Welcome to GoDaddy's third quarter 2026 earnings call. Thank you for joining us. I'm Christie Masoner, VP of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we'll open up the call for your questions. If you would like to ask a question on today's call, please use the raise hand feature in the webinar to be added to the queue. On today's call, we'll be referencing both GAAP and non-GAAP financial measures and other operating and business metrics. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted on our investor relations site at investors.godaddy.net or in today's earnings release on our Form 8-K furnished with the SEC. Growth rates represent year-over-year comparisons unless otherwise noted.
The matters we'll be discussing today include forward-looking statements, such as those related to future financial results and our strategies or objectives with respect to future operations. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings. Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, October 29, 2026, and except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm pleased to introduce Aman.
Good afternoon, and thank you for joining us. At GoDaddy, our purpose is to make opportunity more inclusive for all, and our strategy is to become the agentic operating system for micro and small businesses. Creating customer value and transitioning it to shareholder value over time has been our formula for success. Airo is at the heart of meeting this moment, and we are transforming GoDaddy to stay ahead of what comes next, evolving our customer experience and building the foundation for long-term growth. We are early in this journey, and the meaningful growth in Airo's adoption over the last two quarters has validated our strategy. In Q3, we delivered bookings growth of 6% and expanded normalized EBITDA margin to over 33%, reflecting continued operational execution and structural leverage we achieved from the strategy we launched at our 2024 Investor Day.
We are excited to announce that Airo's annualized bookings run rate more than doubled to over $100 million, up from $50 million last quarter and $10 million the quarter before. Even more encouraging, Airo incrementally contributed to our bookings growth this quarter as its bookings more than offset the impacts of migration of our legacy website products. Looking forward, we are excited to share more about our vision for the next several years with you at our Investor Night on December 1 in Tempe, where we will lay out where we are driving this business and how we will continue to deliver value for our customers and our shareholders. This is a pivotal moment for our industry and for GoDaddy to help entrepreneurs succeed online. Small businesses everywhere are experimenting with AI tools, and we are bringing more capabilities and customers to Airo as fast as possible.
This year, we made a strategic decision to make Airo our flagship website product, replacing Websites + Marketing. Over time, Airo will become the operating system, bringing together all the products that GoDaddy offers. In late Q3, Airo became the default option in the domains path. With that change, we are stepping up marketing, shifting plan spend, and investing in brand awareness with the incremental spend in Q4 offset by efficiencies elsewhere in the business. We have also deployed significant internal resources behind Airo as it performs more marketing and commerce jobs for our customers. We priced Airo for broad adoption for both new and existing customers. In a competitive agent first and AI-native market, we are using our advantage of scale to quickly get our product in front of customers.
As Airo is scaling, we are encouraged by the free to paid conversion rate and customer satisfaction, as well as attach rates for new and existing customers that are on par with our legacy Websites + Marketing product. There is a lot more to do, and we are excited to keep going. Turning to what we see in the broader environment. In Q3, Google quickly pivoted towards AI Mode for the bulk of search in our space. Based on early data we observed, we believe the impact to our traffic has been small, which speaks to the resilience of our direct traffic and brand. The more important development is where new demand in our space is coming from. We believe AI coding tools are driving strong growth in our industry, and we believe a broader set of customers, including developers, are driving that growth.
New cohorts are increasingly starting inside coding assistants, command line tools, and agent interfaces, and they buy differently. As this new demand grows, we are also seeing sharper discounting across the industry on products like domains, along with freemium offers on hosting. We have moved quickly to launch and expand a suite of agent-friendly APIs spanning domains, hosting, professional email, and commerce. Understanding that pricing is a critical component of going to market as we move into 2027, we will lean into testing new bundles with competitive offers that will deliver more value. We will test these new bundles as part of our pricing and bundling program, which we have had success with over the last several years. We also expect these new bundles to show up favorably in LLMs and AI agents.
We are working to improve how we appear in these channels to attract more of the traffic that comes from them with a continued focus on high-intent customers. This is an ongoing effort, and we are driving incremental progress. As the agentic open web unfolds, we continue to see a long-term opportunity for GoDaddy to play a foundational role with Agent Name Service serving as a core component of the infrastructure needed to support an increasingly agentic world. Earlier this month, we joined Infoblox, Google, and Cloudflare to demonstrate Chain of Trust, an open architecture developed in collaboration with the Singapore government and informed by its AI governance framework. For the first time, agents on different platforms that had never worked together completed a simulated live purchase on the open internet using ANS, ARD, and other open internet standards.
The system verified agent identities and permissions in an auditable pathway while also blocking imposter agents before they could transact. This demonstration shows the integral role that identity, Agent Name Service, and GoDaddy will play in an agentic open internet. We are transforming GoDaddy for an agentic world, and this quarter, we made real progress. Airo is doing more of the work for business owners. Our expanded suite of APIs is making GoDaddy available in the tools where people now build. While our work on identity and discovery is laying the groundwork for businesses to be found and trusted as agents take on more of the customer jobs to be done. Together, we believe these efforts will continue to make GoDaddy's offering more valuable and mission-critical for our customers. With that, here's Mark.
Thanks, and good afternoon, everyone. We are transforming GoDaddy with the same financial rigor that has long defined us, and our third quarter results reflect that focus. We delivered revenue above the high end of our guide and expanded our normalized EBITDA margin by approximately 120 basis points. We generated free cash flow of $481 million, with trailing 12-month free cash flow of $1.8 billion and fully diluted shares outstanding of 123 million. Taken together, these show strong continued progress toward our North Star. Total bookings grew 6% to $1.4 billion, in line with revenue growth. Applications and commerce grew 8%, up from 7% in the second quarter. Airo adoption drove incremental bookings this quarter, while productivity grew on targeted pricing actions taken earlier this year, partially offset by a lower unit volume as customers renewed email accounts with fewer seats.
Airo unit growth acceleration was led by our starter tier, as many existing Presence customers migrated to annual Airo plans. Higher unit volume and token credits more than offset the lower price point of this entry-level tier. That growth came largely before we introduced Airo in the domains purchase path, our largest funnel in late Q3. Core platform grew 4%, driven by an increased volume of high-value transactions and strength in new primary domain registrations and renewals across many of our TLDs. Total revenue for the quarter grew 6% to $1.3 billion, and ARR grew 5% to $4.5 billion, with international revenue up 3% to $436 million. Our Applications and commerce segment grew 9% to $524 million on continued growth in productivity and commerce, partially offset by the ongoing transition of customers to Airo from Websites + Marketing that we began in the first quarter.
Segment EBITDA margin expanded roughly 120 basis points to 47%. Core platform grew 4% to $818 million on a strong aftermarket, overcoming a tough compare driven by increased volume of high-value transactions. Segment EBITDA margin was flat at 33%. Underpinning everything we are doing is the resilience and durability of our model. Once customers are with GoDaddy, they tend to stay and do more with us. More than half of our customers have at least two paid products, and retention rates remain above 85% and continue to improve. For Airo customers, more than 70% have at least two paid products. With ARPU reaching $253 and more customers spending over $500 annually, we are now using Airo to attract and retain high-intent customers and help them adopt more of our products. Our experience shows that customers spending over $500 annually with two or more paid products have nearly perfect retention.
As Airo helps us build more of these relationships, we see an opportunity to strengthen retention and customer lifetime value over the long term. The strength of our model allows us to pursue these opportunities while still returning capital to shareholders. Normalized EBITDA grew 10% to $449 million, with margin expanding approximately 120 basis points to 33%, reflecting revenue growth and continued expense discipline. Free cash flow grew 9% to $481 million, with normalized EBITDA converting to free cash flow at better than a one-to-one ratio. Our healthy balance sheet gives us flexibility to move quickly as the market evolves. We ended the quarter with $1.1 billion in cash and total liquidity of $2.3 billion. Net debt was $2.7 billion, representing net leverage of 1.4 times on a trailing 12-month basis, well within our target range.
We also continued our responsible and prudent capital allocation program, repurchasing 5 million shares for $477 million during the third quarter. Year to date, through October 26th, we repurchased $1.4 billion, reducing our fully diluted shares outstanding by 12%. Turning to our outlook. For the full year, we expect to finish toward the higher end of our $5.215 billion-$5.255 billion revenue range, helped by outperformance in the aftermarket in the first three quarters. We expect A&C revenue growth of approximately 10% and Core Platform revenue growth of approximately 4% for the full year. For the fourth quarter, absent any impact of FX, we expect bookings growth to accelerate and be slightly ahead of revenue growth, driven by the increasing units from adoption of Airo within our A&C segment.
We are reaffirming our normalized EBITDA margin target of over 33% for the year, reflecting more than 100 basis points of expansion on continued operating leverage and AI-driven productivity, alongside continued investment in AI products, platform, marketing, and compute. We are reaffirming our full-year free cash flow target of approximately $1.8 billion, with a normalized EBITDA conversion ratio of greater than one to one. On capital allocation, we operate within a disciplined returns-based framework. We remain focused on allocating capital to its highest value uses, with a priority on driving long-term shareholder returns. Taken together, our free cash flow and approach to capital allocation keeps us on track to deliver on our free cash flow North Star of a three-year CAGR of over 25%, well ahead of the 20% target we set at our last Investor Day.
Finally, we look forward to hosting many of you at our Investor Night on December 1st, 2026, at our Tempe, Arizona headquarters. Registration for the evening is now open. Please contact our investor relations team at investors@godaddy.com to request a link for registration. We will use the evening to give you a more comprehensive view of our strategy, how we plan to invest behind it, and what we expect it to deliver for our customers and our shareholders. With that, I will hand the call back over to our Vice President of Investor Relations, Christie Masoner, to open up the call for Q&A.
Thanks, Mark. As a reminder, if you would like to ask a question on today's call, please use the raise hand feature at the bottom of the webinar screen to be added to the queue. Our first question comes from the line of Ken Wong at Oppenheimer. Ken, please go ahead.
Great. Can you guys hear me?
We can.
Aman, great to hear that Airo is incrementally contributing to bookings. That seems to have come a lot faster than we would have expected. Would love to see if you can maybe unpack that a little bit. How much of that is perhaps customers coming in at a higher total contract value, so that being additive, versus how much of it is potential new business that is coming through the doors because of the Airo funnel, the marketing spend put behind it? Would just love to understand some of the moving pieces there.
Thanks, Ken. Super excited about Airo being incremental to bookings, and yes, it has come sooner than we expected, too. Airo has grown very fast, and customers love the product and are adopting it at higher rates than we expected. Just overall, Mark touched on this, and I am sure he will jump in as well. Overall, Airo is priced very competitively, and we worked hard to improve the attach with Airo as well. We actually have to sell more units and attach it better to domains and other products to get it to be incremental, because it is cannibalizing Websites + Marketing. In the past, we have also talked about our do it for you offering that it cannibalizes. We are super excited about being incremental, but it has actually had to jump a couple of significant hoops to get there.
As an example, we added it to the domains path late in the quarter, and overall, it is attaching already better than Websites + Marketing in the domains path, which is fantastic. We actually want it to attach better and better so we can bring more traffic into that path at really strong attach rates, and then open up all kinds of jobs to be done with Airo. Mark?
Yeah, I will just add, you said it great, Aman, is that we are excited about the volume, excited that it is incremental, so it is adding more than we are losing in our Websites + Marketing and other Presence products. It is a great place to be. Almost all of it is attributable to the migration of existing customers, as we just launched it into the domain purchase path. That did not contribute too much this quarter. The exciting part is we are seeing them come in at the lower starter tier, but they are attaching more credit packs. That attach is really propelling us to get to a better place and get to that incrementality faster than we thought. More to come as obviously we have rolled it out now, but really excited about the momentum of Airo right now in the marketplace.
Got it. On the other side of the growth, how should we be thinking about potential margin pressures? I did notice gross margins down ticked. Is there further erosion that we should be thinking about?
Yeah, Ken, there's no doubt that Airo, from a gross margin perspective, has less of a gross margin than some of our internally developed software products like Websites + Marketing. There will be pressure on the gross margin itself. We think our operational efficiencies up and down the rest of the P&L will more than offset that and allow us to continue to expand our normalized EBITDA into the future. Obviously, we have an Investor Day coming up, so we'll talk a little bit more about what those moving parts are. Yes, the gross margin is going to see a little deterioration as we move forward.
All right. Fantastic. Great outcome, guys. Thank you.
Thank you.
Thank you.
Our next question comes from the line of Vik Kesavabhotla from Baird. Vik, please go ahead.
Hey, can you hear me okay?
We can.
Okay, great. Hey, thanks everyone. Thanks for taking the question. Hey, I wanted to follow up on some of your comments regarding the impact to the industry as more traffic originates from AI environments. Can you elaborate more on some of the steps that you're taking to adapt to that trend? I know you expanded the suite of APIs this year. What are some of the early observations that you're seeing from your efforts there? You also referenced testing some new pricing and bundling activity in 2027. It would be great if you could talk more about some of the opportunities that you see and how you plan to approach that process.
Yeah. Thanks, Vik. On the AI traffic or with LLMs, we are engaged with all of the LLM companies, and there is a lot of history with GoDaddy that we are working through with them. Over the last quarter, we did see a jump in our traffic coming from LLMs. It was on a small base, but it was a good result based on the efforts we have made. We still have a long ways to go, and we think these new bundles that we mentioned will continue to help in that area. This is an ongoing activity with us, and we just want to keep improving on it as much as we can. In terms of the new bundles, we are taking pricing and bundling into what it is going to be in the future.
With the way LLMs are indexing and taking behavior, we think by introducing new value into our bundles, we will get more traffic and better visibility in the LLMs. That is what we are going after. We will be testing these bundles near the end of this year into early next year. Our expectation is that together with our efforts on improving some of the existing and adding the new, that we will continue to make improvements with these new sources of traffic.
Just very quickly on the APIs, yes, those are targeted towards the agent builders and sort of the CLI and the new, you can almost call it a new channel of traffic where customers are engaging differently and they are buying differently. Our APIs are very new, but we are excited about having expanded that quickly, and we are sort of working that track as well to get our APIs better integrated into the tools that are out there so we can attract that traffic as well.
Okay, great. Thanks for that color. Separately, I also wanted to ask about the A&C segment. Mark, I think on the last call you said that you expected A&C bookings to remain in the high single-digit range for the remainder of the year. Obviously, it looks like it was about 8% in the third quarter. Is that still your expectation for fourth quarter? Anything else we should keep in mind as we think about bookings for the rest of this year?
Yeah. Generally, we're on pace, and obviously a lot has to do with the momentum of Airo into the domain purchase path. From what we're seeing right now, we feel really good about the bookings being slightly ahead of our revenue coming out of the year. Obviously, we'll talk about 2027 as we get closer. But right now, we're seeing that trend. We feel good. We feel good about the contribution of Airo, and we feel that's improving quarter to quarter.
Okay. Thanks, everyone.
Our next question comes from the line of Mark Zgutowicz from StoneX. Mark, please go ahead.
Thanks, Christie. Good evening, guys. Just curious on the, by Airo cohort, I'm curious what percent of users convert to paid repurchase credits and renew.
Yeah. What we see with Airo, I will give you color from new customers that are not GoDaddy customers at all, and existing I will give you a little bit of color separately. What we are seeing is that the free-to-paid conversion rate continues to be very healthy with Airo. That is one of the two key indicators we are looking at in terms of how we are positioning Airo, how we are pricing it, and how customers are doing that free first build and then getting into paid.
That number has remained very stable and healthy, even as we have added more and more traffic to it. Whether it is adding the traffic in the domains path or other sources, or directly from channels, we have seen continued stability in that metric, which is fantastic. The other piece is we continue to have really good reaction from customers in terms of customer satisfaction.
That continues to tell us that it is a good indicator for what renewal we might expect. That they are able to build, they are able to get to the outcome they are looking for, and they give it a good score. In terms of adding other products, what we are seeing is that when a new customer comes to Airo, to be very clear, this is someone that is not a GoDaddy customer. They actually add a second product 70% of the time, which compares to our average at little over half.
So Airo is actually really doing a great job for the customer we are looking for, which is the high-intent customer, the customer that is going to have two products, three products, and so on. So we are pretty excited that even a lot of what we have done so far is with existing customers. The new we have is actually performing better than our average.
That is helpful, Aman. Mark, if I could ask a quick follow-up to an earlier question on the gross margin headwinds. Is that still predominantly inference costs, or is there still like W+M migration or product mix pressuring there? How does that, I guess, alleviate itself and when? Is there an open weight model benefit at some point that you are going to comp positively against? I am just trying to get a sense of on the inference side, when that maybe subsides.
Yeah. Speaking specifically to A&C and Airo, our margin itself is pressured by other products like Aftermarket, which we've called out before. But when it comes to Airo, keeping in mind a couple of mechanical things when it comes to bookings and revenue. While a lot of those costs are built into the inferences of the token use, that revenue on the subscription is recognized over time. While it will improve over time, and we feel good about that improvement starting to show up as we go through 2027, it's still not going to be at the margins that are things like Websites + Marketing was at. There will be some of that downward pressure as we go forward. We feel good about Margin, where it's going, it's positive, it's contributing. Having said that, it will get better over time and I'll let Aman handle the inference part of this.
Yeah
Because I know it's something we look at a lot.
Yeah. I think I've probably touched on this before. As GoDaddy, we are a scaled hosting player. We do have some of our own data centers as well, and we do have GPUs deployed and right now we are testing models that are open weight models in our data centers. What we've been seeing in the market is that the frontier models, they've introduced sort of cheaper pricing. They're encouraging people to use it. For Airo, we've built the technology so Airo can switch between these models and use whichever make the most sense. What you're going to see from us over the next 3, 6, 9 months is that we're going to deliver the best value for our customers at a cost that we think delivers good margin for us and leads to a price that our customers can afford.
Within that mix, we will have all of the options, which include routing to different models for different queries, using open weight versus frontier models, and a couple of other things that we're very focused on in terms of what we can do internally with our data centers, that doesn't require us to go out to third party. There's three or four levers there that we intend to use to sort of balance this equation. We intend to do it incrementally to keep driving growth of Airo and keep managing its margin. Mark, just coming back, these are the costs associated with Airo. There's no other-
Yeah
migration costs or anything along those lines associated with that.
Yep. Got it. That's interesting, guys. Thank you very much.
Our next question comes from the line of James Michael Sherman-Lewis. Please go ahead, James Michael.
Hi there. Hopefully you can hear me. Two from me, if I may. First on the Developer Platform, could you touch on the adoption trends you are seeing with that and how we should think about these new customer entry points to GoDaddy evolving into next year? Then following up on that, given this more competitive domain discounting environment, should we expect any changes to your promotional intensity towards acquiring these new customers? Thank you.
Yeah, sure. On the Developer Platform, it is all very new. We really want to get to a situation where our APIs have the competitive differentiator in terms of the breadth of products that we offer. We just got to the point where we have domains, we have hosting, we have commerce enabled as well, and professional email. Those four things together when combined, bundled, we think that is differentiated. But we are still very early and folks are just starting to realize that GoDaddy has this offering, and we have work to do in terms of go to market and linking it into all of the tools that people are using. But we are very excited. It started out really well. We have done a bunch of testing, experimentation on it. We worked with customers.
There is a good ecosystem developing there and, again, always a lot more to do, but we like where we are going. On the second part of the question, while we see domain intensity in terms of discounting and such, we have a long history of testing pricing, of testing merchandising, and we tend to look at these things with a very data-focused way. We collect multiple data points, not in terms of just what the conversion is or units is or what bookings it carries, but also what kind of behaviors those customers have in terms of attach or second or third actions that they might take, which in some cases might take 14 days or 30 days or so on. So I feel very good about our ability to continue to focus on that high-intent customers, given the data we have.
And if in the short term there are some tactical decisions that are made because of what I would call short-term dynamics, I think we have the ability to test into those and to really compete where we need to compete. But overall, our strategy is based on the same ethos that we have had for a long time. Test into these items, understand the data, and continue to look for that lifetime value that we know only exists when the customer has high intent, when they do multiple things with us, and then they stay with us a long time, and that turns customer value into shareholder value.
Thank you.
Our next question comes from the line of Alexei Gogolev from J.P. Morgan. Alexey, please go ahead. Alexei, you are still on mute. We will move to Arjun Bhatia.
Sorry about that.
Oh, go ahead. Go ahead, Alexei.
Sorry about that, Christie. Mark, you talked about starter tier growth plus higher attach of credit packs driving incrementally. Can you maybe share what percent of Airo bookings are credits versus subscription today, and whether credit attach is primarily from existing customer migrations or new customers coming through the domains path?
Yeah. Alexei, thanks. I would say it's roughly two-thirds subscription, one-third credit packs is contributing, and it's primarily coming from the migration as we launched the Airo and the domain purchase path late in the quarter in and of itself. So that's a pretty good breakdown of how it's coming in right now. Now remember, you have to have a subscription to get to the credit pack. So it would have a ratio of about that.
I think the only thing to add, Alexei, is as we look at open weight models and multiple sources of finding efficiency and the agents themselves improve and the LLMs improve as well. This is a pretty dynamic space, so we watch it pretty carefully to see how it's shifting, how customers are using these credits, and what value are they getting with them. So, I would expect this space to still be dynamic, given how early we are in the AI wave.
Thank you, Aman. You said that LLM-originated traffic increased in Q3 but from a smaller base. Can you size that channel in a way that's useful, maybe like a share of traffic or a share of new customer adds, and call out what specifically drove the improvement? Was it bundles or SEO or maybe API distribution?
Yeah. It's a number of small improvements, Alexei, that we are focused on in terms of improvement. Some of it relates to what we control, some of it relates to things on the internet or how we work with partners. So we have a hit list of things that we're going through. What's encouraging for us is that as we got through some of the items on the list, we actually saw a jump. Again, it's on a small base, so it's too small to parse out.
But we're encouraged by that jump because it shows where our efforts are working. Also keep in mind that a significant percentage of our traffic, like the majority of our traffic, comes to us directly. It's based on our brand, it's based on the awareness GoDaddy has and the customer base we have and so on. That's still the larger area of focus for us.
Thank you very much.
Our next question comes from the line of Arjun Bhatia from William Blair. Arjun, please go ahead.
Hi, team. I'm Willow on for Arjun Bhatia. Thanks for taking our question. Aman, you commented there are more jobs to be done with Airo on the GoDaddy platform. I'm curious to hear, what are you seeing in terms of early repeat consumptive behavior related to Airo? Are customers already coming back to buy more credit packs given there are more opportunities to use these credits? Thanks.
Yeah. What we're seeing is that there's sort of a power law type curve where a percentage of customers are using a lot of credit packs, right? But most customers tend to use credit packs to get to a certain point, and then they sort of turn more into a subscription-type model. For those customers or with those customers where we think there's a ton of opportunity, because if we can help those customers discover that if they build a website, Airo can help them do marketing, or Airo can help them respond to their customers or communicate with their customers, those are all incremental opportunities that we're looking at.
Because, with Airo, we already have a product that does a great job. Customers like it. Its price, it'd be very competitive. So we're getting good energy into the product, and now we can truly work on engagement and get people to do more and more and more with it. I'm pretty excited about actually being able to move that needle with a large group of customers.
There are two paths once they enter the Airo platform, right? That is why we are seeing a lot at the starter. Once you get through your credit packs, you have the option to buy more, or you can upgrade to the higher level tier and pay a higher subscription and get that access to those credit packs at a higher level as you move forward. Again, we are giving the customers a couple different paths to grow, and the initial engagement is showing that they are doing both.
This is helpful. Thanks, team.
Thank you.
Our next question comes to the line of Kishan Patel from Raymond James. Kishan, please go ahead.
Hey, this is Kishan Patel on for Josh Beck. Where are you seeing the strongest early demand across the expanded suite of agentic APIs, and how are you thinking about the agentic hosting opportunity? Thank you.
Yeah. I think it's just very early for us to comment on where we see the most. We're excited to have the product, the APIs out there, and we're excited to have the breadth of the product. Again, we have more to do there. In terms of agentic hosting, we think there's a good opportunity for GoDaddy there. GoDaddy actually recently launched Node.js hosting, which is very much the new style of hosting with very simple experience, very competitive in terms of what it offers customers, and we're seeing good adoption with those customers.
Most of that adoption is still coming from the web for us. Only a small percentage of it is coming from APIs, and we think that's mostly a discovery issue. It's not an issue in terms of product we have or the API, but people just don't know yet that GoDaddy has these APIs and this capability, and we have work to do to get there.
Thanks very much.
Thank you.
Our next question comes from the line of Robert Culbreth from Evercore. Please go ahead, Rob.
Hi, hope you can hear me. I'm probably asking the same question a different way, but just wondering, as users maybe get even, users who are migrating, get past that initial sort of maybe heavy build phase, just wondering, the subscription itself, with the multi-product attach, setting aside the consumption of credit packs, is that enough to be sort of at equalization with W+M from an LTV perspective? Is it significantly lower, potentially higher? Just wanted to see if you have any early proof points or could maybe sort of talk us through that a bit.
Then wanted to ask, as we've seen early proliferation of consumer agents who are doing a lot of subscription audits and things of that nature, if you've seen any change in behaviors whatsoever, people coming in and maybe questioning how many of the domains they own or whether they want to have auto-renewal on or things like that. Yeah, so just wanted to ask on that, too. Thank you very much.
Yeah, on the first one, as we think about Websites + Marketing, I would just share the context that the optimization of Websites + Marketing across the different plans that exist has been done over multiple years. What each of those plans have and how upsell happens into those plans or other products that are attached into those plans, those went through multiple optimization cycles. For Airo, while it's very early, it's already doing a very good job of Airo selling to more customers, and it's doing a good job attaching other products now. Airo's able to keep up just by selling more, basically, versus W+M, which is highly optimized.
When we look at it long term, we see those similar opportunities of multiple cycles of optimization that Airo can go through, which can deliver some of those same things that you're talking about in the future, where it becomes more and more about stepping customers through the value that they get and being able to optimize the monetization of those pieces. While we're not up that path that I think you're talking about already, we are on the first few steps, and we know where the staircase is, if you will. That should cover the first question. On the second question, we don't yet see similar type of concern of agents coming in and doing things. I don't know if Mark will comment on that a little bit, perhaps. But the domain names tend to be things that people are really attached to.
People don't typically give up their domain if they think that that idea has any remote value for them. It's typically one of the smaller purchases a customer is doing across their ecosystem of purchases. Very often, what customers are paying for a domain for a year is less than what they're paying every month for other subscriptions that they have. So, I'm not sure that we have yet seen the type of behavior that you're talking about.
Yeah, I would even add a step further. If anything, we're seeing stronger retention rates, and included in that is the retention improving around our domains over the last couple of years. We haven't seen anything that looks as a headwind to that improvement. Again, it's a result of going after the high-intent customers. We did call out that email renewals, we are seeing some seat reductions there, but there's no indication that that's agent driven versus just customers needing less seats with their emails right now for the micro-business.
Got it. Thank you very much.
Thank you.
Our next question comes to the line of Naved Khan from B. Riley. Naved, please go ahead.
Great. Can you hear me?
We can.
Great. I just wanted to clarify something first. I think one thing just on bookings growth, I think you spoke about how Q4 bookings should be slightly ahead of revenue, and I think it was in the context of overall revenue. How should we be thinking about A&C? I think A&C, you said revenue should be around roughly 10%, so just help us think through A&C bookings. Why shouldn't A&C bookings accelerate if Airo is deployed on a broader scale? That's part one of the question. The second thing I wanted to ask is just launch of, say, other agents like Meta just launched Meta business agents. How do you think about GoDaddy agentic offering working in conjunction with those that are available through these large platforms such as Meta? Thank you.
Yeah, thanks, Naved. I'll take the first part on that one. Yes, the comment that we would be slightly ahead on bookings to revenue was for the full year, but we attribute it to the momentum in Airo adoption, which is obviously A&C related. So we do expect to see bookings ahead of revenue and A&C in and of itself. Again, we just launched Airo into the domain purchase path. So we have some data points, but yet this will be the first full quarter we'll be able to observe that momentum and see how it's attaching. Early signs are great. We'll keep everybody updated. We like where the fourth quarter is going, and we like this trajectory. But yeah, it's early in the journey right now.
Yeah. On agents like Muse, I think we'll see how these agents are positioned and what jobs to be done these agents do and how far they go in terms of being able to do certain things. Airo is very targeted towards our customer. Airo has built-in things like hosting and payments and a number of jobs to be done that Airo can natively handle. We think there's an advantage to an agent that has all of those items built in and being able to produce an outcome fairly easily for customers. But it's a brave new world and it's like the start of the internet again.
There's lots of new things, lots of new business models, lots of technology and customer adoption to think about. I don't know if you caught my comment at the beginning of the prepared remarks that we have a thesis, or I have a thesis that all software's going to get rewritten with the agent at the heart of every software. It's not about putting agents on top of software, it's about having agents at the core of software.
I think we're going to see consumer behavior evolve, and we're going to see these technologies come in, and a year from now, we'll be looking back at much of this and saying, "Oh, wow, look at how much it's changed." I think we're pretty excited about where we are with Airo. Clearly, customers love it, share the data points. Clearly it's adding value for customers. So we're going to keep pushing as hard as we can and moving as quickly as we can. I'm sure there'll be competition in all sorts of ways.
Thank you, Aman. Thank you, Mark.
Thank you.
Our next question comes from the line of Jack Halpert on for Deepak Mathivanan at Cantor Fitzgerald. Jack, please go ahead.
Thanks, guys. Can you hear me all right?
We can.
Awesome. Got two from me. Just one on customers. I think you've talked about customers spending over $500 a year with two or more products, have nearly perfect retention. I think you said that before. Is there a way to frame what share of your 20.5 million customers sit in that cohort today, and maybe how fast it's growing? I think in the past, maybe in Q4 it was, you said around 10%, but just curious the trends there. Then the second one, just on kind of operating expenses. Can you talk about how you guys are leveraging AI internally for efficiencies? Do you view that as a key lever to offset spend and planned marketing behind Airo? If not, maybe what are the other levers that you have to sort of offset that, like you talked about in prepared remarks? Thank you.
Yeah. I will start. It is about 10% customer group of $500 plus. It is improving, but I think 10% is a good base point as we move forward around that number. You want to?
Yeah, when we look at the use of AI internally and our OPEX spend, it comes back to some of the things that we talked about for Airo as well. Of course, AI adoption has moved very quickly at GoDaddy. Large majority of our software is now written with AI tools and with AI. We have paths to being able to make it more and more efficient, right? We have the ability to route to different models. We have the ability to run it in models in our own data centers.
As I said, we are testing actively with open weight models for Airo. Our priority has always been to put Airo first to create the best experience for our customers. All of those capabilities are going to trickle down, I would say, over the next three to six months into our operations as well. Very likely, we will see GoDaddy employees using more and more and more tokens, but at the same or lower cost.
Got it. Very helpful. Thanks, guys.
Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.
Hi. This is John Byun for Brent Thill. I had two questions, and one was similar to another one earlier, but maybe a different way. The A&C revenue, given you expect faster bookings, does that mean we should expect the A&C revenues to rebound after we end this year? The second question is, the international growth was a little bit weaker than U.S. Was there anything to explain that? Thank you.
Yeah. On the A&C revenue, obviously we are excited about the bookings trajectory of what we're seeing related to Airo and the momentum around it. Just a reminder, we're now adding different elements and levers into our revenue models today. So the timing of that revenue may shift from period to period, depending on things like the usage of the tokens, the subscriptions, when they start. So again, we're in a good spot. We like the momentum, we like the trajectory. On the international growth, nothing to call out. I think in prior quarters, we've had aftermarket transactions that were international. This quarter, most of the aftermarket transactions were domestic in the U.S. So that just explained the variation there.
Okay. Thank you.
Our next question comes from the line of Chris Yeung from UBS. Chris, please go ahead. Chris, are you there? We will move on to Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.
Hi. Yes, thanks so much for the question. I wanted to ask around domain pricing, and I believe we have a Verisign price increase coming soon. Just given the industry has been more competitive or sensitive to prices recently, how are you thinking about working through the latest Verisign price increase? Thanks.
Thanks, Elizabeth. Even if we look back the last few years, we tend to take price based on our pricing and bundling initiative, versus when a partner may take pricing. You'll actually see that we're looking at our overall set of metrics, whether it be bookings or retention rate, or actually a slew of other metrics to take a price increase versus now. That includes competitive behavior as well. I think generally speaking, we are quite on top of understanding how we want to handle that price increase. We have a plan, and it's all already rolled up into what Mark talks about, and we usually come to that very early in the process when we come to know about it itself. We feel comfortable with our approach there, and we'll likely continue the same approach going into the next few years.
Yeah. I'll just add just a reminder. The price increases are done on the renewals, not on the new. They show up over a period of time as people renew.
Great. Then just as a follow-up, I wanted to circle back on some of the OPEX efficiency that you guys are looking to deliver. You guys have been a pretty efficient business for a long time. So just wondering if you could put a finer point on where some of those incremental opportunities are.
Yeah. I'll start. Elizabeth, a couple years ago in our Investor Day, we talked about the tailwinds that we had around OpEx. The growth of A&C, we had a higher margin profile, access to global talent, and obviously, the efficiencies we got through some of the actions we had taken in 2023 and going into 2024. All those continue to provide us a tailwind as we go forward at different levels, but they continue to provide that tailwind. Then on top of that, now you have the efficiencies around productivity gains within our operating expenses that are really starting to show up, I would say, up and down the P&L. Now, remember, when I talked about our 33% target a couple of years ago, one we've reaffirmed today, the productivity gains were not a part of that equation when we did that.
So they are becoming incremental to our operating leverage as we speak here today, and also giving us an opportunity to make choices about where we invest those savings. Aman talked about the Airo and the cost associated with Airo, but it also comes into play around marketing when we get behind marketing for Airo. And obviously, as we continue our innovation, our ability to make sure that we're seeing all the jobs to be done in creating that operating system that we want for the micro-businesses. So, I'd love to call out one big item in our operating expense, but frankly, you could go from legal to accounting to tax to HR, to right down the line, and you're seeing the productivity gains amongst the whole organization right now.
Yeah. I think, Mark, you covered it well, and we will definitely touch on this at the Investor Night as well. But one other item, and I think Mark just briefly touched on it, but I'll say two bits more, is that the product evolution that we see with our strategy of the agentic operating system should lead to efficiencies over time. Right? As an example, with Websites + Marketing, it's not that Websites + Marketing has completely gone away. It is still there. We have a lot of customers on Websites + Marketing, but we have replaced it for the most part in New Now. And customers that would've moved to an AI-based product, many of them are moving to Airo, right?
But being able to have a platform like Airo where we can add the next job to be done and the next thing and the next thing, the cost of us doing that is appreciably less than what it would be to add something new after Websites + Marketing. We will talk a little bit more about that at the Investor Night. But those are some of the things outside of what you see as the core operations of the company. It is really the product strategy of the company evolving as well.
I would be remiss if I did not talk about the productivity gains that we have in care as well. So, I will just add that to the list.
Great. Thank you so much.
Your next question comes from the line of Ygal Arounian from Wedbush. Ygal, please go ahead.
Hey, guys. Good afternoon. Maybe I'll I guess, sorry if this has been asked or you addressed it on the call. Just bouncing around, a lot happening tonight. Just on the ANS, I know you mentioned it, but there's obviously a lot more happening in the agentic world. Still early, but becoming more mature and security elements around that and domains becoming greater in focus. Are you getting closer to being clearer on the monetization opportunity? Are you seeing any early signs of that? Can you just give us an update on where you are and when we can expect to start to see it hit the financials?
Yeah. We're pretty excited about the agentic open web. Really what it comes down to on the agentic open web is that we, as the world, has to decide whether we're going to treat agents as humans or as machines. On the internet today, humans are anonymous. They have anonymity, but machines don't. Machines have IP addresses, and you can trace them. Our thought process behind ANS is that agents should have identity. We should be able to identify them. The reason that's important is because identity builds trust, and trust enables engagement, it enables commerce, and all the engagement and commerce create opportunity, right? That opportunity can be a tailwind for every industry as agents become sort of the bigger and bigger part of the internet. So we're still pretty excited about it. I talked about it a little bit.
We just did a big demonstration of how agents could transact on the open web and have identity and be trusted. As part of that demonstration, we also showed how two agents that have never engaged before can complete a transaction, but also rogue agents can be rejected because of how the open standards are evolving. We think that's a tremendous opportunity. It is still a long-term play. While we have some of the best companies in the world engaged on it, we continue to sort of wait for that moment where we can truly break through on it and make it very large. So pretty excited about ANS, but it continues to be a long-term opportunity.
It's not in any of our numbers as they exist today, just FYI.
Okay. Then as a second on sort of the competitive pricing environment you guys are talking about here. I guess, A, do you think that there could be a prolonged pricing environment as the competitive ecosystem continues to evolve here? Can you talk a little bit more about what you're seeing in the credit packs and particularly in the upgrade paths, in terms of conversion? Are customers less price-sensitive at that point? What are you seeing when people are hitting that wall? Is it too early to tell or just any early signals around that? Thanks.
Yeah. I think on discounting or pricing, I think what is going to happen is in every iteration of products coming out to customers with new technology, you have to increase the value for customers and then find ways to monetize that and create margin for shareholders and the company, right? I think we're going through that cycle. This is where we're pretty excited about some of the new bundles that we're going to test over the next 3 to 6 months because we think they address some of these exact things that we're talking about and have us be very, very competitive on them. On the credit packs, I don't know if there's more to be added versus what you already said, Mark.
No, there's nothing to call out at this juncture. We're seeing a healthy attach of the credit packs. We're seeing customers coming back for more. We're seeing power users of credit packs, and then we're seeing regular users. But it's too early to really say, "Hey, this is a pattern we can call out as permanent," given the newness of the introduction.
Yeah. I think the one comment I made is that this is all very dynamic space with improvement in LLMs, improvement in agents, open weight models. I would say this is an early very dynamic thing, and let's see how it progresses over time.
Got it. Thank you.
We will try again for Chris Yeung. Chris Yeung from UBS, are you there?
Yes, I'm here. Can you hear me now?
We can. Thank you.
Awesome. Thank you so much. I also have two questions if I could. The first one, also on ANS, just because the recent development in the market and also the Chain of Trust demonstration appears very fascinating. Just wanted to think more conceptually, understanding that it is not in numbers. I do not think anyone is actually pressing for immediate direct monetization. But thinking about the role of ANS longer term, especially in a commerce transaction, I think there can be a lot of collaboration with what the card networks are doing or can be doing, and maybe there is some overlap. But overall, I think it is more of a part of the ecosystem.
But on the other hand, in terms of monetization, I feel like maybe more of the monetization is going to be done through the payments ecosystem, with the benefit accruing to them with the agentic network tokens and Trusted Agent Protocol by the card networks. Is it fair to understand the ANS is more of a longer-term indirect driver for domain subscription growth, or is there any other scenario you could potentially monetize ANS? Compared to this, what is the incremental investment you see needed in the years to come?
Yeah. I will be super quick because we are almost at time. We do think ANS is a great tailwind for domains and continue to keep domains at the heart and DNS at the heart of the agentic open web. You listed out a number of use cases. We actually believe that there are many use cases in terms of ANS monetization. We are pursuing a couple of them. We are excited about them. But there is a lot to prove out with it, I would say, over the next few months and years. I think you had a second question, if you want.
Incremental investment, and I will just really quick say it. Listen, we have built out the infrastructure around DNS, and this will be on top of the DNS and an evolution of that structure. There probably is some stuff, but we are not there yet, right? We still are looking for adoption. We are still looking at how this would roll out and making sure people agree with the concept and where we are going. That is the most important part right now.
All right, awesome. Thank you so much, Aman and Mark, for accommodating my question. The second one, I will be quick on the second one. I think for the 70% of the Airo customers that have at least two paid products, maybe can you just recap again, kind of bring to life what the 70% looks like. Outside of the 70%, are the customers mainly using just the domains plus a free Airo tier or if you can just give us a sense of the products
Yeah
the customers are using or not using.
Yeah. We are right at the end. I will give you a couple data points. The 70% is based on paid products. That does not include any free products within that metric. Most of the time it relates to domain. Then email is probably the next place they go, and that seems to be the makeup of the attaches that exist today.
Just to clarify, the 70% is out of all Airo customers.
Airo customers
that are new.
Yeah.
There is no domain only here. We're taking a cohort of new Airo customers that don't have other products, and what's the second product they attach?
Got you.
That percentage is higher than our average, which is another good reason to say Airo is very exciting.
Awesome.
All right.
That is super helpful.
Christie.
That concludes our questions. I will turn it back over to you, Aman, to close the call out.
Thank you all for joining. Very quickly, a big thanks to all GoDaddy employees, and we're looking forward to seeing many of our shareholders at our Investor Night.