Chapter 1

GoDaddy: The Business and the Setup

GoDaddy is the world's largest domain-name registrar and a subscription platform for small-business web presence: about 20.4 million customers, roughly 81 million domains under management, and $4.95 billion of revenue in 2025. It has grown free cash flow every year for a decade, to $1.6 billion, and used it to shrink the share count. The stock has since fallen about 58% from its January 2025 high while that cash flow kept rising — the gap that defines the investment question.

What GoDaddy does

GoDaddy sells the plumbing of being online. An entrepreneur registers a domain name, points it at a website, adds email, payments and marketing tools, and pays GoDaddy a recurring subscription for each piece. The company describes itself as a global leader serving entrepreneurs as a "one-stop shop," and reports about 20.4 million customers as of December 31, 2025 [1].

The foundation is domains. GoDaddy is the largest domain registrar in the world, with roughly 81 million domains under management at the end of 2025 — about 21% of the roughly 387 million domains registered worldwide — and approximately 94% of its customers hold a domain bought from GoDaddy [2]. The domain is the entry point; the higher-value products — website building, commerce, payments, email and security — are sold on top of that relationship.

The business reports in two segments. Core Platform ($3.06 billion in 2025) is domains plus hosting and security. Applications & Commerce ($1.89 billion) is the software layer: website builders, GoDaddy Payments, and resold productivity tools such as Microsoft 365 [3]. Within Core, domains alone generated $2.31 billion [4]. Applications & Commerce is the faster-growing, higher-margin end and the segment management is pushing hardest.

Source: FY2025 Annual Report (Form 10-K), segment and disaggregated-revenue disclosures [5] [6].

The revenue is overwhelmingly recurring and paid in advance. Customers typically pay at the time of sale for subscription terms that can run from one month to ten years, and GoDaddy recognizes that cash as revenue ratably over the term. The result is a large customer-funded balance: $3.32 billion of deferred revenue at year-end 2025 — about eight months of revenue booked but not yet recognized [7]. That float is why the business converts profit to cash so heavily, and why a soft quarter is slow to show up in reported revenue.

The scale, in numbers

Source: FY2025 Annual Report (Form 10-K), MD&A Key Performance Indicators [8].

The shape of growth has shifted from adding customers to earning more from each one. The customer count is roughly flat — 20.4 million, down slightly from 21.0 million in 2023 — while average revenue per customer has climbed to $242 and annualized recurring revenue reached $4.34 billion on total bookings of $5.4 billion [9]. Growth now comes from pricing, bundling and attaching commerce and software to an existing base, not from a rising headcount of customers. About two-thirds of revenue is generated in the United States, one-third internationally.

In 2025 that produced revenue of $4.95 billion, up 8.3%, operating income of $1.13 billion (a 22.8% operating margin) and net income of $875 million, or $6.22 in diluted earnings per share [10].

A decade of rising cash flow

The reason this company is worth studying for a cash-flow-focused investor is the record below. Revenue has roughly tripled since 2016, but the more striking series is free cash flow, which has risen in every single year of the decade — through a pandemic, a rate cycle, and a leadership change — from $325 million in 2016 to $1.58 billion in 2025.

Source: derived from reported financials, FY2016–FY2025 (Consolidated Statements of Cash Flows) [11].

Two features stand out. First, the gap between free cash flow and net income runs the "wrong" way for a skeptic's instinct: free cash flow of $1.58 billion in 2025 exceeded net income of $875 million, because the deferred-revenue float and low capital intensity mean cash arrives ahead of accounting profit [12]. Second, capital intensity is minimal: capital expenditure was $23.9 million in 2025, under 0.5% of revenue [13]. This is a business that grows without needing to reinvest much cash.

One honest qualifier belongs here at the outset: reported free cash flow does not charge for stock-based compensation, which was $318 million in 2025 [14]. Deducting it would lower the true owner's cash yield by roughly a fifth. The consistency of the cash flow is real; its exact level deserves the scrutiny a later chapter can give it.

What management does with the cash

Because the business needs so little reinvestment and pays no dividend, nearly all of the cash goes to buying back stock. GoDaddy repurchased $1.6 billion of its shares in 2025 and has bought back roughly $5.4 billion over the past five years [15]. The board's authorization was raised to a cumulative $4.0 billion through 2025 and, in April 2025, extended by a further $3.0 billion through 2027, with $2.17 billion still available at year-end [16].

Source: Consolidated Statements of Cash Flows, FY2021–FY2025 [17].

The buybacks have shrunk the count: Class A shares outstanding fell to 134.7 million at year-end 2025 from 141.2 million a year earlier [18]. There is a fair counter-point on timing, worth flagging early: much of the 2025 repurchasing was done through accelerated programs at a weighted-average price of about $176 per share [19] — roughly double today's price. Buying back stock is only value-accretive at the right price, and 2025's buying was not cheap. Whether the remaining $2.17 billion authorization is deployed better from here is a question for the reader to track.

The setup: a 58% decline against a rising business

Here is the tension that makes GoDaddy a decision rather than a description. The shares peaked near $214 in January 2025 and traded around $89 in July 2026 — a decline of roughly 58%. Over the same stretch, revenue accelerated to 8.3% growth and free cash flow set a fresh record [20]. The price re-rated; the cash flows, so far, did not.

Source: market price data, monthly closes January 2024–July 2026 (as reported).

At about $89 on roughly 140.6 million diluted shares, GoDaddy is valued near $12.5 billion of equity, or about $15.2 billion of enterprise value after $2.7 billion of net debt. Against $1.58 billion of reported free cash flow, that is a free-cash-flow yield of roughly 12.6% on the equity — closer to 10% measured against enterprise value, and lower again once stock-based compensation is charged.

Source: derived from market price data (July 2026) and FY2025 Annual Report balance sheet and cash-flow statement [21] [22].

The balance sheet carries $3.78 billion of debt against $1.08 billion of cash, so net debt is about $2.7 billion — roughly 1.7 times a single year of free cash flow [23]. That is modest leverage for a business this cash-generative, though not the net-cash position a conservative screen prefers. The $3.32 billion of deferred revenue is a customer-funded obligation to deliver service, not borrowed money, and the company does not count it as debt — a distinction that matters to how the balance sheet is read, and one a later chapter should test directly.

The question this report exists to answer

The pieces above frame a single analytical question, and it is the spine of everything that follows:

Can GoDaddy's domain-and-web-presence franchise keep compounding the roughly $1.6 billion of free cash flow it now produces — so that a decade out that cash flow is reliably higher, not lower — and is that durability being priced, after a 58% decline, at a double-digit free-cash-flow yield?

Both halves are contestable. The bull case is a near-monopoly registrar with a customer-funded float, a decade of unbroken cash growth, and a price that has halved while the fundamentals improved — the kind of gap between market value and cash-flow value that rewards patience. The bear case is that the same halving reflects a real threat: artificial-intelligence tools that let anyone spin up a website and a name in seconds may erode the very attach-and-upsell engine that lifts revenue per customer, and management's own filings now frame the company's future around an "agentic" internet it is racing to stay ahead of [24]. Whether the moat is durable enough to make year-ten cash flow a safe bet, and whether the current price pays for that durability with margin to spare, is what the rest of this report sets out to weigh.