in order to get more customers, you have to have better marketing. In order to have better marketing, you have to have a clean and compelling brand and the brand has to be present more than likely in social media or other forms where you have -- where the customers are present.

Think about content like images, obviously, is very basic. But video content, how do you create video? How do you personalize a message for every person that buys something from you? It's now possible to do that. And obviously, the cost has to be managed because video content creation is still quite expensive, so we're not going to offer it until we can optimize it efficiently.

But fundamentally, as a seller on the Internet, you could theoretically send a personalized message in your voice with your face, thanking your customer for buying from you. And that really changes the narrative of what does it mean to have a personalized experience from a seller, a small business seller. And I believe we can do that.

It's well within reach. Technology is already there. It's just the price point needs to be managed. And that's -- those are some of the things we are working on. I'm sure that's the pattern that will start. But over time, I believe there will be more such elements that will pop up.

So just kind of a market question. There's obviously a ton of vibe coding applications out there and one new one comes to market almost every day. I feel like, clearly, I think from the data we've seen in some of those early players, they've done really well. But I think the common shortcoming has been is they can ideate really well, right, throw an idea up on a whiteboard, digitally bring it to life, so to speak.

But to sustainably run it, right, you need some of those back-end tools, you need marketing, you need payments, inventory or half a dozen other sort of plug-ins and so forth. The software investor view is that eventually, they will get there because it's AI and it's easy to build and all that stuff. You're a product guy, you do this for a living. Why is maybe that not the right way to think about it? Or is it?

Well, if you want to issue an SSL certificate, you have to be an issuing authority, a certificate authority. And not everyone has it, and we do. Now can someone go and resell somebody else's SSL certificate? Sure, you can, but then your margins are affected.

For us, it's like we can generate the certificates ourselves and deliver it to customers, and we can do it at massive scale. We support some really large players, who are resellers of our certificates. Same thing holds true for domains. Same holds true for actually hosting the apps. So the foundational things like getting a customer's app with a domain, hosting security; it's just built into our narrative, and it just scales.

Other things like we've talked about ANS, for instance, we are going to market with a concept and trying to get people to adopt a technology that is open that makes agentic technology broadly available to everyone. Now that is very different from what's happening with the walled gardens, who want to keep things within their purview.

When new players come in, they actually have -- want to work with somebody like GoDaddy because we open up the world to them. So I don't necessarily think of these vibe coding apps or people building these apps as being adversaries. They literally will have to use the backbone that we've already built.

So to us, there are more customers that we can work with. And I think it's an opportunity for us to actually increase our base and actually have our core products offered not just to our direct customers, but the customers of our customers.

Yes. And then the idea of custom agents. I mean you guys are building, what was it, 22 at this point, more to come in a couple of weeks, it sounds like. But the idea of custom agents within this ANS framework is super interesting. What could that even turn into?

Well, I mean, historically speaking, if you think CompuServe wanted a walled Internet, and that never happened. And here we are with millions and millions of websites out there because -- primarily because DNS made it easy to discover, a browser made it easy to access and SSL made it easy to trust.

So those three things still hold true for agents. We need to make discovery easy. And we have built ANS as a standard on top of DNS. It's not a net new standard. It's an existing standard that we extended. It is an open standard, so anyone can adopt it. It's -- we still need certificates to create trust.

So all these factors that we're building with ANS will just, I believe, lead to the same kind of proliferation of agents that we saw for websites.

Interesting.

And that's important for our customer base when you think about the micro business, doesn't want to be in a walled garden where you lose control of absolutely, who and where they can sell. They want to be able to sell across multiple platforms because it's important to their ability to grow a micro business in and of itself.

Totally. So let's talk pricing and bundling, your favorite topic. How -- put this into context for us. What -- we know what pricing and bundling looks like today in the traditional product set. We're talking about a lot of new things. How does that change?

Yes. So think about it as these are additive to each other and the incrementality around it. Pricing and bundling still is an initiative that is working on godaddy.com that allows us to value customer -- value-based price to customers based on the value that they're getting from multiple different bundles.

It's an ongoing strategy for us. We saw the results that has given us in 2024, now in 2025, that continues on. This is an incremental layer that has paywalls within it that we're experimenting with.

Now that can ultimately become part of pricing and bundling, it also can become its own separate tier. It can be a premium service, allows us to look at the value they're getting out of it and ultimately add to it later on, based on what we're seeing. But it's being done on Airo.ai because that allows the experimentation to take place there where we can see where the value is being delivered and not get muddled up within the core platform of godaddy.com.

So more to come on how we ultimately do that, but it is all part of the same schematic of pricing and bundling, seamless experience and Airo being the driver of it all at the end of the day.

And I think 2024 was kind of the first real big year for pricing and bundling. '25 kind of a, we'll call it, a tougher comp a little bit. But we know you're always -- particularly Q2, we know. But as you look towards '26, right, you always talk about this, you're always testing, iterating, right, and seeing what works, what people like, what people will attach.

How central was all of this to some of that commentary -- because you've been giving that commentary for a while, right? Like that's not a new comment out of you. How central is all of this in the context of that prior sort of pricing and bundling commentary as we think about next year and lapping '25?

Yes. So obviously, we'll talk about 2026 a little further, but it is a -- I would say, it works within the existing model that we've built, that we are still looking to what our customers need, what are their jobs to be done? How do we bundle that into products? How do we put that at a price point that works within our customer base? How do they continue to get value? And then how do we add to that on a continuation basis?

And the great thing is this isn't a new initiative for us. We have several years of experience with it now. So we know how to test, to experiment, to look at the results and to launch.

I would say, the biggest change we have right now is when we first launched it, it was very product specific. And now we're moving it to be very customer-specific as to what that customer is getting for value. And this will continue the journey for us, right? This is where we get to that LTV, and this is why we feel comfortable that our model continues to work. I have to say, it continues to compound free cash flow. Yes. Got it in there.

Yes. We love that. And then just on that point on playing to the customer, you guys have talked about each of your customers uses the products in such different ways, right, that there is going to be a -- I don't want to say a bespoke pricing, but there is going to be sort of custom buckets of pricing. But I don't think you're very far along in that or maybe I'm wrong about that.

Where are we in the journey of sort of like optimizing price for what value your customers are really getting out of the products?

It's just a matter of signal collection. So if you -- let's talk about the agentic experience. One of the things that has been a priority before we ship anything is telemetry. We have to get signal on every single user's customer's usage of the product. And we do evaluation on the answers we gave them to see the quality of the answers that are being generated.

So evaluation and usage behavior, both tell us based on reinforcement, "Oh, this is working well for the customer. This is where they got value. This is where they did not get value." So that's inherently built into the product before we even ship.

What that does is when we go to value-based offers on the pricing side is all those signals are readily available to the algorithm. So day 1, it starts to learn based on the reinforcement by the customer and their usage pattern, whether they're getting value or not.

And unlike other products that were legacy products that had to be retrofitted, these products have been built ground up with the signal collection.

Got it. Okay. So a long way to go, noted. And then just as we think about your favorite topic, customer count and everything, let's go there in a second. Small business formation, right? It's kind of been stagnant the last few years. It exploded during COVID. There were probably a little bit more of sort of, we'll call it, defensive or reactive businesses formed, so you've had to sort of churn that out of the system.

But here we are 2025 headed into '26, does this -- this technology seems like it has the potential to sort of like almost change new business formation structurally. Is -- are you guys seeing any indications of that? Have you -- do you have any thoughts on that? Just curious.

Yes. So we'll take it at the highest level, and then we can talk about specifically what we're seeing today. But as we've gone through these -- we've been around for 30 years. We've seen a lot of trends, and we've a lot of ups and downs, and we've been able to grow and grow with entrepreneurs through that entire time period, right?

So the cycle around people coming to market with ideas, ideating and wanting to launch things has always been a consistent steady pattern that maybe spikes here or there in certain years based on some economic factors.

Right now, what we're seeing is that stable environment, right? We're seeing customers coming in with ideas, high-intent customers wanting to get those ideas online, whether they're selling a product or trying to share content, could be any of the above. And that hasn't fundamentally changed throughout this year.

We saw variations in COVID, no doubt about it. But since we've come out of that cycle, we've seen a stability that the only thing impacting that has been the actions we've taken internally going after the high-intent customers, which we talk about. And we've seen the right behaviors. They're coming in, they're attaching faster, their conversion is better. We're getting to that $500 mark a lot faster than we used to. We have perfect retention in there, all the metrics we like to talk about because the strategy is working, because ideation is now getting to launch a lot faster.

And what we're talking about Airo.ai, just closes that gap even further to being able to get online. And think about it, where a small business may had to hire 4 or 5 people to do certain tasks, like think about writing a business plan concept in and of itself. You used to have to pay someone to go do that for you. Now it's done right there for you with all the market research, and you can decide whether you want to launch this in your geographic area or you want to move somewhere because it's a better market.

All those things now just create a better environment for entrepreneurs to be able to get through all the hurdles that they used to have to have to get their idea online and to sell them. And we think that is exactly where we need. And that's why we champion the open Internet, too. They need to be able to get it to wherever they want to go and be able to sell it everywhere.

Got it. And then one last one. We can't have a 30-minute discussion without talking customer count. Can you update us just on how you -- and we've talked a lot about -- clearly, there's a lot of potential with these new products.

But just setting that aside, customer count, you've had some things where you've done to the business, hosting migrations, tech migrations, little divestitures that affected that metric. Investors obviously are kind of waiting for that to stabilize, if not turn positive. How should we think about that?

Yes. We've talked about this a lot, no doubt about it. We are through the divestitures, through the things we did. That impacted that number. We're in a steady-state stabilization now we're going through.

But a reminder, our strategy isn't to grow customers just for the sake of growing customers. Our strategy is around higher-intent customers, customers that are going to come in, attach product, want to get that idea out online. That $500 has become a big mark for us for us, that represents when a customer has to be attaching products most of the time and has to be getting some value to renew.

And that's the customer we're going after, and that's the cohort we continue to see driving our ARPU going forward and continues to be a larger and larger part of our bookings number as we go forward. So that is our strategy, and that's what we continue to focus on.

Got it. Understood. That's great. I think we're out of time. But Gourav, Mark, thanks for being here. And anybody who's in the Phoenix area December 2, come out to the Investor dinner.

Just call Christie. She'll get you to see.

Sounds good. Thank you, guys.

All right. Thank you.

[Video Presentation]

Welcome to GoDaddy's Third Quarter 2025 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. Following prepared remarks, we will open up the call for your questions.

[Operator Instructions]

On today's call, we will 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 to 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 statements that we make on this call are based on assumptions as of today, October 30, 2025, 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 happy 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 in 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 ANC bookings growth acceleration to 14% on strengthening customer cohort dynamics we also delivered 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 task 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 a 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 will shift from a generative AI tool set to an a 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 that 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 core 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 agenetic 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 imagines 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 A&S, built on DNS infrastructure and proposed as an open standard, GoDaddy's AMS 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 personalized recommendations and refined 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 A&S 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 is, 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, where rising attach rates are 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 [ dot-com ] 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.

[Operator Instructions] Our first question comes from the line of 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. Let's start with -- I've been a sort of proponent of AI and been super bullish on AI for a long time. I fundamentally believe that AI and a Agentic AI is going to automate journeys for our customers and for their customers, allowing our customers to sort of serve their customers in a manner that we could only imagine a couple of years ago. And it's super exciting to be GoDaddy and meeting this moment and with all the innovation that's happening internally in the company, too, I think we're experiencing this moment where there's a symbiotic relationship between more websites and better models that consume those websites and it's getting easier to build websites, and that's going to lead to more more websites being created. And I think that synbiotic relationship is a positive. It's a positive for GoDaddy. If I have 10 ideas that I wanted to bring to the world, but it was hard to do. And if it's easier to do, I can just do it much faster. I can do it with the help of tools, but I can do it faster.

That's fantastic. To me, that means that there should be more domain in the world. And in fact, there should be more agents in the world. And that's what we're trying to showcase at GoDaddy. With Airo.ai launching, we're demonstrating how just starting with a few agents, but over the next few weeks, we're going to put dozens of agents on Airo.ai. So people can start to get a feel for what it's like as a customer sort of progresses between these agents and build whatever idea idea they have. And of course, while AI is continuing to make us better in terms of our internal velocity and our efficiency, what we're really looking at is how agents can transform how we work internally. And then how agents can exist in the outside world. And that's where agent name services just a fantastic innovation that we're bringing in terms of an open standard. And our goal there is allow the world to register agents, to discover agents that can work across domains that can work across companies. And all of that agent infrastructure is also based on [ DNS ] based on the domain infrastructure that we're the largest player in the world for. So I think these things are coming well together and ultimately making it easier for our customers is what we are focused on. That's the tools that we're building. We're bringing our scale and strength of products and the variety of products that we have to that customer, build for that customer. The more agents do for our customers, I think the better it's going to be for us.

Yes. And Vic, on the customer question, 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. We will -- 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 arrow.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've mentioned the monetization on Airo Plus, you'll have things like like the [indiscernible] tool, it looks like I 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 or 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 here?

Yes. Let me start with how Airo is sort of evolving and how Airo.ai is going to be launched. Now it's important to mention that Airo.ai is built on the GoDaddy software platform. What that means is that anything you see on Airo.ai is not a separate experience, it actually links in very well into the GoDaddy experience. If you go to Airo.ai, as an existing GoDaddy customer, it already knows everything GoDaddy, knows about you, and it gives you a different experience because it knows that you're a customer. What we'd like to do with Airo.ai is to bring targeted traffic to it and test agents very, very quickly. And then whatever is more successful, bring it back into need to GoDaddy experience where we have a ton of traffic already. In terms of monetization, as I shared, Airo Plus will be the monetization vehicle on Airo.ai and godaddy.com for all of these agents and Airo Plus is already ready to do that with the launch of , which it is still in beta, but we'll sort of make a full release over the next few weeks.

With this launch, Airo Plus is going to offer paywalls on Airo.ai as well. So we'll be able to test that experience to see to add some friction to convert new customers, and we're super excited about being able to move very, very fast. I know you've mentioned wanting to try it out, and I'm super excited. I'd love for you to try the app builder, and you'll find it, I think, pretty interesting. But what you don't see, and I'm really excited about is the changes of the app bill coming next week and the week after where new capabilities are coming every 5, 7 days into that product and the other regions as well. And as I look at them, I'm sort of more and more excited about what's going to be available just over the next couple of months. Turning 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 there, and we're seeing those strong results start to become a tailwind as we go into future years.

I think -- sorry, Ygal, it's important to mention that Airo is our primary vehicle for driving engagement and attach, right? And what Mark's really talking about is the better attach, the better renewal the more one-stop shop, a better exposure for our customers for the breadth of our products that creates this [ $500-plus ] cohort. And like Mark said, with the near perfect retention, we're super excited about expanding that more and more now getting to 10% of our base. Yes.

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

Great. 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 had to 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 that of 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 where 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 and 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're going to have many, many releases every week without worrying about our big funnels, our version 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 price 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 to the 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.

Thank you for taking the question. I wanted to ask a little bit about kind of how to think about maybe the TAM for Airo.ai. Obviously, your existing business is very closely related to the certainly the SMB environment and certainly new business formation. Are you getting into a new area where it's maybe beyond just the website. Just kind of curious on maybe if we should be thinking about different TAM? And then on the like custom app piece of it -- Should we think Is being competitive with lovable or base 44 those kind of players?

Yes. Look, as you'll see on radar, even for website building, we're offering 2 experiences. One is very tuned do our micro business customer as you interact with it, you'll find that it's learning and more and more instead of the customer asking for something, it prompts the customers as kind of by this next right? Or here are 3 options, big one of them because that's what we found in our testing that our customers don't necessarily want to keep prompting to do something they want the AI to sort of guide them through the process, and you know how sort of important guidance like our transcript and how care guides, help people build upside, and we're training our agents on that, which is very particular to GoDaddy, it's very much our secret sauce. It's very much something that we focus on this sort of ethos of guidance.

But as we do that, obviously, the models and the tools we have are much more capable and we do have a big set of customers that are designers and developers that are in our core business, typically our hosting business. And those customers are more interested in going deeper and being able to give more complicated prompts and letting the AI generate something for them right? The next thing actually, you'll see very, very quickly on Airo.ai. Today, the tool does similar to other tools, it can create it and it can host it for you and you can go look at it. But what you'll see pretty soon is that, that same model will start to create WordPress sites. And that's, again, going back to where a very large work press host, we have a large base of customers that work with us on WordPress. And we think Agentic AI can do a fantastic job for our customers to help them. But that way that, that tool works is a little bit different than the tools that we optimize for our micro business customers. That one is really for that custom based Hopefully, that gives you some context of how we're approaching them. We're not looking at this as we are going to a different customer. We're looking at this as we have a breadth of customers, and we have a set of AI capabilities, and we're expressing them in different ways depending on which customer is approaching us.

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 of the micro business and the person who's getting that ID online.

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

Aman, I wanted to ask about the agent naming service. Look, I think a very fascinating concept here. 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?

Yes, I love that question. So if we go back and we'll take the autonology, if we go back and we say when the Internet came along, what solved the identity problem, and it wasn't websites. It was actually domains in DNS that was sort of first of the identity problem, right? And if you think about agents needing to be registered with 2 different companies or 2 different domains or 2 different systems have to be able to trust and validate that an agent is saying what it is, right? You have to be able to validate it. That's the service that agent name service provides. And by attaching it to the DNS infrastructure, which is one of the largest things on the Internet, and is what makes the Internet possible for us to navigate right, by attaching it to the DNS infrastructure, we are really reusing the fundamentals of the Internet, right? And what that what the Asian name service can do is it can do a bit more than DNS -- not only can it register it can have the certificates embedded in it, and GoDaddy is also a certificate authority.

So those certificates get embedded into it, and it can also provide a way for companies to discover those agents. And you'll see all of these as we launch agent name service with our own agents, you'll be able to see how each of those steps work and how much easier it makes or different companies or different domains to be able to tap into agents. This is based on a fundamental belief that different companies and different individuals are going to create agents that are very, very good at different things. And we will -- because different groups of people specialize in different things, those agents will do certain tasks paying well. And another agent will want to tap into that capability when it does tap into that capability, it wants it to be validated, it wants it to be trusted, and that's what A&S provides. And it provides it at the foundational layer of the Internet.

Got it. I really appreciate the context and looking forward to seeing how that evolves. Mark, one for you. Look, 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 again. 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 beat, we're at around 8% growth, which really reflects the the underlying strength not only in the domains market primary and secondary, but also in A&C in and of itself because we're seeing that -- 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 of each of the metrics in our 3-year model and that be that Mark is talking about goes to how to normalized EBITDA. It goes down to free cash flow. And by maintaining the margins on those lower metrics, 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. And thank you, Aman -- and remember, our North Star, we look at free cash flow. When everything is working together, that number, combined with our share buyback gets us to that North Star. And we were ahead of ahead of schedule on that delivering that number or that CAGR we talk about.

I appreciate the reminder. We always have such short-term memory over the -- in Wall Street. .

Thanks, Ken.

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

I'm Willow Miller on for Arjun Bhatia. Thinking about the balance of investing in AI and supporting profitability, is it fair to say your investments in AI can be offset by the efficiencies gained from internal use cases of AI? And then as a follow-up, can you comment on internal use cases of GenAI and Agentic AI and the customer care org could guide head count come down over time?

I think we have already demonstrated that. It's not that our investment in AI can be offset by efficiency. We've actually demonstrated that we are actively and have been for the last over a year plus we're offsetting our investment with creating efficiencies in other areas. That's one of the reasons I shared how much AI-generated code is happening GoDaddy how quickly the new products are moving and coming to market. So I'm very, very bullish about that and very, very happy with the progress that the team is making. In that role, sort of generative AI so far has had the biggest impact, where you're using AI to generate content, whether it's code or other things across different functions. Now with the Agentic AI, our focus is shifting to the broader cycle time, like if there is a product life cycle or a life cycle of a corporate process, what we're finding is that by using agents, we can go after efficiencies in other areas.

And that's that's our new focus, and that's got us excited as well. In terms of the care guides, we have leveraged on the care light item. I want to say, for the last 6 years I have been here, and we have been very disciplined and showing many, many moments of efficiency with care while providing better and better service. And that's been our model. We want to provide higher and better service for a lower price, and there's no sort of doubt in my mind that we'll continue to deliver that that our care offering will get better and better with AI and we'll be able to do it more and more efficiently over time. Mark, I don't know what you'd add.

Yes. No, I think you hit it right. We've been on this journey for several years now. And we've been creating the operating leverage within the model. And now we're seeing the evolution of that is we're able to produce more efficient, whether it's engineering or it's care, whether it's in our corporate functions, that efficiency allows us to free up hours and times and now we can reinvest those in what I would say is exciting things like the AI functionality we've talked about today. But this has been a journey, and we've set it up so we can get those efficiencies, continue hitting our normalized EBITDA marks that we put out there. We're very comfortable with the 33% we put out for next year, and that's because it gives us the balance of the efficiency plus the ability to reinvest in innovation going forward so that we can carry the LTV for GoDaddy well into the future.

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

Sorry about that. Thanks, Christie. 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 looks like there's 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. And I'll start with the latter and then go into the -- well, I'll start with the first part. Let's go there. The strategy is working. And we continue to focus on the high intent customer, the $500 less cohort we talk about because the average order size goes on an attach more. And that's all the accumulation of what you're seeing in the strength in A&C right now. Obviously, our pipeline is strong, and Aman talked about the agents that will be coming back, which will help propel us well into the future. But what you're seeing today is what we've been doing for the last few years. through Arrow going after those customers, focusing on those stronger customers or just focusing on that cohort. And that is rolling out as we get finish up '25 and we go into 2026. On the leverage product mix. We just had some shifts in product mix in the segment normalized EBITDA. Nothing to call out. It should stay in a similar range, give or take a few points as we go forward, just dependent on that 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 [indiscernible] coding. Is there any considerations we should have there in terms of how that may or may not impact gross margin? Over the next few months?

Yes, we're keeping a very close eye on our cost and we have for a very long time, right? We've used Airo is used generative AI for almost 2 years now. So we keep a very close eye on it. We do have alternate model capabilities model that we host internally, which we can use to offset the cost. But what you're really going to see is us testing with different models us sort of striking the right balance of that objective function of reducing revenue, giving customers an amazing experience and managing the cost. So we're looking at that full equation, and we feel comfortable that we have the expertise to manage it. and still hit the 33% margin before market goes in with that. .

You saw, I knew you.

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 were 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 at the site running. We see improvements in that cycle time, and we're happy about that. we've bullishness from what we tested with the WordPress upgrades is what is bringing the agent to Airo.ai soon, where we'll be able to offer a fully agent 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 the new WordPress platform that we're putting AI tools around it and the capabilities aren't 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 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, both primary and secondary. And we saw some large aftermarket transactions and 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. a, what our survey shows is that our customers, they 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 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 do -- 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 of 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 sort of they're buying or 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 core 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.

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

And Mark that's very helpful. And if I could squeeze one more in. We're really curious about the section of domains and AI. So it seems like Airo has been positive for domain sales. Are you seeing your customer -- your customer funnel composition change at all? Or even are you seeing customers adopt new type of TLDs that weren't as common before?

We have seen over the last year or 2 more, for example, AI domain usage, right? And as any of those sort of TLDs becomes more popular, you see some demand shifts. But if I had to take a long -- a little bit longer time period and look at it very broadly, we don't see massive shifts in references for our customers. We see a steady amount of traffic and pipeline, we see improving conversion rates over time. Now again, that's a focus of our marketing and our strategy of high-intent customers working there, too. But we see pretty consistent demand and usage from our customers when it comes to domain. And again, I'm just very bullish on AI. I think it will do amazing things for us, for our customers.

And as it gets easier to create content as it gets easier to build a website, I think there's a symbiotic relationship where LLMs are using websites to gain content, creating tools that make it easier to have websites, and that's a symbiotic relationship that should sell more and more domains. And frankly, even I'm even more excited about a world where that domains infrastructure powers agents across the world. And I I went on about it already a little bit, so I want to repeat myself, but I'm just super excited about a world which we call the Agentic Open Web agents use the A&S infrastructure and open standard to sort of work with each other. And it just others in line on how exciting that world is going to be for our customers, like they'll be able to do things they couldn't even imagine 2, 3 years ago.

And just one thing to call out, 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. That usually means while it's not a perfect correlation, it usually means bullishness on behalf of people buying those domains because they go after sort of these high-value names.

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

This is actually Sang-Jin Byun for Brent Thill 2 question. Two questions. One, just on industry trend. There's a lot of talk about the MCP service 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 any day, and you will find like GoDaddy with A&S. Supports both protocols. So when you register an agent, you actually tell it because they want to use MCP or [indiscernible]. 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 or 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 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. .

Yes. So make it easier to consume for SMBs next.

Exactly.

And then the other question, on 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 or 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 Jin, 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, higher retention, A lot of that shows up in the A&C bookings and then obviously, it 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 Quarter from Morgan Stanley.

Great. Thank you so much. You 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 open AIs, 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 splitting 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 have 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 on 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 just a 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. And thanks, Elizabeth. A good way to look at it is if you want to look at what is being driven by quantity, usually bit stronger renewal rates, better attached and new customers coming in for the first time and getting to all for [ 8 ], right? And then you have the pricing and the bundling on the other side is 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. I shout out to all GoDaddy employees for a fantastic quarter, and I look forward to welcoming all our investors at our Investor Day in December. Thank you.

All right. Thanks, everyone, for being here. Got Mark McCaffrey, CFO of GoDaddy, up next. I'm really looking forward to this conversation. Mark, thanks so much for being here.

As am I.

Great. We'll have some mics, if anyone has any questions towards the end or really want to jump in, just raise your hands. I've got plenty for you, Mark.

Okay. So I would say broadly, the biggest theme in the space over the past couple of months, probably longer -- a little bit longer than that has just been the impact of Gen AI Vibe coating in particular, and how this is going to change the world of website building, came up at earnings. We talked about it a little bit, but I want to kind of expand on that. And what are you guys seeing today with Gen AI?

We'll talk about your products, obviously, but this theme of you can just kind of talk a website into creation, how that -- what that opportunity is for you? Is it a risk around business model? What are you seeing today? Just start with that at a high level, given the importance that we're seeing?

Yes. Absolutely. And I'll start with -- this is exciting. AI is really changing the game and the velocity at which it's moving and creating value is extraordinary. And we feel we are in a fantastic position to not only take advantage of things like website building, things like running a business, even the domain space in and of itself as people gather more of their presence on the Internet is extraordinary. Now we introduced Airo Out 2 years ago, almost 2 years ago to the day when we started talking about it. I think it may have been hinted here with you back then.

I remember.

And look at the impact it's had on us. Look at our ability to attract high-intent customers, look at our ability to get to higher average order sales. Look at the success our customers are having now using one application being able to drive their business and their growth. And remember, GoDaddy focuses on the micro business, the mom-and-pop shop, the sole entrepreneur, maybe up to 9, 10 employees, but that's even a large customer for us.

And their ability to do more with tools that are helping them be better at what they do is just evolving at a rapid pace. Airo introduced their ability to now do things seamlessly to do things that they couldn't do before without having to hire employees now they could do on their own.

And when you start thinking about the next version of this, ask Airo out, which we've talked about, we'll introduce at our next investor dinner coming up. Now you're getting to helping them with predictability, with solving solutions, with insights that how do they go to market versus helping them go to market where they want to, it suggests where they might be able to grow their business.

So the evolution of this in our market is extraordinary. And look, when you take our scale, our brand, our technology, our customer care, you take what I've always said, you have to own the customer relationship and you have to be able to innovate.

You put that all into where AI is taking this and you look at the technology we have and the data we have around turning this into useful insights for our customer group, we think it's amazing. And we think this is a huge opportunity for us going forward. And we can't wait for people to see Ask Airo.

Okay. Anything you could expand on Ask Airo and how it works and the flow for customers?

Well, now it becomes more conversational. And now it becomes more -- we went from demand -- or sorry, discovery to engagement to monetization. The engagement by the customer, there was things offered up to them based on what they were doing.

Now it expands that out even further as to, hey, have you thought about doing this? Have you thought about doing this price? What about this market? Here's maybe a channel you can consider to grow. So it gets more into this predictability based on the data it's seeing versus, I would say, just addressing the immediate need right in front of you. I don't want to take too much away, but it should.

It's not rolled out yet.

It's not rolled out. It's in testing. We're getting very, very positive feedback on it. By investor dinner, I think you're going to really appreciate the demo. .

Okay. And so just to tie up this LLM vibe coding conversation before we move on. So there has been or at least reported a kind of fast-growing ARR from some of these new entrants and smaller platforms. It sounds like you're not seeing any impact to your business or your customer at all from that, and it's kind of a different swim lane. Is that fair?

Yes, it's a fair statement. Now remember, we're a broader business than just websites. Websites is a part of our business, but we have domains, we have e-mails, we have commerce. So you take that all in its entirety, and we haven't seen any shift or variation in our ability to attract traffic into the front of our funnel, the attach we're seeing, average order size. All that momentum continues. There's no doubt that there is an LLM and a vibe coding going on.

And I think at the enterprise level, it's helping things like engineers be more efficient in how they're working. So I don't want to take away, but that seems to be a different business model than ours. And ours is more focused on that entrepreneur who wants to get up and running, not necessarily the engineer who wants to be coding faster, right?

The velocity of which the products are going to be produced, no doubt is going to change significantly as there's more efficiencies related to all this technology. Ultimately, it has to give value to the customer and the customer group in order to support that valuation going back. And that's why we think we're in a great spot.

Got it. Okay. So Airo has been talked about driving conversion, retention and product attach. So maybe if we could take kind of Airo and Airo Plus concurrently, right? So on the attach and the monetization, conversion attach monetization. And any KPIs, color you can share on what you're seeing in retention on product attach? And then any updates on the Airo Plus monetization side?

Yes. So the stat we gave out at Q2 was we're seeing the customers spend who spend more than $500 with us increased in 2024 from 2023, close to 20%. And we're seeing that continued momentum. And what's driving that momentum is the attach at the front of the funnel, the average order size going up, all that is driving that $500 customer growing now. I think it's close to 9% for us, but continuing to grow.

And that's a significant contributor to bookings for us, right? That is a -- that drives a lot of growth in and of itself. Now that customer, what's unique about that customer is the retention rate on that customer is near perfect.

So I think the lawyers would not let me say 100%, but near perfect was a close language I could get to that appeals them. But when you think about that in the early stage that we just had Airo into market in 2024 and now into 2025, and we're seeing the strength of that cohort and that ability to retain them.

Now our average retention is around 85% for our customers. When you think about the ability to move that number up over time, that's a significant driver of value. We have a great model. Like our North Star is always free cash flow, but the ability to compound year after year and just grow that base and grow that ability to retain that customer, get more attach out of them, get more dollars.

I mean if you estimate an average entrepreneur maybe spends $2,000 a year on their website present in its entirety. We started with domain getting $20 of that $2,000. Now we're slowly getting that ARPU up to around $200 and $200-plus and continues to grow. But there is still room to grow on the overall spend for that entrepreneur in that market that can drive our growth going forward.

So again, Airo has allowed us to accelerate that process and the ease of use around getting to those second and even third products has significantly improved into 2024, and we continue that momentum into 2025.

Okay. On the landing page that Airo creates when you buy a domain, are you starting to see more of those landing pages convert into full operational websites?

Yes. So we're seeing them go at a good rate, right? And we -- you're talking about the coming soon page. We saw a significant uptick when people came in and the coming soon page. Now we're seeing as they are renewing in that cycle, they're more likely to convert to a website. Now it doesn't get counted as a second product for us until it converts to a fully functional website because the landing page is offered free as part of that process.

So it doesn't -- for us, the second product has to be a paid product. That's how we define it. So when we talk about getting to that second product attached, we're seeing websites are going up. Now sometimes it's e-mail, sometimes it's websites. I don't want to say it's one specific path. But that conversion to that second product is definitely happening no matter which direction they go at a faster pace. Sometimes it's logos. Logos has become very popular.

Okay. On Airo Plus, I know it's earlier, but any kind of early signals that you're seeing there?

Good momentum. I would classify it still in the test phase, and we'll talk about it more as we get into 2026. We're testing through the bundles. The key to what we put into market beginning of the year was the logo, was part of the Airo Plus bundle. And the logo was a new on-ramp for us, so we wanted to use something that would drag people into Airo Plus and logos seem like the place to do it.

Now once you buy the logo in Airo Plus, you get it, right? We -- it's not a subscription. You get that logo in and of itself. We don't take it back if you don't renew. The trick was to bundle products with the logo that they would renew the subscription.

And that's where we're still in the experimental phase of making sure that the customers are using and engaging the additional technology in Airo Plus so that they do convert into that retention, it takes a little while to get to the retention and we got to make sure that we're seeing the right signals. It's positive, but nothing to -- we haven't added anything into our current model to incrementally account for Airo Plus contributing at this point.

Got it. Okay. Well, I mean, in terms of your guidance, Airo also, there's nothing built in...

There's nothing built in. We are seeing some great signs coming into 2025, like I said, of the average order size. But we're a big company, and these kind of manifest themselves slowly over time. At the end of the day, I always say when you see our free cash flow growth, you know the strength of the momentum in and of itself because our ability to generate free cash flow is premised on all these things moving in this direction.

And as long as we see that momentum, we see health in our free cash flow. That's why we felt good coming out of Q2 of raising our guidance on the free cash flow because that momentum is manifesting itself.

Okay. Tying free cash flow and AI together for a second. Just -- so on the internal efficiency side, I think you've talked about it from the care organization with Gabby and then produce product development, being able to develop things faster. What are you seeing? And is that -- does -- has Gen AI created an incremental potential benefit to margins over time?

Yes. So I think conceptually, you have to say it's going to contribute to margin improvement over time. There is no doubt that the productivity aspects of using the AI tools is going to come into play.

It's -- I would say -- and this is, I think, a general comment, not to GoDaddy comment. People are starting to see it, but don't know where the ending point of that productivity gains are going to be. So it's hard to say, oh my God, by 2028, this is going to add 3 points of margin for me there's no doubt it's going to show upside to margin improvements. And we already are very efficient in and of itself. But when you look to the out years, you have to start thinking about the fact that this will improve productivity. It will improve things like research and development around technology.

We've already talked about it in our care organization. We've already talked about the adoption of it in our marketing spend and how we look at it and how we use -- first, it was machine learning and now it's AI to look at the returns where we spend our marketing dollars.

But then you start to look at the efficiencies around G&A. You start to look at the efficiencies around some of the simple things like are you getting the right insurance rate, your ability to do analysis becomes better, your ability to find efficiencies using these tools there.

This is a step function. We've only seen this a few times in the technology industry, and this is going to be one of them. It is going to change the game and create a lot more ability to analyze, be faster, the velocity is going to pick up. And no doubt the productivity is going to pick up as well.

Okay. Great. I have a few more AI questions, but I think let's maybe move on for a little bit. And if we have time, we can...

Whatever -- you control.

All right. Let's -- you hit on customer growth. I think other than what's -- how Gen AI impacts your business? This has been probably the biggest topic from investors, but it's focal point. And I think part of what people are trying to understand is you guys are talking about getting back to customer growth still this year. That's what you've been talking about. The last earnings, you talked about excluding some of the divestitures and I think it was like the migration impacts.

Maybe you could elaborate on that. But excluding those, you've seen customer growth in the past few months. At the same time, and you talked about it right now, you're really focusing on that higher end, higher converting multiproduct customer more than the kind of like the broader funnel.

I think maybe I'm not characterizing correctly. So can you just talk about your strategy, what you're seeing from customer growth, where you're really focused? And how can you get investors to finally feel comfortable about where you are with your customer?

Yes. It's interesting times. So I'll start with the basic premise. Our strategy is working. We put forth a strategy that said we're going after high-intent customers and just not customer growth. And with that, a couple of years ago, we started to even take actions to not focus on customer growth and get ourselves out of what we call low-calorie customers that really weren't doing anything with a domain name or something they had bought through an acquisition years ago.

That was a conscious decision by us. There was a conscious decision by us to also turn off discounting at the front of our funnel because that attracted customers who are just going to come in for the price. And then once you try to get them to the regular price, they were going to churn out at the back end. So we cut off discounting at the front of our funnel.

The discounting was, sorry, just on the domain side or...

On the domain side, right? And it was primarily on the domain side. I'm sure there was a few others in there, but it was primarily on the domain side. And with that, our strategy started to work. We saw customers coming in, our average order size going up, attaching to a second product because they were coming in with intent. Again, Arrow was facilitating that, which was part of our strategy.

And that's where we started to see the growth in the customers with $500. And that $500 mark was something that goes back to our IPO and has always been the measure of the high-intent customer for us. So we know the strategy is working. Look at the movement in that number in and of itself. Now -- with that and those decisions, obviously, our total customer number has been all over the place. And it's hard to -- but if I wanted to just grow customers, I could do that.

I could turn on the discounting at the top of the funnel. I could do all these behaviors that would drive up my customer number, but would not be consistent with our strategy and ultimately doesn't generate the free cash flow over time that we talk about. So we feel really good about where we are today. And what I always come back to is everybody wants to focus on this number. Can you just look at the totality of the number of customers we have, period, it is over 20 million.

That is a phenomenal statement in and of itself that we have over 20 million customers and the fact that we can make decisions that drive us towards our North Star and not have to worry about that 20 million-plus number puts us a huge, huge advantage. where others have to go grow customers and bring them in, we're choosing which customers we want to bring in because we want to serve that entrepreneur that is coming in to do a business that has some purpose that wants to be with us and is going to grow that retention rate over time.

Got it. But any change to the getting back to customer growth?

No, no, there's no change in what I'm saying. And my point here being our strategy isn't to drive that number. It will naturally drive itself because eventually, all the stuff we did...

Right. I mean if you're growing those $500 a year, customers 20% ...

Eventually, after you get beyond the dispositions, the migrations and everything else we did, it returns to growth. But we're not doing anything in particular to make sure we're driving that. We're going for that $500-plus customer.

Okay. Got it. So let's shift to pricing and bundling, which has been a big part of, I think, so Arrow was one and then the pricing and bundling strategy on getting -- growing that $500 a year, the high-end multiproduct customer. You kind of shifted to this -- to the approach around customer cohorts versus product. And so where are you with that? What's -- how much more room is there with the pricing and bundling opportunity? Where exactly are you focused right now? Just spend a little bit of time on that.

Yes. So this is a cycle now for us. We saw it launch at the end of '23, and you saw the impact of the first cycle in 2024 around pricing and bundling. It drove the momentum in our A&C segment, which was fantastic.

And now what you're seeing is the growth in the retention and the renewal rates into 2025 as that cohort starts to renew at a better rate than the previous cohorts before we did pricing and bundling. So what we do now is at the end of '24, we experimented with several more bundles out there, and we launched them in -- now not all of them are A&C.

You're starting to see the benefits of some of it in the core platform in and of itself because we created bundles around the domain. And we saw the momentum start to take place in the second quarter around some of those bundles that were launched at the beginning of the year. So now what will happen is that will compound on itself next year. So now you'll have 2 cohorts. So at the end of this year, we'll start to experiment with next year's bundles. And we'll start to look at what we're going to put into market.

We'll experiment around 4 or 5 bundles in and of itself. And then based on what we see working, we'll put those into market on January 1. So this is a multi-cycle. Now where it gets really fun, interesting is as you start to be cohort versus product specific on bundling, you almost branch off into multiple different layers because every time someone elects into a bundle, you've created a new cohort.

So now next year, you can target that cohort with another bundle and then you can go after the predecessor cohorts that didn't bundle and use the same bundle with them and see now if they -- that bundle sticks. So it's this compelling compounding process that we have. And now that we have a technology stack that is consolidated and everything sticks together, the ability to bundle based on the value we can give the customers is unlimited. It's just driven by what we think the customers are going to pay for based on the value they're getting.

So we can continue to look at, do we do this with this, do we do this? Do we add on that? Do we put this there? And that's the experiment phase, right, right? Everything we do, we experiment with. We see what the reaction is. If the reaction is stat sig, I think, is what we call it, sorry, early. coffee. Stat sig, then we know we have the ability to launch that into market, and we'll see the incremental benefit of that going forward.

Okay. So if I'm a customer in a cohort, then I'm getting multiple bundles, like I'm renewing for one and then the next year, you might add a separate bundle? Or do you kind of view it as one single bundle?

Separate bundle. So think about it, you'll come in and we bundled -- I think we've talked about it, security with e-mail last year. So I'll use that as an example. So you get offered 3 packages when you come in, either new or renewal. And it says, do you want the base e-mail? Do you want e-mail plus security and do you want e-mail essentials? The preponderance people go towards the middle. And you think about our customer base, what do they value?

Well, they're worried about phishing. And therefore, the security on the e-mail was something they valued and they went right for it, right? So now you have -- we have a cohort that has e-mail with security. Next year, you move that e-mail with security to the left, you come up with another bundle in the middle and then you have Essentials to the right again. If you place that right value within that middle bundle again, they'll take it from what they bought last year and then go to the middle bundle again.

The cohort that went to the left last year and just stayed with the e-mail, they may see the same offering again. And hopefully, we'll go for the middle of security because maybe now they're more worried about security than they were a year ago or maybe that now that price point makes better sense than what they're -- so the ability to offer that up to a cohort, and I really want to emphasize this, to offer different options to different cohorts on the technology stack is what Arrow does and is the significance of pricing and bundling for us because the technology allows us to carve out what you see based on your behavior.

And it is being offered on an individual basis.

Yes, yes.

Okay. And then -- so then you'll get that e-mail and security bundle and then -- but at the same time, I'm up for a renewal of my domains and you're kind of doing the same thing on the domain side.

Yes, that's right. We can do the same domain side. And then next year, offer them another bundle. Now there are so many different elements to this. But again, it comes back to having the technology to manage through it, experiment through it and then offer it up based on a point that the micro business will see value in it. And then they elect to do it.

Got it. Okay. Let's kind of break it down to the segments a little bit more. So in Applications and Commerce, I guess another big talking point has been some deceleration in the bookings growth on what's been increasingly more difficult comps is the pricing and bundling through. We're cycling that and comps will start to get easier in the second half and into next year.

We've talked about Aero and pricing and bundling and that drives across the board on everything. What else should we be thinking about in terms of what are the drivers in A&C? You talked about commerce, you talked about the seamless experience. Like what are the elements that drive that reacceler I don't -- you haven't specifically guided to it, but that drive that other than the easier comps.

Yes. So definitely, Q2 was our hardest comp. We grew 24% in A&C last year, which was our highest growth rate for the year for the quarter, and we were comping back to that. And so as you pointed out, the comps get easier in the back half of the year.

But it doesn't change how we feel about the momentum of A&C in and of itself. We are seeing strength in new. We're seeing strength in renewals, all of which are the indicators that I've given you. So that gives us a lot of confidence about our ability to continue this moving forward. We see commerce growing. We see websites growing. We see e-mail continuing to grow. All the underlying elements having that growth.

Now -- as you look at it, there are things we have talked about at our Investor Day that were out there that we hadn't put numbers around, for example, partnerships. That's an opportunity for us that we haven't built into the model today, but could help us as we go forward. The underlying elements of what's driving the growth, though, I always look at it as 2 different things. Now that you have all this in play, if you want to look at volume, we look at volume and we talk about attach and renewal rates and the new products and new customers buying new coming in.

The volume part of the business is contributing about 50% of our growth in and of itself. And then you talk about the pricing part of the business, which is the pricing and bundling and the value. Again, I try to get this to the P times Q equation and how we look at it is the pricing and the value, that's the other 50% of the contribution.

And this is A&C specifically?

This is across the business in its entirety, right? But as it relates to renewals and attach and our ability to bundle, a lot of that falls within A&C in and of itself because when you take core platform, it's domains, Hosting isn't growing and aftermarket transactions.

So when you really talk about the business in and of itself, it's domains and A&C and our ability to put that all together. And those are the 2 drivers. Now this is probably the first time coming out of Q2 that I have said 50% of our business is being driven by the volume part of the equation and 50% of our business is now being driven by pricing and bundling.

They were equal contributors and that momentum in and of itself helps us drive that growth in A&C going forward. And the underlying elements of what's driving it is just the combination of everything we are doing today.

Okay. Got it. On core platform and domains, you don't disclose it specifically, but if you look at the disclosures, you back into it, the Domains is -- we do the work, yes. Domains has been driven by pricing. It's been up like 10% in the past few quarters.

Yes. And just -- it's been driven by both volume and pricing.

On the domain...

On the domain side.

On the demand side. Okay. Because your domains under management has been down. I guess that's...

It's similar to the customer conversation, right? That number ...

Total domain is still growing.

And we're still the largest player by far.

But I think in that -- in domains pricing has been a bigger contributor. Is that -- and that's pricing and bundling driving that? Is it less of the discounting? Like what's the sustainability in that maybe on domain specifically on the P times Q?

So on the P times Q, we did offer bundles within the core platform that helped drive the pricing element. And to be specific, this wasn't us passing along the VeriSign pricing, right? We did not do that this year. We instead offered a bundle with our domain that added protection that allowed us to drive that price point up slightly.

We did not pass through that.

We did not pass through VeriSign. Okay. So when I say it's pricing and it's volume, it's the combination of the 2 again. And some of that's being driven by the attach of the bundling, which in and of itself is a portion of that. So it's equal contributions and the domain business is -- it's been healthy and it's been steady for us.

Okay. I've got about 5 minutes. Any questions from the audience point? Okay. I'll keep going. If any questions, just raise your hand. It's -- the market is almost opening. But all right.

Maybe -- so let's talk margins and investment levels and maybe particularly around like what we're seeing around Gen AI. And yes, there's an opportunity on the efficiency side, but is there an incremental investment level needed to kind of ramp up? How do you see -- I know you talked about your North Star and free cash flow per share. What -- how should we think about the puts and takes in that?

Yes. So our model remains stable and the framework in which we do everything is consistent. We believe our ability -- we believe, number one, I'll start with, we're a unique company in that our ability to balance investment in innovation and also return value to our shareholders at a significant amount, we think is a unique benefit of the GoDaddy model. We -- I think we retired over 25% of our outstanding shares over the last 3 years. But at the same time, we've invested in things like Harrow.

And we've been able to launch and our innovation muscle is very, very strong internally. And that equation continues to be in play for us. Our ability to innovate and our muscle around innovation and looking at what we think is going to work into the market and then test into it and then be able to have assurances we're going to get the return. is extraordinary. We experiment with everything.

We innovate, we prioritize, we experiment and then we launch. And that muscle has really worked and allows us to meet our customer needs. And that's the second half of the equation, right, is you have to be able to innovate, but you have to understand your customers. And if you can understand your customers' needs, which we do through our care organization, then you really have both ends of it and the ability to do that.

And we feel really good about the framework that allows us to operate and to continue to innovate organically and continue to innovate in a manner that provides value to our customers and then just drives the LTV equation within our model. So in a long way, what I'm saying is we feel really good. Our model supports our ability to stay ahead of innovation, especially in this AI game.

Got it. What about in M&A? You made a comment on earnings about the strength of the balance sheet, being able to leverage that. You're talking about it here on the investment and buyback side. Has anything changed in your M&A approach? GoDaddy used to be a lot more acquisitive and you've kind of shifted to building internally a lot more.

Yes. Thank you for pointing that out. When you look back, we made a decision years ago that the valuations on companies to go acquire innovation had gotten extraordinarily out of balance and that our ability to innovate internally was the way to go with things like launching Arrow.

And as we look back at what we could have done versus what we did internally, we were very happy that we focused on building the muscle around innovation in and of itself. And nothing has changed on our focus around that. How we look at any potential M&A still fits into the category, strategic, has to be financially work within our framework. We have to be able to integrate because everything works on this core technology stack.

And if there is something that comes along, we have the strength in the balance sheet to do that. But we've done so well internally. The bar around meeting those 3 criteria has continued to go up. Having said that, our leverage ratio remains pretty low. Our cash, we generate a lot of free cash flow, and our balance sheet remains relatively clean.

So we get a lot of inbounds, but we do evaluate it based on a very strict criteria. If something came along, I never want to say never, but it has to be something that is accretive to what we're doing today that will drive the LTV equation.

Okay. With the stock where it is and the valuation, more willing interested in doing buybacks. What about levering up to do either M&A or just how do you view leverage, I guess, on M&A and buybacks given where you are? We also used to have a higher net leverage ratio.

Yes, we used to have a higher net leverage ratio. We are becoming a bigger business. So we're trying to balance between the 2, but we have options, and we'll evaluate those -- again, we know we have options and that optionality allows us to evaluate what the right path forward is. And we know we have all these levers to pull on if and when something were to come along that made sense for us to do.

Got it. One other question we get on the free cash flow per share over the coming years is the transition to cash taxes. Just to remind everyone where you are with that and your plans on managing that.

So obviously, we built up significant NOLs that we are still utilizing. We do not pay cash taxes in the U.S. as of today. We don't expect to be a full cash taxpayer in the U.S. until 2030.

And maybe with the new change in the tax law that may even get pushed out. We're still evaluating the R&D credits capitalization versus expensing immediately and which one will benefit us in the long term. But it is 2030 before we really start to see the impact of us paying taxes within the U.S. in and of itself.

Okay. All right. 15 seconds left. I think we could leave it there. All right. Thanks, Mark. Really appreciate it.

Always a pleasure.

Thanks, everyone.

Sounds great.

Welcome to GoDaddy's Second Quarter 2025 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. Following prepared remarks, we will open up the call for your questions.

[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 to 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 statements that we make on this call are based on assumptions as of today, August 7, 2025, 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 happy 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 the ingenity of our customers who are the people building businesses, chasing dreams and positively impacting their communities.

As our small business survey consistently shows they are a resilient group and remain optimistic about their own businesses even when navigating increased complexity, that's why we are committed to delivering the critical technology they need, combined with the human guidance that is empathetic, accessible and grounded in their success. It is this combination that helps our customers thrive and grow with confidence.

In the second quarter, our disciplined execution delivered strong results, reflecting the power of our strategy of attracting and retaining high-intent customers who generate high lifetime value for GoDaddy. A&C bookings grew 12% against the toughest comparison for the year and normalized EBITDA margin expanded nearly 200 basis points, reflecting the operating leverage in our model. We made strong progress towards GoDaddy's financial North Star of maximizing free cash flow with growth of 21% and Reflecting that momentum, we are raising our full year 2025 free cash flow guidance to approximately $1.6 billion.

As a leader in bringing AI to micro businesses, we are energized by the transformative potential that Agentic AI is unlocking for Airo and our customers. This is more than an evolution. It is a leap forward. This quarter, we began testing a new conversational experience that lays the foundation for something truly groundbreaking, an agent that can intelligently complete complex multistep tasks for our customers, freeing them to focus on what matters most, building their dreams.

Imagine a world where entrepreneurs can ask Airo anything across the full spectrum of our offering and receive instant contextual support seamlessly connected to our expert guides when they need a human touch. -- brought to the customer experience as Ask Airo, its goal is to be a fully guided and proactive digital experience powered by agenetic AI and elevated by empathetic care. The short video you saw at the start of this call offers just a glimpse into the future we are building for our customers. Behind the scenes, our operations are undergoing a fundamental shift powered by AI. Across the company, employees are embracing AI and Agentic tools to accelerate velocity of execution.

In one recent example, two interns leveraged our internal Agentec platform to build an agent that autonomously diagnoses anomalies in experiments, reducing a process that once took days to just minutes from engineering to accounting, AI and Agentic AI is reshaping how work gets done by transforming roles, unlocking efficiency and enabling our teams to focus on higher impact outcomes. We can't wait to bring all of this to life for you as well.

We look forward to sharing a deeper look at Airo's Agentic capabilities at our Investor dinner later this year. What we are building is exciting, and we are off to a great start.

As always, I also want to share a bit more about our growth initiatives, starting with pricing and bundling. With half the year behind us, we feel confident that this initiative is on track and delivering across both ANC and core platform for 2025. At the same time, we are actively executing against our 2026 road map, testing and scaling new offerings that represent the next phase of this multiyear journey. These new bundles are based on new partnership capabilities and the early results have been promising.

Pricing and bundling is starting to benefit from our increased co-writing velocity using AI. As an example, we recently concluded a test integrating a new partner product into GoDaddy's technology stack over a matter of weeks rather than months. Remarkably, nearly 100% of the code was generated by AI and guided by a senior engineer. This was work that would typically have required a small team for a few months.

While the exploration of AI-driven coding is ongoing across many use cases, this example demonstrate the transformative potential of AI-driven coding and pricing and bundling. Scaling this type of result across our teams would create a step function change in velocity, enabling us to test new bundles at a pace many times faster than today.

Our next major initiative is seamless experience and ongoing large-scale experimentation machine designed to enhance the entire customer journey from landing page and initial search all the way through to purchase and renewal. It is focused on improving discovery and reducing friction, saving our customers time and effort. Through this initiative, we boosted conversion rates, strengthened attach and drove better renewal performance, outcomes that our scale translate into meaningful financial impact now and in the future.

The bookings generated from seamless experience have scaled in an impressive manner, and this initiative has an equally strong road map as pricing and bundling and its impact and contribution is becoming increasingly comparable.

Turning to our commerce initiative, we surpassed a significant milestone, reaching more than $3 billion in annualized gross payments volume on continued strong conversion of our existing base of customers. A clear signal that our strategy is resonating. Equally exciting, our focus on delivering powerful, high-value tools is gaining traction.

Our newly launched Rate Saver, a credit card surcharging feature that can reduce effective rates from merchants by more than 50% is demonstrating promising early momentum with attach rates climbing. Last but never least, Airo discovery and engagement continues to grow, and we expect it to increasingly shape and monetize our future customer cohorts, and our strongest cohorts are ahead of us.

Notably, Airo cohorts consistently outperformed non-Airo cohorts across key metrics, including average order size, multiproduct attach rates and renewals. Serving as a catalyst for the growth in higher lifetime value customers. These games are compounding creating long-term leverage in our model. We are deeply focused on Aero's continued evolution into a true differentiator that accelerates customer success and drive sustained value across the entire GoDaddy ecosystem.

In closing, we are proud of the progress we made in the second quarter as we push our strategy forward, making meaningful progress towards our 3-year targets outlined at our Investor Day in 2024. And our results reflect the impact of disciplined execution and the growing traction behind our priorities of expanding high-intent customers capturing more wallet share and driving greater lifetime value.

As we enter the second half, our teams are focused. Our path forward is clear and our business is well positioned to accelerate the pace of innovation that delivers long-term value to our customers and shareholders.

With that, here's Mark.

Thanks, Aman. Good afternoon, everyone, and thank you for joining us. Q2 was another strong quarter for GoDaddy, underscoring the resilience of our customers and the mission-critical solutions that differentiate us in the market. We delivered ANC revenue growth of 14% and expanded normalized EBITDA margins to 31%, and we grew free cash flow to $392 million. Our consistent performance reinforces the strength of our strategy and the discipline of our execution as we progress toward our North Star of maximizing free cash flow over the long term.

Total revenue grew 8% to $1.2 billion, on both a reported and constant currency basis, surpassing the high end of our guided range. Annual recurring revenue grew 9% to $4.2 billion, and international revenue grew 11%. For our high-margin A&C segment, we drove 14% growth in revenue to $464 million, in line with our guided range. A&C is now approaching an annualized run rate of approximately $2 billion, nearly doubling over the past 4 years on the ongoing adoption of our subscription solutions. A&C revenue now accounts for 38% of total revenue, which is an all-time high, up from 36% at the same time last year.

Segment EBITDA margin expanded nearly 100 basis points to 44%. Our core platform segment delivered revenue growth of 5% to $754 million, exceeding our guide. These results were driven by growth in primary domains, up 7% of both units and pricing and bundling initiatives, alongside continued momentum in aftermarket, which also grew 7%. Segment EBITDA margin expanded by over 200 basis points to 33%. Moving to profitability.

Normalized EBITDA grew 15% to $382 million, delivering an expanded margin of 31%, up nearly 200 basis points and in line with our guide for the quarter. The expansion was driven by sustained operational discipline with leverage gains reflected across our P&L. Total bookings grew 7% on a reported and constant currency basis to $1.3 billion against the toughest compare of the year. Within that, A&C bookings grew 12% and core platform bookings grew 3%.

As a reminder, bookings primarily represents cash collected during the period. Importantly, free cash flow grew an impressive 21% to $392 million, reinforcing the strengthening of our customer cohorts and the increasing conversion of normalized EBITDA to free cash flow at a ratio that is now greater than 1:1. Our go-to-market strategy is focused on attracting high-intent customers who adopt multiple products and generate high lifetime value.

Over the past year, cohorts that spend over $500 annually grew meaningfully, and that momentum carried through into Q2. This group now represents nearly 9% of our total base. An Airo is playing a pivotal role in its evolution by intelligently guiding their journey. These customers are expanding average order size and fueling GoDaddy's impressive total ARPU growth up 10% to $230. What's more, this cohort demonstrates near perfect retention. The combination of rising ARPU and exceptional retention clearly illustrates the durable pathway we build toward a growing base of sticky, higher lifetime value customers.

On total customers, we have largely moved beyond the impacts of eliminating deep discounts and divestitures. That said, we continue to see some residual pressure from migrations as they move through their initial renewal cycles. Excluding this remaining headwind, customer count has grown in each of the last 2 months. As these pressures subside and we benefit from strong conversion of higher intent cohorts, we expect a return to customer growth later this year. This momentum underscores the effectiveness of our strategy and the long-term value creation embedded in our integrated platform.

On the balance sheet, we exited the quarter with $1.1 billion in cash and total liquidity of $2.1 billion, net debt was $2.8 billion, representing a net leverage of 1.6x on a trailing 12-month basis. Year-to-date, through August 6, we have repurchased approximately $900 million of our outstanding shares. Our commitment to a disciplined capital allocation framework is unchanged and share buybacks remain a key mechanism to return value to our shareholders. As of the end of the quarter, our fully diluted shares outstanding was $142 million.

Looking ahead, I am pleased to share that given the strength of our performance year-to-date, our increasing profitability to cash flow conversion and the proven durability of our business model, we are raising our full year free cash flow target to approximately $1.6 billion, representing growth of over 18%.

Additionally, we are raising our full year 2025 revenue outlook that we provided in February. We now expect total revenue to be in the range of $4.89 billion to $4.94 billion representing growth of 7% at the midpoint. For the full year, we expect FX-neutral bookings growth to be in line with revenue growth.

For Q3 specifically, we are targeting total revenue of $1.22 billion to $1.24 billion, also representing 7% growth at the midpoint of the range. Within total revenue for both Q3 and the full year we expect applications and commerce revenue growth in the mid-teens and core platform growth in the low single digits.

Regarding our outlook, I want to mention that beginning in the fourth quarter of this year, GoDaddy will no longer operate as the registry service provider for the dotco top level domain. As a result of this change, we anticipate an approximate 50 basis point headwind to bookings and revenue primarily in the fourth quarter. Importantly, this transition does not affect our ability to execute our strategic initiatives or deliver on our 2025 and 2026 financial commitments.

With the third quarter, we are projecting a normalized EBITDA margin of approximately 32%, and we are reaffirming our full year margin expansion target of 100 basis points with continued sequential expansion each quarter this year, exiting 2025 at 33%. We expect normalized EBITDA to maintain greater than a 1:1 conversion to free cash flow for the full year.

Our capital allocation approach remains unchanged, and we will continue to evaluate all opportunities according to our rigorous returns-based framework to maximize long-term shareholder value.

In closing, we remain more confident than ever in the strength of our model and our ability to execute toward our targets. Our second quarter results reflect GoDaddy's solid foundation powered by disciplined operations, consistent innovation and the growing impact of our strategic initiatives, from enhancing and expanding AI-powered experiences and solutions like Airo to attracting higher-value customers. We are driving sustainable and profitable growth across the business. with nearly 30 years of consistent growth through a variety of macroeconomic backdrops, GoDaddy is built for durability and long-term value creation. That strength is anchored by a high-quality recurring revenue base disciplined cost management, robust free cash flow generation and a strong balance sheet.

Looking ahead, we are fully committed to delivering on our Investor Day targets of $4.5 billion plus in cumulative free cash flow generation, 6% to 8% annual revenue growth, an expansion of our full year normalized EBITDA margin to 33% by 2026. With our continued momentum, we remain excited about our path forward.

With that, I'll hand it back to Christie to open up the line for questions. Thank you.

[Operator Instructions]

Our first question comes from the line of Willow Miller on for Arjun Bhatia at William Blair.

So maybe we can start with the A&C growth. How should we think about the diesel in the quarter? And does this continue through 2025? Just trying to figure out if there's a trough considering the Airo strategy is layering in, which should help drive average order size and attach in the segment? And then maybe just a follow-up -- what are you seeing in the latest cohort of customers who experience Airo? Is this helping with the multiproduct adoption?

Yes. Thanks, Will. No trough, right? We are happy about the momentum of A&C. And overall, as a business, we think that the bookings and revenue will be on par for the year, absent any impact of of FX. A&C now is at a run rate of about $2 billion for bookings and revenue. We're really proud of the momentum there, and it is a growing business. It's 38% of our total business today, and we're looking at it growing to about 40%. So we couldn't be more excited about the momentum within A&C. And hey, it was a tough quarter compare considering the growth last year in A&C was upward of 24%.

And maybe below that the comps do get easier in the second half of the year for A&C growth. So you can keep that in mind.

On the -- I also want to -- you had a question on the cohorts related to Airo. And listen, we're seeing these cohorts. They're coming in, they're converting at higher rates. Their average order size is being driven up. It's driving our increase in ARPU, and we have a near perfect retention rate with them. So this strategy is working. We're getting to those high intent customers, and we're really pleased with the momentum it's providing in the business, not only in A&C but also in our core platform.

On the customers that are sort of over $500 customers, that's where Mark's talked about the near perfect retention, but that's being driven by the attach that Airo facilitates. So I think you're talking about it's a driving attach is a average order size. We continue to see cohorts out from non-Airo cohorts every month.

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

I have a higher-level question probably for Aman. But when we think about the genic web and this kind of potential new front end, how do you think about kind of making sure that the website ecosystem and app ecosystem remains relevant. I think in some ways, investors want to make it a little bit cut and dry like it's either the genetic web or something else. But just kind of just big picture, high level, like how do you see this affecting the way that consumers are gathering information and what does this mean for GoDaddy.

Yes. Thank you, Josh. I think I'm a huge proponent and very bullish on AI generative AI and Agentic AI as well. And I think these new capabilities give companies like ours that have access to over 20 million customers, brand awareness across the world. The ability to provide a whole set of products to our customers, but woven together in a manner that's simpler for them to use more simple than they have ever ever seen before. And we have been a leader and innovator in the AI space for micro businesses from the very beginning, right?

I personally am super involved with have been for years at the company with how we work with AI and now how we work with Agentic and how it's transforming our customer experience, and you'll see that with Ask Airo if you were able to catch that video at the beginning of this call, we're bringing forward a new interaction pattern for Airo, which just makes it even more easy or seamless or you can say, conversational with the customer.

And we're even working to bring in sort of AI and human expertise together. So it's seamless between the two. For me, -- when I think about GoDaddy, there are two areas of opportunity. One is what we can do for our customers, which is make things much, much easier for them, which leads to attaching more products, which leads to us being able to expose them to higher SKUs and so on. We're also internally the company transforming where every role in the company is empowered with AI and those rules evolve and change and sure, for now, there's a lot of exploration and utilization of AI and Agentic is growing. But as those two curves cross I think what you're going to see is a step-function opportunity for companies like ours to be more efficient and provide great products to our customers.

And we'll actually show you some of this at the Investor Dinner later this year. So I'm super excited to sort of bring it all to life.

It's super exciting. I wanted to also ask just on the pricing kind of learning curve from Airo -- all Access and certainly the Airo plus logo maker. You've seemingly done a lot of testing. Do you feel like you've kind of got that at a point where this is somewhat of a stable pricing pattern moving forward? Is it still in heavy experimentation. Just kind of curious on the learnings and how that's influencing where the pricing goes.

Yes. You saw us test all access, but you're also seeing different forms of Airo if you're watching the different experiments on the site. It's still all very, very early. There are some paths where we're having great success in introducing Euro Plus and customers intuitively understand it and go for it. And on other paths, what we're finding is more education is required sort of more easing into the path is required. So well, Airo Plus is still very new, just launched in Q1. So you'll continue to see us testing it. But overall, we're very excited about where Airo is in terms of creating a higher average order size through attach where it's getting engagement into multiple products with us, how it's helping us reach sort of that higher end customer and filling a broader set of intents for them. And we can see that, that naturally leads to Airo Plus over time. So yes, continue to be super excited about that.

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

Great. First one for me. On the --registry change. I appreciate the color sizing that for us. Is there a change here in thinking on whether you want to be a registry versus a registrar -- or is this just a one-off related to that specific country code.

And then, Mark, on the 3Q EBITDA margin and full year margin unchanged, it implies diminished margin improvement in the back half versus about 2 points in the front half. Are there some cost layering in here that we need to be mindful of or some mix differential or anything like that? And then bridging that to the raised free cash flow guide, is there something working capital-wise that we need to be mindful of? I think I heard you say that you're now expecting greater than 1:1 EBITDA to free cash flow conversion. So just hoping you can unpack that.

All right. No problem. Trevor, no change in our philosophy. This was a one-off situation where we went out to rebid and the profitability that metrics that were needed to continue in this relationship just weren't there for us. So I would say it's more on the strategy of our profitable growth and making sure we stay disciplined to our framework versus a change in philosophy.

On the diminished margin expansion, nothing really to call out here. We are doing well. We're expanding sequentially quarterly. We're on target for a 33 exit. -- our comparisons for the margins last year and the second half a little harder than they were in the first half. There's nothing to call out expense-wise. And on the free cash flow, it's being driven by our strong bookings and the cohorts coming in.

Remember, bookings is the beginning of our free cash flow, the top line of our free cash flow. And we're seeing a lot of strength at the top of that funnel related to the cohorts we're bringing in they're coming in at higher average order size, better retention, and that's helping us on our free cash flow. So positive momentum in the business and operations as the driver, nothing to really call out on working capital or unique expenses in the second half.

Our next question comes from the line of Vikram Kesavabhotla from Baird.

Can you hear me okay?

Yes, payback.

My first 1 is on Ask Airo. I appreciate the video that you shared at the top of the call and all the commentary around the opportunity from Agentic tools. I'm just wondering if you could talk more about how you're thinking about the time line for bringing these solutions to market across your customer base? And just what some of the initial feedback has been from the tests that you've been running so far?

And then my second question is on the customer account. I appreciate all the color on some of the underlying trends there -- but on a headline basis, I think you said you still expect to return to growth later this year. And I'm wondering if you can put a finer point on the time line there, if that's going to happen to the third quarter or the fourth quarter -- and what you're seeing at the top of the funnel or other signs that give you confidence that you'll return to growth this year? And I'll leave it there.

Thanks, Vik. Let me start with Ask Airo. Ask Airo is actually already being tested on a few pages on the site. So what happens is we replaced that little button at the bottom where customers can ask questions with Ask Airo. And initial tests have shown that customers actually by clicking on that button. It attracts their attention, and it opens up a model and a conversational experience for them where they can do a few things.

Now having this initial success where the user interaction pattern seems good and is tested, we're going to layer in more and more Agentic capabilities into Ask Airo over the next quarter. So it's very much right in front of us over the next few months. And the idea is to keep bringing in more and more capabilities as we see what customers are exploring and what sort of works well.

I think folks probably understand this, the AI capabilities, they're not deterministic. It's a probabilistic modeling work and so you have to test it, you have to see that the customer is getting a fantastic interaction and then you sort of roll it out and handle more and more use cases.

The thing I would say about I Ask Airo is we are talking about a real set of agents that actually find and resolve issues or no sales or all of that on the customers we have. We're not talking about an agent that says, "Oh, if you want to do this, you can find it here. We're talking about very, very real AI Agentic technology that really simplifies it for our customer.

Yes. And Vik, on the customer count, just hey, our strategy is around going after these high-intent customers and we're seeing improved customer count around those that are spending more than $500 with us. And these -- this cohort is having meaningful contribution to our growth. We're seeing -- like we said, the higher average order size, near perfect retention. It's working exactly the way we wanted to, if not a little ahead of schedule. On the total customer count, yes, we are seeing some tail off effect of the migrations as we get through the renewal cycle.

Now a reminder, these are mostly one product customers, a lot of times they're low-cost domains, we expect to see it through the rest of the year, we're seeing positive signals in the last couple of months, but nothing to call out on the exact timing of when we will say it positive. But again, our focus is on that high-intent customer that's going to spend more than $500 with us.

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

Fantastic. I guess my question is kind of merging Vik and Josh is a little bit this is probably less of a headwind for you guys versus your peers. But are you guys seeing any change in terms of the top of funnel? Are you seeing any change in share shift in terms of potentially AI, by coding tools maybe taking some share on kind of your web presence products? Any color there would be great Aman.

Yes. Look, I'm super excited about AI and agenetic capabilities, making it easier for customers, whether that's to find domains or build websites or any of the features that we talk about. The main point I would make is, one, we are not seeing any direct sort of issue our strategies to attract a high intent customer. We're seeing strong top of the funnel. We're seeing better sort of year-over-year conversion of those customers, and we're seeing higher hatch. -- higher average order size.

So that's what the metrics are saying. But if I want to sort of look forward the next year or the next 2 years, maybe the context that I would share is that I've been involved deeply into this sort of with our teams for many years now.

And the things that are possible today a year ago, I don't think we would have thought possible. So if we're looking at things today and saying, "Hey, XYZ is now made, that's not -- in my mind, that's not the case at all. We are at the beginning of this new way of working, which is going to be powered by AI, and there's going to be a lot of movements over the next 2 to 3 years as the AI capability improves, as it scales, as it gets sort of put into every piece of how we work. And to me, that's a massive opportunity. right? Are multiple companies going to use it? Absolutely.

But GoDaddy has fantastic brand awareness globally. We have a big customer base. We have a lot of customers coming to us, new customers coming to us every year, and we have the opportunity to both build these tools ourselves because of how our technology capability, our software development platform has improved, but we also have the ability to use our balance sheet and financial position, if we want to really provide the best for our customers. And that's, I think, a great opportunity for the company.

Got it. Understood. Appreciate the insights there. And then maybe somewhat building on that, I guess, do you feel the value or having the starting point at the domain, does that strategic value increase going forward maybe a little high level and maybe a little far out, but I'm sure something you guys have noodled on internally.

We love our position as the world's largest domain registrar. We love our position that the world thinks of GoDaddy, they think of domain names because every idea, when people have the idea, the first thing they think about is, oh my God, let me protect the name of that idea. And they do that by buying a domain name. That gives us access to those customers when their ideas start. In fact, we see so many ideas that never start because customers search for things, they may not even become our customers, but we are gathering that data all the time. And given our large scale, we get to see search traffic or what people are searching more than probably anybody else.

So our core model of starting with the domain name, making that funnel stronger has been a tremendous advantage over the last 28, 30 years. And as we look forward, it's only becoming stronger because we've taken the domain name and we work to reinvent it to say when you start with the domain name with Airo, you're going to get all these other things, too. So you're not just starting with the domain name, you're starting almost with sort of a set of things that start your business, almost like a business in a box just with a domain name.

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

Maybe one -- so just on Airo and conversion and monetization updates. And when you first rolled out Airo, kind of the big feature was creating the initial landing page when you register for a domain and the expectation that, that landing page over time turns into more. I mean it sounds like you're making progress there, $500 customers, but are you seeing better conversion in those landing pages turn into real sites and more products being attached. Can you just update us on that flow and how that's been trending?

Yes, Ygal, the percentage of customers that end up in a paid website product with us -- the path for that more and more over the last year has become through Airo. And actually, for a few quarters, we shared that data, but now it's just sort of gotten up and up and up, where customers come in, they start with a domain name, we build them the one paid site.

A good percentage of customers take that, they love it, and that makes it easier for us to upsell the paid website. And more and more of that paid website is driven by AI, where the whole site is just created for the customer, which basically disrupts this whole idea that customers come in and they have to build a website using an editor and a template. And it's more about, no, you've got the domain name from that name. We have done a good job of understanding what your idea is about and we give you 7, 8 options, if you pick one of those options that tells us very clearly what it is that you're in and now we have a paid site, but we can take all of that information and of course, the information we have from many other customers and turn that into a paid product, a paid website for you.

So that's the path we're going down, and it's just more and more customers end up with a paid product going through the Airo path.

Yes. And just taking a step up, right? If you think about volume for us being stronger retention rates, better attach, new customers coming in and buying and converting higher. That is doing really, really well for us. The other side of the equation is the pricing and bundling, giving more value and getting price for it. If you look at those as the 2 drivers, the price element plus the volume element, they are contributing equally now to our growth. And that puts us in a really good spot going forward, pricing for value, but yet also getting the stronger attach retention and new customers coming in and converting at a higher rate.

Great. That kind of segues into my second question, Mark, on pricing and bundling and you just kind of shifted from a product to a cohort lens. How is that going? Any learnings or maybe on the trajectory of pricing and bundling and the opportunity going forward?

Yes. The shift to taking the customer cohort has been fantastic. We have approached it from the customer lens and the biggest impact that -- or the biggest thing that's opened up for us is we're able to look at the full relationship with the customer and really help our renewal rates overall because we want to help our customers succeed, and we don't want to take price if that's going to lead them to depart. We want to help them along. We want to give them the tools that will make them successful. And once they are successful, of course, we participate in their success, and that's what the value-based offer does for them.

And just to interject, you have more to jump in. But the great part about this cohort that we're seeing it now contribute to both ANC and core platform, and we saw some of that growth start to show up in the domain element of the core platform because we were bundling the domain certain things. So again, those cohorts are really starting to work. And I know we're talking -- we're thinking about next year already.

Yes, exactly. What I was going to add is that both for pricing and bundling and seamless experience, we feel very good about the road map in front of us because right now, we are testing the bundles that are going to go live in Q4 this year or Q1 of next year that are going to be the pricing and modeling initiative next year.

So we go into this entexperentation with a lot of confidence. And the same is true for seamless experience with it is a program that is literally based on thousands of tests that get run that improve customer experience at many, many, many nodes, allowing us to ask very different experiences and we are getting better and better at that. And that's something I called out in my prepared remarks that the -- if you look at the return coming from these programs, both of these programs are starting to contribute sort of in a similar manner and have great road maps in front of us.

Our next question comes from the line of Brad Erickson from RBC.

Maybe I'll just follow on to that last one. I think security was a pretty big driver for you on the pricing and bundling last year. I guess as you're doing all these tests, and you talk about the Q4 launch, any way to think about kind of sizing the magnitude of impact that it had because I think I think it showed up in the P&L fairly well from the security side. So just how to think about that as you roll these products out over the next 12, 18 months?

Yes. I'll probably turn to Mark a little bit, but my guess is a little early to talk about what the specific bundles would be for 2026. As we've evolved this capability, we're a little careful about how much detail publicly talk about the specific bundles because they can tend to be quite unique to cohorts of customers. But I think we'll talk about 2026 when we get to -- we talked about 2026, but coming back to the commentary I made before, when we look out at the contribution across our cohorts, how much is being driven by the volume element and the improvement and the attach and convert versus how much is being driven by pricing and bundling and that value element of it.

And the fact that they're now starting to even themselves out. It gives you a pretty good idea that we have a good model here that's starting to contribute, and it's based on the balance between the two. Got it.

Our next question comes from the line of Alex Lavigne on for Mark Zgutowicz from Benchmark.

First, nice acceleration on ARPU sequentially. I was hoping you could qualify uptake from marketing suite or Airo Plus that may have contributed to that.

The marketing suite and Airo plus are still pretty new products. So while we're very happy with the attach that's happening with these products, and we continue to put them in front of more and more customers. Overall, there is still a small part. I don't know, Mark, if you want to.

I'll just talk about Airo in and of itself. We couldn't be more happy at how the strategy is working and what we're seeing at the top of the funnel and the increased convert and the ability to get to the average order size and the near perfect retention that we're getting from that cohort that is coming in. Airo plus, that is still in the early stage and things like that, we will contribute to Airo overall.

Right now, we're just seeing the experience driving that strong behavior at the top of the funnel. We see steady traffic. We see higher convert, we see better attack, we see higher average order size. And that's because the Airo experience is taking our customers on that journey of what they need much faster, much better. And that cohort is becoming very strong in our customer base right now. It's reached 9% or about 9%. And we continue to see that contributing more and more to our overall growth.

Got it. That's helpful. And then just 1 last 1 on high picture question. As you think about Agentic and the opportunity that this may catalyze an upmarket push for you guys, perhaps something like an MCP broader integrations there.

Just curious if you could elaborate on that, perhaps some of the milestones we should expect over the next 12 months in terms of Agentic monetization?

Yes. I think over the next 12 months, you can expect to see a GoDaddy that is completely enabled for Agentic AI, where Ask Airo uses agent agent technology your other evolving technology that if you're asking me about these, I'm sure you know there are new standards coming out sort of every few weeks.

And we expect to keep pace with them. We expect to be able to enable the GoDaddy platform for our customers and for our partners in a very significant way using Agentic AI.

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

Can you hear me?