GoDaddy Earnings: Profitability and Bookings Momentum Offset Aftermarket and Hosting Headwinds

We raise our fair value estimate for no-moat GoDaddy to $94 from $87 per share following strong third-quarter results that met our top-line expectations but exceeded our profitability assumptions. While aftermarket and hosting headwinds persisted into the third quarter, GoDaddy reported healthy bookings momentum, pointing to a recovery in top-line growth from fiscal 2024. In addition, GoDaddy is reaping benefits from headcount reductions, platform consolidation, and a cloud transition underpinning an impressive 250 basis points of sequential EBITDA margin improvement to 28%. While we expect GoDaddy will need to continue to invest in product functionality to remain competitive, we factor in structurally lower technology and development investment going forward, underpinning our improved valuation. Following a post-release rally, GoDaddy shares screen as fairly valued relative to our updated valuation, moving from 4-star to 3-star territory.