Of Investor Relations. Thanks for joining us. I think this is at least three or four years in a row now, so we 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 on stage here.
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 didn't.
Lots of new AI product initiatives coming together recently. Let's start with Airo.AI. It's a new surface that you recently launched. It's in beta right now. It highlights some of the new Agentic AI product suite that you've rolled out, I think over the last month or so with more events 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?
Yeah, 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 agentic agents that are sitting in there helping 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, wants 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 business is being 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 quickly, very seamlessly. I come back to, and I always talk about the entrepreneur's 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 presents it to them so they can get up and running and do what they do even better. Remember, we're microbusinesses, 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 a service we provide to them.
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 were five agents that we launched, and now there's more than two dozen agents that are rapidly being deployed. With this new surface, what we're able to do is understand the usage patterns of customers. What is the conversion? How is the orchestration of all of these agents working together to deliver, like Mark was saying, these jobs to be done for customers that help them have a fulsome experience business-in-a-box solution?
Got it. And it sounds like so kind of three key takes there. One, new surface with rapid experimentation and expansion of kind of use cases. Two, continued innovation and going from five agents to two dozen and presumably more to come.
Yeah, more to come.
And then the third piece being really outcome-driven. That was something that I think I heard you hammer on, that 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.
Exactly.
That is, listen, we've said this time and time again. We've had AI out in the market for almost two years. I think it's about two years now. Our continued focus is how to use the AI to get the Jobs to be Done by our customer done. 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?
Yeah. So I think, right now, we're very focused on the 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, then the evolution of the internet now will go to ANS, Agent Name Service, right? Agents have to be registered. They have to be validated. They have to be basically marked as a good actor, for lack of a better term. As agents start to get introduced in 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 microbusiness, 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 that job now is being done in collaboration with somebody else.
I think it's just that orchestration of what Mark was saying, 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, do social media. All of these things sort of work together to, instead of saying pain points, it's more of that frictionless experience and carrying out those Jobs to be Done for customers.
That makes a lot of sense. And you outlined kind of three distinct use cases when folks go to Airo.AI. Can you help investors understand the differences between these three experiences? And in particular, how does a customer find themselves pushed into one funnel versus another when maybe they don't know what they need?
Yeah. 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 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 they input, we'll direct it to the experience they will get because it'll immediately say, "Okay, I'm a pro. I need a project plan to present to my client that is a baker." And immediately it'll identify that person as a pro. Chances are it'll go into a Managed WordPress type of environment. It's a more complex environment, Managed WordPress. It has a lot of plugins that has a certain requirement within Airo.AI versus, "Hey, I'm a handyman.
I want to start a business." Then it'll start to give you prompts. And based on how you start to interact with it, it'll 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'll come back and say, "I can't get there right now," right? "We'll try again later." Or, "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.
Further to that point too, one of the things that it's identifying as the agent or is orchestrating those tasks is it looks like you as the end user are 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 solution for you and carry out the things that you're trying to get done. How can we do that better for you?
Right. And think about it as 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'll go in and diagnose the problem and it'll come back, "Okay, we need to do this. Are you okay with it?" 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 in 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 layman.
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 microbusiness and the entrepreneur. They're not necessarily the programmer 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, what's embedded into this experience too 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, "You should build a map showing your service area. You should have some social media tools. And let us help you draft a blog or a post. And let us help drive traffic to your site." So having those next best actions get them there sooner.
Yeah, and prompting that for them, right?
Exactly.
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 the types of paywalls that you could introduce? And how should we measure success from here a financial perspective, the P&L impact, maybe a year or two from now?
Yeah, 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 two years, and two 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'm remiss if I don't say we focus on free cash flow and we focus on free cash flow per share. Those are our 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, see what's worked, 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 service is to our customers because we've had the experience with the LLMs. 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.
More to come, obviously, as we talk about how this evolves. When you look at what we've done, we're building on the two 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 a 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 or 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?
This is the belief in the Open Internet. We have built the open web. I shouldn't say we built it, but we have contributed to the building of the open internet, which today works on DNS, right? The technology. 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 will go to an agent to perform a task, but you want to make sure that the information that's being passed between those two 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 rogue agent.
A rogue agent or something along those lines. So how does that work, right? It works similar to how a domain works. You today register a domain. You pay an annual fee for it. That becomes your valid domain. And everything around that domain that you build on the domain gets 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've defined on top of that technology, the agent itself. So when you know your agent's 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. It's not a job to be done that we've identified. But we did a demo that shows our agent, when our customer wanted a jingle on their website, went out to another agent that created a 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 in and of itself.
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 ANS.
Essentially, yeah. And the proposal is the continuation of this open standard like we're talking about it. And so that 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 the space. And if you believe that agents are going to proliferate on the internet, which we do, then there needs to be a trust 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. I think that the same rapid innovation can happen in the agentic space when you have the.
When you have the standard.
And GoDaddy is obviously uniquely positioned here. Like Mark said, of course, we are a major player in DNS, but we also have certificate root trust status so that we can offer the security layers for these agents also.
Yeah. And 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'll 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.
Yeah. It'll 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 contributed most to that shift? And how much of that growth is tied to the rollout of Aero and your newer AI-assisted onboarding flows?
Yeah. 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. 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 email to website to transactions. It can go different places. It can go domain to logo to email 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 instantly. It's up to the person engaging to go and make the choices very quickly of what they want.
Sometimes they're right on top of each other when you think about an experience. I want an email. 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 and domains, which is a large part of the funnel. A lot of 60% of our traffic comes to us naturally. And that is still a big part of it. We feel good about 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.
The statistics we put out there at the end of Q3 is that when we get a customer to $500+ , our retention of that customer is nearly perfect, and that is ultimately want to go, and that continued strength is evolving. Airo.AI will continue to evolve that journey.
Okay. And as we head into 2026, what are you seeing in terms of top-of-funnel trends and SMB demand signals in the U.S.? How would you kind of characterize the state of SMB right now?
Resilient and healthy. I don't know.
Yeah. We survey our customers, and we publish our survey work quarterly. What the survey work tells us is that micro- and small businesses continue to be very optimistic about their business and their revenue prospects over the six months' future from that survey point. They are more optimistic about their business than they are about the overall economy. 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 means they're 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. We're enabling them to do those things with these simplified business-in-a-box solutions that, "Here's your next best action 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 so 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.
Exactly. Yeah.
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 on 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 backend. They want to be out there selling their products. They want to sell their products in as many places as they can. They want to compete with the bigger players out there. They want to make sure their pipeline's secured. Our average customer base, maybe we have some customers that go up to 10 employees.
On average, you're talking about maybe two or three, and a whole bunch of them are 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.
GoDaddy is a true partner for them to be able to access, like Mark was saying. Sometimes they just want someone to talk through their challenges with.
That makes sense. Competitive dynamics. How should we think about the competitive set today, particularly given the emergence of agentic coding tools, natural language interface, AI website build tools, live coding? How do you think about how competition's evolving here and how you stack up versus them?
Yeah. And 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 one of our products out there, from the domain to the payment processor. No doubt about it. Our view and our focus continues to be focused 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 and 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.
We know if we continue to meet our customer needs, we will continue to be successful as a company. 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 finding use cases.
Yeah. 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 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?
The way we look at it is our average customer is going to spend anywhere between $1,000-$2,000 being online. We always say $1,500 is the average wallet size for a typical customer for us being online. Our ARPU is around $230. We have a lot of room to move up, meeting our customer needs to get a 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're there. Our strategy and how we've designed all of this is around, I always talk about everybody likes to go to P Q.
The Q for us is really better retention, more product attached to our existing customers than the new customers coming into the top of the funnel. Those are very important elements of how we drive the Q part of the equation. And the P has evolved from blunt 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.
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 house. We've hit 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 higher inference cost is going to pressure margins? How does that impact GoDaddy?
Yeah. 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 five years. We've also created an environment where our Normalized EBITDA converts to free cash flow on almost a one-to-one 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 LLMs, and we understand where to put the paywalls 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?
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 simplified 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, etc., 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 LLMs.
It's very much within your control.
Yes.
Yeah. Since you mentioned free cash flow, 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?
Yeah. 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 have a very strong balance sheet, and that's by design. And we apply the same criteria 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 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.
Yeah, a lot of things come across our plate, but it has to meet those criteria. I always say we've launched these agentic agents that a lot of people have seen on Aero.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. Appreciate it.
That was great. Good to see you.