GoDaddy (GDDY) Q3 2026 earnings review
GoDaddy's profit rises 24%, but its software growth slows down
GoDaddy, the world's largest domain name registrar, grew profit fast on cost cuts and share buybacks while its software sales slowed. Revenue rose 6% and profit per share jumped 38% as every operating expense line shrank as a share of sales. Chief executive Aman Bhutani pointed to the top end of the full-year revenue plan, which by our math leaves fourth-quarter growth near 6%.
| Revenue | $1,341.8M +6.0% from a year ago |
|---|---|
| Diluted profit per share | $2.08 +38% from a year ago |
| Airo annualized bookings run rate | >$100M >$50M last quarter |
| Full-year revenue outlook | High end top of range: 6.1% growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because rising profit margins and lower software growth cancelled each other out. Third-quarter operating margin reached 27%, easing fears that second-half marketing bills would hurt profit. The bad news: Airo, its artificial intelligence software for small businesses, doubled its annualized contract value past $100 million, yet total contract signings did not speed up and management trimmed the software division's full-year sales plan.
The question now is whether Airo brings in fresh customer spending or mainly replaces the older website packages GoDaddy is phasing out. If it adds new spending, software bookings will speed up; if it mostly replaces old packages, software growth will keep sliding toward the domain division's slower pace. Management's transition numbers at the December 1 Investor Night will tell.
🐂 Bull Case
Flat Overhead and Falling Depreciation Lifted the Margin
GoDaddy, the world's largest domain name registrar, has used artificial intelligence inside its own operations to keep headcount and support costs flat while revenue grows. Finance chief Mark McCaffrey said the third quarter showed "expanded profitability and strong free cash flow", even though management had warned that delayed marketing bills would land in the second half. Operating margin rose 3.6 percentage points from a year ago to 27.0%.
- Depreciation and amortization (wear and tear on past acquisitions): down 1.3 points of revenue to 0.9%
- Technology and development (engineering costs): down 0.9 points of revenue to 15.7%
- Customer care and marketing: down 0.9 points of revenue combined to 12.1%
- Normalized EBITDA margin (profit margin before interest, tax, depreciation and stock pay): up 1.2 points to 33.5%
Every major operating expense line shrank as a share of sales, which eased the concern that second-half marketing and computing bills would squeeze profitability. Because nine-month Normalized EBITDA margin already sits at 33.2%, the company needs only 32.4% in the fourth quarter by our math to clear its full-year floor of 33%. What to watch: fourth-quarter marketing and engineering spending. Another flat quarter would show that support savings are paying for the AI rollout.
Buybacks Turn 6% Sales Growth Into 38% Per-Share Profit Growth
The domain registrar returns almost all of its spare cash to shareholders by buying back its own stock. Through October 26, GoDaddy spent $1.4 billion to repurchase 15.7 million shares, cutting its total diluted share count by 12% since the start of the year. In the third quarter alone, the average diluted share count fell 9.6% from a year ago to 125.7 million.
That shrinking share count is doing the heavy lifting for per-share results. Revenue grew 6.0% and net income rose 24.4%, but diluted profit per share jumped 37.7% to $2.08. Even after spending $1.31 billion on buybacks in the first nine months, the business generated $1.40 billion in free cash flow and kept cash on hand above $1.1 billion. What to watch: any new multi-year cash per share target at the December 1 Investor Night. A raised target would confirm that buybacks remain the main engine of per-share growth.
🐻 Bear Case
Airo Bookings Doubled, But Total Bookings Did Not Speed Up
"Our AI transformation is gaining momentum, and this quarter Airo hit an annualized bookings run rate of over $100 million and began incrementally contributing to our bookings growth," chief executive Aman Bhutani said. Airo is GoDaddy's artificial intelligence software that helps small businesses build websites and run daily operations. While Airo's annualized bookings — the yearly value of customer contracts signed — doubled from $50 million last quarter, the company is simultaneously phasing out older standalone website builders and do-it-for-you design services.
- Total bookings growth: 5.7% from a year ago, unchanged from 5.7% in the second quarter
- Applications and Commerce (website, email and payment tools) revenue growth: 9.0%, down from 11.0% last quarter
- Full-year Applications and Commerce outlook: cut to about 10% growth from a prior plan of low double-digits
- Full-year Core Platform (domains and hosting) outlook: raised to about 4% growth from low single-digits
If Airo were adding mostly new spending, total bookings and the Applications and Commerce division would speed up as Airo's run rate doubled. Instead, total bookings growth stood still and the high-margin software division missed its third-quarter target, because Airo is mainly replacing older packages that customers are leaving behind. The release still gives no dollar figure for Airo's recognised revenue or the size of the retiring products. What to watch: a breakdown of Airo's new versus replacement bookings at the December 1 Investor Night. If management does not separate them, investors cannot tell when software sales will stop slowing.
New Developer Tools Open Hosting and Email to Outside AI
GoDaddy earns 61% of its revenue in its Core Platform division, which sells domain names and web hosting, and uses that checkout path to sell extra software. Because users increasingly ask external AI chatbots to build sites instead of searching on Google, the company launched its Developer Platform last quarter for domains and expanded it this quarter to hosting, email and commerce, "enabling developers and AI agents to turn working code into live businesses".
Core Platform revenue grew 4.2% from a year ago, beating the company's low-single-digit plan even against a tough comparison from last year's 28% jump in domain resales. That beat shows the domain business is holding up for now, but letting outside AI agents buy hosting and email automatically bypasses the website checkout screen where GoDaddy sells its highest-margin bundles. What to watch: Core Platform and Applications and Commerce attach rates on the conference call. A drop in bundled sales per domain would mean automated connections earn less than human shoppers.
Risks this quarter didn't answer
Three standing concerns got no new numbers in the third-quarter earnings release because their usual disclosure points sit in the conference call or the quarterly filing.
- Segment bookings growth: Applications and Commerce bookings slowed to 7% last quarter; the conference call remarks will show whether it held the high-single-digit plan.
- Customers spending over $500 a year: omitted last quarter after four straight updates; the call or filing will show if management has retired the metric.
- Patent lawsuit exposure: a court upheld an infringement verdict with up to $170 million of potential loss; the quarterly filing's legal footnote will update the appeal.
💲 Other KPIs
Annualized recurring revenue — the yearly value of active subscription contracts — rose 5.1% from a year ago, slowing from 5.7% growth in the second quarter and 8.0% a year ago. By our math, GoDaddy added $92.5 million of net new recurring revenue in the quarter, down from $112.5 million in the same period last year.
Total deferred revenue — cash customers have paid upfront for multi-year domain and software subscriptions not yet delivered — grew 5.0% from a year ago by our math, down from 5.2% in the second quarter and 6.9% at the end of 2025. Because deferred revenue turns into recognised sales over time, its 5.0% pace sits below current 6.0% revenue growth.
Average yearly revenue per user rose 6.8% from a year ago to $253, slowing from 8.7% growth in the second quarter and 10.2% a year ago. Meanwhile, the total customer base grew by 40,000 in the quarter to 20.5 million, building on the 22,000 customers added in the second quarter.
Net debt — total borrowings of $3.81 billion minus $1.12 billion in cash — fell 7.6% from $2.91 billion a year ago. It ticked up by $29.5 million from the second quarter because share buybacks slightly exceeded the cash left over after operations.
🔮 Guidance
Raised. GoDaddy kept the dollar range it set last quarter but now expects to finish "toward the higher end" of the band, which equals 6.1% growth at the top versus 5.7% at the middle. By our math, the middle of the range leaves 4.3% growth for the fourth quarter, while the top end leaves 5.8%, roughly matching this quarter's 6.0% pace.
Cut. Management lowered the software division's full-year plan from low double-digits (10% to 13%) to about 10% after third-quarter growth slowed to 9.0%. Because the division grew 10.5% over the first nine months, a 10% full-year finish implies fourth-quarter growth slowing further to about 8.6% by our math.
Raised. The company lifted its domain and hosting outlook from low single-digits to about 4%, offsetting the software trim. With nine-month growth at 3.7%, hitting 4% for the year implies fourth-quarter growth picking up to about 5.0% by our math as last year's promotional discounts drop out of the comparison.
Unchanged. The plan still calls for a full-year profit margin before interest, tax, depreciation and stock pay of over 33%. Because the first nine months ran at 33.2%, the company only needs a 32.4% margin in the fourth quarter by our math to clear the 33% floor.
Unchanged. Management kept its full-year cash target at about $1.8 billion, up from $1.6 billion in 2025. After generating $1.40 billion in the first nine months, the business needs $402.1 million in the fourth quarter by our math, which is 8.6% above last year's fourth quarter.
❓ Key Questions
How much of Airo's $100M run rate is new spending?
Airo's annualized bookings doubled from $50 million to over $100 million, yet total bookings growth stayed at 5.7% and software revenue slowed. Investors need the dollar split between net new spending and customers migrating from retired website packages.
What was Applications and Commerce bookings growth in Q3?
Last quarter management guided software bookings to grow in the high single digits for the rest of the year after slowing to 7%. The press release gives only total bookings, leaving the software division's forward pipeline unconfirmed.
Do Developer Platform APIs carry lower attach rates?
GoDaddy opened hosting, email and commerce to automated AI agents via its Developer Platform. Management has not said whether an automated agent buys fewer extra services than a human customer using the standard website checkout.
Has the $500-plus customer cohort metric been retired?
For the second straight quarter, the release omitted the count and growth rate of customers spending over $500 a year, while average revenue per user growth slowed from 8.7% to 6.8%.