GoDaddy Inc. (GDDY) 2025 Earnings Quality Report

Grade: F — Major Red Flags

Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles

Data: SEC EDGAR 10-K (Filed 2026-02-25) + Yahoo Finance

Auditor: Ernst & Young LLP — Clean opinion (served since 2004)

One-line verdict: GoDaddy's operations are increasingly efficient — operating cash flow surged 24% to $1.6B and the company generated $1.6B in free cash flow on $875M of net income. But the balance sheet tells a different story. Goodwill plus intangibles of $4.6B represent over 2,100% of a razor-thin $215M stockholders' equity, cash covers only 28% of $3.9B in debt, and the Altman Z-Score of -1.07 places GoDaddy in the distress zone. This is a profitable subscription business funding aggressive buybacks with debt, compressing equity while inflating leverage ratios to alarming levels. Net income declined 6.6% despite revenue growth of 8.3%, partly because FY2024 included a non-recurring $267M tax benefit from restructuring Desert Newco. The M-Score reads clean at -2.97 — the cleanest in this batch — but structural fragility earns the F.

Revenue: Steady Growth, Two-Segment Model

Per the consolidated statements of operations:

Applications & Commerce grew 14.3% and now represents 38.2% of revenue, up from 33.6% two years ago. This higher-margin segment includes proprietary website builders and commerce tools. Core Platform — domains, hosting, and related services — grew a slower 4.9%.

Net income declined 6.6% despite operating income growing 26.2%. The filing explains: FY2024 included "a non-routine, non-cash benefit to income taxes of $267.4 million related to the conversion of GoDaddy's Desert Newco, LLC subsidiary from a partnership to a disregarded entity for U.S. income tax purposes." FY2025 had a smaller one-time $34.6M tax benefit. Stripping out these non-recurring items, underlying profitability improved.

Cash Flow: Strong and Improving

Per the filing's financial highlights:

Cash conversion is excellent — $1.83 of operating cash per $1 of earnings. The low CapEx ($24M on $5B revenue) reflects GoDaddy's asset-light model. Bookings of $5.4B exceeded recognized revenue of $5.0B, indicating the deferred revenue base continues to grow.

Stock-based compensation of $318M is the largest non-cash item, representing 36% of net income. While high, it is consistent year-over-year and not used to mask operational deficiencies.

Balance Sheet: The Leverage Trap

Per the consolidated balance sheet:

Stockholders' equity collapsed from $692M to $215M — a 69% decline in one year. The accumulated deficit deepened by $737M, driven by share buybacks that exceeded net income. Goodwill of $3.6B increased $114M, entirely from foreign currency translation — no acquisitions.

The intangible asset detail reveals that most of GoDaddy's finite-lived intangibles are nearly fully amortized: customer-related intangibles have $13M net carrying value against $431M gross, and developed technology has $2.4M net against $241M gross. The indefinite-lived assets — trade names ($445M), domain portfolio ($217M), and contractual-based assets ($293M) — comprise $955M and are never amortized, meaning they sit at historical cost regardless of current value.

The Z-Score of -1.07 is alarming but must be interpreted carefully: GoDaddy's negative equity is self-inflicted through buybacks, not from operating losses. The deferred revenue of $3.3B represents real customer prepayments, not liabilities in the traditional sense.

The 18-Point Screening

Key Risks from the 10-K

1. Restructuring and Other Charges

The filing notes $11.1M in restructuring charges in FY2025 and $39.4M in FY2024. The workforce was reduced to 5,845 employees by year-end.

2. Declining Equity Creates Acceleration Risk

Equity dropped from $692M to $215M. At the current rate of buyback-driven deficit accumulation, GoDaddy will have negative equity within one year. While this is a choice rather than a crisis, it eliminates the equity cushion that protects debt holders and makes refinancing more expensive.

3. Revenue Concentration Risk — Domains

Core Platform (domains, hosting) still represents 62% of revenue. Domain registration is a commoditized, low-growth market. GoDaddy's strategy depends on upselling customers from commodity domains to higher-margin Applications & Commerce products.

4. Deferred Revenue Trends

Total deferred revenue grew from $3.1B to $3.3B — a healthy 7% increase that tracks revenue growth. This is a positive indicator of future revenue visibility.

Key Financial Trends (4-Year)

Summary

Grade: F. Two red flags. A healthy subscription business wearing a dangerously leveraged balance sheet.

GoDaddy is operationally sound: revenue grew 8.3%, operating income surged 26%, free cash flow of $1.6B covered net income 1.8x, and the M-Score of -2.97 is exceptionally clean. There is no evidence of earnings manipulation. The underlying subscription model — with deferred revenue of $3.3B providing visibility and CapEx of just $24M — is genuinely attractive.

The two red flags are both balance-sheet structural:

The Altman Z-Score of -1.07 formally places GoDaddy in the distress zone, but this is driven by the self-inflicted negative equity structure rather than operational deterioration. The real question is whether permanent negative equity increases refinancing risk when the term loans mature (2029 and 2031).

**Disclaimer**: This report is based on GoDaddy Inc.'s fiscal year 2025 10-K filed with the SEC on February 25, 2026. This is NOT investment advice.

**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade F means major red flags were detected that require thorough investigation.