GoDaddy (GDDY): It Beat Earnings and Fell 17% — Now Priced for a Decline That Hasn’t Started

GoDaddy Inc. (GDDY) Q2 2026 — Revenue $1,298.0M (+6.6%), top of guidance. Diluted EPS $1.83 vs $1.41 (+30%) vs ~$1.69 est. Operating income $342.5M (+28.6%), a record 26.4% margin. FCF $443.5M, and the ~$1.8B FY26 target reaffirmed. The stock closed at $82.74, DOWN 16.7%. GoDaddy beat, posted a record margin, generated $443.5M of free cash flow and reaffirmed $1.8B — and lost a sixth of its value in a session. Two things did it: FY26 guidance narrowed to a midpoint just under consensus, and total customers grew only 22,000 in the quarter, 35,000 in six months, on a base of 20.5 million. THE CALL: ACCUMULATE (3/5, PRICED FOR A DECLINE THAT HASN'T STARTED) — base-case value ~$94.0 vs ~$82.74 today. KEY METRICS: - Revenue $1,298.0M (+6.6%, +6.3% cc), top of the $1.285-1.305B guide. A&C $514.8M (+11.0%); Core Platform $783.2M (+3.9%); International $427.1M (+7.9%). Bookings $1,422.1M (+5.7%) — A&C bookings slowed 9% to 7% against an EASIER comp - Diluted EPS $1.83 vs $1.41 (+30%) vs ~$1.69 est; net income $240.1M (+20.1%). EPS beat net income by 10pts purely on buybacks: 9.8M shares for $851.8M YTD, diluted shares down 7% since January to 127M (>95% of FCF to buybacks for 4 years) - Operating income $342.5M (+28.6%), a record 26.4% margin (+450bps) — BUT D&A fell $30.6M to $13.3M and stock comp $81.0M to $70.2M, together ~37% of the $76.2M gain. The honest number is NEBITDA +13.7% to $434.1M (33.4%) - THE NUMBER NOBODY MENTIONED: 20.5M customers, +22,000 in the quarter and +35,000 in six months (~0.17% annualised). ARPU +8.7% to $250 did all the work. Never cited on the call; none of the 11 analysts asked. Retention >85% and improving - AIRO CANNIBALISES AS IT SCALES: run rate $50M, 5x last quarter's $10M — but the CFO put the drag at 'about a point to our TOTAL bookings'. ~100bps destroyed while Airo is ~0.9% of a ~$5.7B bookings run rate. Do It For You was '~a couple thousand dollars'; Airo is subscription+tokens, 'a smaller number' - THE TAX SHIELD NOBODY ASKED ABOUT: H1 tax provision $144.2M but deferred taxes added back $130.8M — roughly $13M of CASH tax on $598.9M pre-tax (~2%). The deferred tax asset fell $1,052.6M to $912.6M in six months; spent in ~3.5 years, costing ~$270M/yr of FCF - GUIDANCE: Q3 $1.315-1.335B (+5%, toughest aftermarket comp); FY26 narrowed to $5.215-5.255B (+6%) vs ~$5.242B consensus; FCF ~$1.8B reaffirmed. Asked to time the Airo transition: 'not putting a timetable on this' — deferred to a 1 Dec Investor Night. Net debt $2,661.4M (1.4x); equity is $6.7 MILLION on $8.0B of assets - OUR OWNER-EARNINGS BRIDGE: $1.80B guided FCF, less $291M of stock comp, less ~$270M of normalised cash tax = $1.24B — $9.76/share, an 11.8% yield at $82.74 AFTER both haircuts - OUR DCF at 10.5%, 127.0M diluted shares, $2.66B net debt: bear $48, base $94, bull $160; weighted 30/50/20 = ~$93, so we sit at ~$94, about 14% above the close. REVERSE DCF: at $82.74 the EV is $13.17B, which against $1.24B of owner earnings implies 1.1% growth FOREVER — from a company guiding +6%. EV/FCF 7.3x, FCF yield 17.1% - STREET: Buy (22 buy/15 hold/1 sell, 38 analysts). Fast revisers on 31 July average $94.29 ($80-$100): Wells Fargo $80, Cantor $90, Piper/Evercore $95, Raymond James DOWNGRADED at $100, William Blair DOWNGRADED. Slower movers at $110-$170 drag the quoted average to ~$112. We AGREE with the fast revisers, CAUTIOUS on the stale average What to watch: Bullish: total customers growing again (>100k net adds) with A&C bookings back above 9%. Bearish: the Airo bookings drag widening past 200bps, Core revenue turning negative, or a cut to the $1.8B FCF target. Size buyer nearer ~$70. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.