August 2, 2018 / 8:20 PM / in 2 months

GoDaddy reports web hosting sales below estimates

(This version of the August 2nd story corrects paragraph 4 to remove reference to revenue growth in hosting business in previous quarters)

FILE PHOTO: The logo for internet company GoDaddy inc is shown on a computer screen in this illustration photo in Encinitas, California May 3, 2016. REUTERS/Mike Blake/File Photo

By Munsif Vengattil

(Reuters) - Internet domain provider GoDaddy (GDDY.N) missed Wall Street estimates for sales from its highly profitable web hosting business, pushing its shares down 4 percent on Thursday.

GoDaddy is the world’s largest domain name registrar and manages about a fifth of all global web domains, but its web hosting business that serves consumers and small businesses has driven the bulk of its profits in recent quarters.

Analysts have said the Scottsdale, Arizona-based company’s web hosting division generates profit margins well above 70 percent, compared with roughly half that amount at the domain business.

GoDaddy’s revenue from web hosting rose about 14 percent to $244.6 million in the second quarter ended June 30. The figure missed analysts’ average expectation of $247.3 million, according to FactSet.

The result overshadowed stronger-than-expected revenue and profit for the second quarter and a higher revenue forecast for the year as GoDaddy signed up more customers and earned more from each user.

The company had some 18 million customers overall at the end of the quarter, up 6.5 percent from a year earlier, thanks in part to its acquisition of European peer HEG last year.

Average revenue per user rose 10.2 percent to $142. The company says small businesses which start by choosing one GoDaddy service gradually sign up for others and help boost average revenue per user.

GoDaddy now expects annual revenue of between $2.65 billion and $2.66 billion, compared with $2.62 billion to $2.64 billion earlier.

A roughly 10 percent increase in overall expenses, largely to fund investments in new products, dragged GoDaddy’s net income lower by 13 percent to $18.1 million.

The company earned 12 cents per share, above analysts’ estimates of 8 cents.

Revenue rose to $651.6 million. Analysts had expected $643.6 million.

Shares of GoDaddy, which have gained about 52 percent this year, fell to $73.50 in after-hours trading.

Reporting by Munsif Vengattil in Bengaluru; Editing by Sai Sachin Ravikumar

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