Chapter 2

Financials and Estimates

Over FY2023–FY2025 GoDaddy's operating income roughly doubled and free cash flow rose 57%, yet reported net income fell — a divergence created almost entirely by income-tax accounting, not by any deterioration in the business [1]. The forward view is a business consensus expects to grow revenue around 6% while compounding earnings per share in the mid-teens to mid-twenties, on trivial cash taxes [2].

Source: FY2025 Annual Report (Form 10-K) — Statements of Operations [3], Cash Flows [4], Income Taxes [5].

The three-year income statement

Revenue rose from $4,254.1M in FY2023 to $4,951.1M in FY2025, an 8.3% gain in the most recent year and a 7.9% annualized pace over the two years [6]. What stands out is not the top line but what happened below it: operating income climbed from $547.4M to $1,127.3M, and the operating margin expanded from 12.9% to 22.8% [7].

Source: FY2025 Annual Report (Form 10-K), MD&A — Results of Operations [8].

The margin gain is a story of fixed-cost leverage rather than cost-cutting. Total costs and operating expenses rose only 3.2% over the two years — from $3,706.7M to $3,823.8M — while revenue rose 16.4% [9]. Put differently, about 83 cents of every incremental revenue dollar fell through to operating income. Part of that is a genuine wind-down of past-cycle charges: restructuring dropped from $90.8M to $11.1M and depreciation and amortization fell from $171.3M to $116.6M as acquired intangibles ran off [10]. The rest is scale: technology, marketing and customer-care lines were roughly flat in dollars against a revenue base that grew by nearly $700M.

Reported earnings fell while pretax profit grew

Below operating income, the picture inverts. Reported net income attributable to GoDaddy declined from $1,374.8M in FY2023 to $936.9M in FY2024 to $875.0M in FY2025; basic earnings per share fell from $9.27 to $6.34 [11]. A screen sorting on EPS growth would flag GoDaddy as a company in decline. It is not. Income before income taxes moved the other way — from $403.8M to $1,020.0M, a 2.5-fold increase [12].

Source: FY2025 Annual Report (Form 10-K), Consolidated Statements of Operations [13].

The entire divergence sits on the tax line. FY2023 carried an income-tax benefit of $971.8M and FY2024 a further benefit of $171.5M, while FY2025 recorded a normal tax provision of $145.0M at a 14.2% effective rate [14]. Those prior-year benefits came from recognizing deferred tax assets — GoDaddy stopped maintaining a valuation allowance against most of its U.S. federal and state deferred tax assets, and a legal-entity restructuring added more — which flattered FY2023–FY2024 net income by hundreds of millions of non-recurring, non-operating dollars [15]. Measured on pretax profit, FY2025 is by far the strongest of the three years; measured on reported EPS, it looks the weakest.

Cash taxes and the NOL shield

The tax swing that depressed reported earnings has a mirror image in cash: GoDaddy pays almost nothing in cash tax. Cash paid for income taxes was $16.5M in FY2025, $19.1M in FY2024 and $10.6M in FY2023 — against pretax income that reached $1,020.0M [16]. The FY2025 book provision of $145.0M is therefore largely deferred, not paid: the cash-flow statement adds back $157.4M of deferred taxes, having subtracted a $993.2M deferred benefit back in FY2023 [17]. The shield is durable: at year-end FY2025 GoDaddy held $5,332.3M of gross net operating losses and tax credits, of which only about $2.1 billion sits behind a valuation allowance, with the balance available to offset future taxable income [18].

That is why free cash flow runs ahead of net income. Operating cash flow rose from $1,047.6M to $1,599.4M, and with capital spending of just $23.9M — under 0.5% of revenue — free cash flow reached $1,575.5M, 1.8 times reported net income [19].

Source: FY2025 Annual Report (Form 10-K), MD&A — Cash Flows [20] and Consolidated Statements of Cash Flows [21].

One honest offset belongs here. Free cash flow is struck after adding back $317.8M of equity-based compensation, up from $296.3M in FY2023 — a real cost borne by shareholders through dilution rather than cash [22]. Charging that compensation against FCF would cut FY2025 free cash flow to roughly $1.26 billion. The buyback program that consumed 100% of reported FCF in FY2025 is, in part, spending cash to hold the share count against that ongoing issuance.

Where the growth comes from

The two reporting segments are moving at different speeds, and the mix is shifting toward the higher-margin one. Applications & Commerce — website building, commerce and payments, and third-party productivity such as Microsoft 365 — grew revenue 14.3% in FY2025 to $1,889.0M and carries a 45% segment-EBITDA margin [23]. Core Platform grew 4.9% to $3,062.1M, but that number hides a split: domains revenue rose from $2,018.5M to $2,310.5M over two years while the remaining "other" Core line — legacy hosting and add-ons — fell from $805.2M to $751.6M as GoDaddy migrated customers off end-of-life products [24].

Source: FY2025 Annual Report (Form 10-K), Disaggregated Revenue [25].

Segment profitability improved on both sides. A&C segment EBITDA rose from $594.2M to $856.9M and Core from $816.4M to $1,010.3M; total segment EBITDA reached $1,867.2M against roughly $281M of unallocated corporate overhead [26]. The growth mix matters for the durable-versus-maturing question: the fast, high-margin part of the business (A&C, plus domains) is compounding at low-teens rates, while the slow-growth drag is a shrinking legacy tail — not the core franchise.

The forward view

Consensus frames the next two years as steady revenue with faster earnings. Analysts model revenue of about $5,242M in FY2026 and $5,549M in FY2027 — growth near 5.9% in each year — while consensus EPS rises from $6.22 in FY2025 to $7.11 in FY2026 and $8.97 in FY2027, gains of roughly 14% and 26%.

Source: consensus estimates (16 analysts for revenue, 12 for EPS); FY2025 actual per FY2025 Annual Report (Form 10-K) [27].

Management's own FY2026 guidance is consistent with that: revenue of $5.195–5.275 billion, about 6% growth at the midpoint, a normalized EBITDA margin above 33%, and free cash flow of roughly $1.8 billion at greater than 1:1 conversion, with a reaffirmed 20%-plus free-cash-flow-per-share compounding target [28]. The guide also absorbs just over 200 basis points of self-inflicted and one-off revenue drag in FY2026 — the loss of the .CO registry contract and the exclusion of high-value aftermarket transactions account for about two-thirds, and a go-to-market shift toward shorter initial contract terms the remaining third [29].

The gap between ~6% revenue growth and mid-teens-to-mid-twenties EPS growth is the whole engine of the forward case: continued margin expansion plus a share count that management has shrunk about 33% since 2021 and continues to reduce. It rests on two assumptions worth watching. First, that the effective tax rate stays low — the 14.2% booked in FY2025 is helped by research credits and stock-compensation benefits, and a drift toward the low-20s statutory zone would trim GAAP EPS growth even as cash taxes stay shielded by NOLs into the back half of the decade [30]. Second, that revenue does not decelerate further — the ~6% pace is guided, not achieved, and the recent revision trend is modestly negative, with FY2026 and FY2027 EPS estimates edged down over the past month.

Source: consensus analyst recommendations, as reported.

The sell-side sits split, not bullish: 8 buy or strong-buy ratings against 8 holds and no sells, with a median price target of $100 and a mean near $112 against a share price of about $89 — a spread of high-$83 lows to a $190 high. The distribution reads as a market that accepts the cash-generation case but is unwilling to pay up for a mid-single-digit grower until the revenue line reaccelerates or the buyback-driven EPS math proves itself. For a business whose operating profit and cash flow have compounded through a period when its own reported earnings said otherwise, that reconciliation — clean cash and rising pretax profit against a cooling top line and a normalizing tax rate — is where the durable-compounder and the maturing-business readings meet.