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We woke up to a great headline, of course, the market responding obviously very positively to it. I think that goes back to what we have been talking about for the last couple of months, is just day by day, you just don't know really what is going to happen. This is a very headline-driven market, and for as bad as things may seem one day, you just don't know the next day they could turn on a dime, and it seems like today we hit that turn on dime status. I think it's worth remembering, this is a temporary solution. This is not something that is locked in in a full-on deal, but it does seem at least like there is some progress in diplomacy and talks. Perhaps the UK deal that was announced late last week, is a bit of a catalyst here. Maybe that's a sign of good things to come. We will have to wait and see.

But I think a lot of what we've been discussing in regard to tariffs and trade talks, most of this is really centered around ultimately China. China is the pot of gold at the end of the rainbow, as they would say. This is where we really need to figure this deal out because when you talk about trade deficits, and there are positives and negatives that come with all of that. But in regard to China, specifically, we've become very dependent on China through the years. When you think about the relationship we've had with China through the years, going all the way back to the 1970s when we really started diplomatically working together, over time, we've seen this trade deficit, where we're importing more than we're exporting. This trade deficit has just continued to grow.

You look at the 2000s. Around 2000, that trade deficit had reached around $85 billion. From there, it just continued to grow. It hit a peak of close to $420 billion in 2018. Today, it's closer to around $300 billion. But the goal, I think, here, is to try to balance that relationship out. Hopefully, this is a sign of good things to come. Again, it's one headline. We don't know a lot. There are not a lot of specifics, but it does seem like progress is at least being made.

Dylan Lewis: If you're like me, you've probably had a hard time following where we are relative to where we've started with a lot of these escalations. From the reading and from some of the reporting out there, it seems like this essentially resets to where we were with the US and China relations in late March. Initial tariffs announced by the Trump administration, retaliations on both sides. You were on the show last week with our colleague Ricky Mulvey, talking about how the S&P 500 had essentially retraced the Liberation Day losses. In terms of macro mentality, are we basically looking at 90-day amnesia here, where we lost some time, but we wound up back in the same place?

Jason Moser: When we look at the numbers, it's just been such a boring year. The market is essentially flat. Ho-hum, who cares? This has just been a really bumpy ride, going back to, you remember how this all started? This was what? The late February, early March, where the conversation really centered around Canada and China in certain trade negotiations there, but also fentanyl stuff and border stuff. Then it expanded very quickly to it seemed like virtually every country on the face of the planet, which is, I know, something like 180, 190 countries. It does feel like we are back to where we started. It's nice to see at least some progress being made. Go back to that UK trade deal. Hopefully, that is a sign of things to come.

We know that countries are coming to the table and want to negotiate. But again, given our relationship with China, and to an extent, our reliance on China, I think China is really seen as the most important of all of these deals. Again, time will tell there. Again, this is not a permanent solution. This is just something that it's extending the timeline. It's indicating that, hey, conversations are being had, because if you think about it, this tit for tat just doesn't work. Hey, I say 175% tariffs. Well, hey, I'll say 185%. Well, I'm going to go 195. It can just go up and up and up and nobody ends up benefiting. We certainly know that China's economy is suffering from this. But we also know that our economy will suffer from this as well. Particularly as we get closer to the holiday season, if you start seeing supply dwindle and consumers aren't able to get what they want, there are going to be real problems. There will be political ramifications that come from that, as well. It's good to see progress being made. I certainly would not look at this as a solution, but it seems like at least a step in the right direction.

Dylan Lewis: Your dogs seem to agree there, Jason.

Jason Moser: They do. They're big fans of diplomacy, Dylan.

Dylan Lewis: As we noted, good day for the market. Even better day for companies that are in the business of buying and selling, and really, anybody in retail, anybody with international supply chains. As you noted, this is a reset, but a reprieve as well. Not a full solution. Any wise words for investors seeing some major moves with their stocks today?

Jason Moser: I think it's great. We always love to see our portfolios in the green or the black, however you want to put it. But it's always nice to see positive as opposed to negative. I think it's really interesting to see the companies that are reacting most strongly to these results. Look at some of these companies that stand out, Wayfair, for example, have better than 20%, totally understandable. They really depend on the supply chain centered around China. Shopify, again, we've talked about that before, plenty of small and medium-sized businesses that do not fare well during these heavy tariff times, all the way down the line there. Amazon doing well, Nike doing well. I think it's nice to see those companies at least starting to recover a little bit from these lows. Again, I think this reiterates why we invest the way we do here. It is so if you tried to time your way in and out of this stuff, I can't imagine that many people would have been very successful. Continuing to invest regularly, staying invested, that is something we just need to reiterate to people because that is really, truly, that's the solution to long-term wealth creation.

Dylan Lewis: We may get some more commentary on the big picture here when we see Walmart and some of the Chinese companies like Alibaba report later in the week, fairly big earnings week, and Fox got started. They're out with earnings this week, and they also had an announcement that their upcoming streaming service, Fox One, will be launching before the upcoming football season, which I can't imagine is an accident. I imagine that's quite intentional. This is something we've been looking forward to for a while, Jason. There's a history of legacy media companies getting streaming services right. There's a history of legacy media companies getting streaming services wrong. I think CNN+ lasted for about a month. What are you thinking about as you see Fox stepping up to the competition here?

Jason Moser: I think it's noteworthy to acknowledge that Fox is looking at this streaming service as something where they want to attract the cord cutter. There's two sides of the coin here, in that we've got folks who are still very happy cable subscribers, and we were looking at it countrywide. There's still plenty of cable subscribers out there. Now, we know the trend is toward cord-cutting, but Fox wants to make sure to offer something for everyone. If, for example, you are a cable subscriber and you get your Fox channels, well, then it sounds like you're going to get access to this Fox One streaming service as well. If you're a cord cutter and you don't really want to participate in the cable network, well, then you have the opportunity to go ahead and subscribe to this Fox streaming service. It's important to note, I think this Fox streaming service is going to be all of the properties. It's not just Fox News. It's the stand-alone Fox channel. It's all of the Fox Sports channel. It's everything that comes within that Fox portfolio.

Let's be clear. It's a very popular portfolio. It garners a lot of viewers, and I think that really matters. You referred back to that NFL relationship there, and that is obviously a very big driver come August when we start talking about preseason and getting into September with the regular season games. NFL is just big business. We know that, and Fox benefits greatly from that. I think we don't really know exactly what pricing is going to look like for this service yet, but it does sound like at least they are not looking for some type of discount or low cost price point, something like, think about Disney when they introduced Disney Plus, for example, and I think they started that out at 599 or 699 per month. I don't think that's what this is going to be. It's going to be something that's a little bit more reflective of the value that they feel like they're returning to all of their viewers. But all things considered, I think this makes sense. It's going to be something that I think helps expand their viewership and gives everybody a chance to participate in that Fox portfolio, how they want, whether they're cable subscribers or whether they are cord cutters that really just want to find access to the best content.

Dylan Lewis: One thing that might bolster some market confidence here in what Fox is able to do, this is not their first horse in the streaming race. They already own Tubi, which is a free ad-supported streaming service. A sleeper in the streaming space in a lot of ways, but at a critical mass. I think with what they saw for Super Bowl editions, they are probably over 100 million monthly active users at this point. It's not a profitable operation for them yet, but they've done over a billion dollars in trailing 12-month revenue. There is some track record of success here, and I think crucially, Jason, there's success in connecting with advertisers and working that ad-supported model. That really seems to be the future of where a lot of this industry is going.

Jason Moser: Well, we've talked about this a lot in regard to ad-supported video-on-demand. This is a massive market opportunity worldwide. I think when you get outside of the US and you get to economies that are a little bit more cost-sensitive, it makes even more sense. But when you look at revenue in the advertising video-on-demand supported market right there, worldwide, it's projected to reach around $55 billion in 2025. That's only going to continue to grow. For me, it makes a lot of sense that they continue to pursue this. It's just interesting that, I don't know about you, it's not top of mind for me. I'm not the biggest Tubi user. I know we have the app on our TV, and I guess we use it every once in a while if we're searching for content. But again, you mentioned this massive base of user, closing in on 100 million monthly active users. They saw in the quarter, their total revenue is up 27%. Fox's total revenue is up 27% for the quarter. Advertising revenue increased 65%, and that primarily was due to the impact of Tubi. They saw tremendous benefit there from the Super Bowl. I think that's something that is slated to continue. For me, it makes sense that they continue to invest in this business because not only do they benefit from this portfolio of central Fox offerings that they have, but then they've got these other little ancillary properties that they just continue to invest in and they fly under the radar.

But obviously, it's working out very well for the company. I think it's worth noting, you look at Amazon, for example, Amazon making a lot of investments in their Freevee offering, which is something essentially, you're going to get Amazon Freevee if you just have Amazon at all, if you're a Prime member. However your relationship is with Amazon, you're going to have access to Freevee. Amazon clearly sees an opportunity there as well. Again, I think, going back to those growth numbers in the AVOD market there, it's nice to see that Fox continues to invest in this business because it's obviously working out for them.

Dylan Lewis: Fox is not a name that we talk about all that often and to our detriment. Shares up almost 60% over the last 12 months. I was glad that we had the opportunity to check in on it because it's one that not a lot of folks have been paying attention to. Stock basically set new all time highs earlier this year, not too far off those levels now. It seems like advertising is a big part of the recent run. If this is getting onto people's radar at all, anything else you pay attention to?

Jason Moser: I think just continue to pay attention to the overall advertising revenue. The ratings that Fox brings in, I think we all know. Fox does pretty well with all of its properties. I think they really benefited tremendously from this most recent election cycle. They noted in the call from last call that on election night, they saw over 13-and-half million viewers tuning in, and then I think they said Fox News Channel had grown. It become the most watched cable network in total day and prime time in that space, growing total day audience by nearly 40%, and then their prime time audience by 45% year over year. It's not just Fox News. We go back to the NFL relationship in all of the different ways they can really win. It's not just Fox News. It's Fox Sports. It's Fox News. It's the stand-alone Fox offering there. They do have a lot of different ways they can win with their media properties. At the end of the day, it does boil down to ratings and as it stands right now, Fox continues to bring in strong ratings across all of its properties. That would be a very encouraging thing for investors looking to maybe get some exposure to the entertainment space.

Dylan Lewis: Jason Moser, thanks for joining me today.

Jason Moser: Thank you.

Dylan Lewis: Hey, Fools, we're taking a quick break for a word from our sponsor for today's episode.

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Listeners, coming up on the show, you may know GoDaddy for its commercials, but you probably don't know its capital allocation story. One that's made the stock a market beater. My colleague Ricky Mulvey caught up with GoDaddy's CFO, Mark McCaffrey, for an interview about the company's growth engine and philosophy on share buybacks.

Ricky Mulvey: A lot of our listeners may know GoDaddy as a domain registration business. They may not know GoDaddy as a long-term market outperformer, which I want to get into. We'll focus on the quarterly results, though, because right now, the growth engine and about a third of your revenue is coming from this applications in commerce business. This is not just registering websites. That's where you're getting 17% sales growth. For our listeners who just know GoDaddy is a spot where you're buying websites, what should they understand about the applications in commerce business?

Mark McCaffrey: Absolutely. It's a great question. We've become so much more than just being a domain company over the years. We just hit our 10-year anniversary of being a public company. We've been around 28 years. We've become a one-stop shop for micro businesses that provide them the IT services for them to be effective, them to be efficient, them to compete on a much broader scale. We're talking the mom and pop shops. I always refer to them the underdogs. They are doing what they love. They are passionate about what they do. They want to do it broader. They want to connect to more customers. They may not be IT savvy. We provide them, I sometimes refer to it as the operating systems for the micro businesses. That's what our application and commerce segment represents. Our core platform was the traditional domain part of our business, but this is the software that gets attached.

It's more often than not a website or an email or commerce capabilities. But it represents a second and third and fourth product attached that makes our customers successful. Because it's proprietary software and some third-party software, but proprietary software, it comes at a much higher profit margin for us and therefore has been our growth engine. It has become a bigger and bigger part of the business.

Ricky Mulvey: We've been talking on the show about how very large companies are using artificial intelligence, Microsoft building up with OpenAI. Palantir getting inserted into every government and any company they can find. You're at a micro level with very small businesses in helping them use AI to build and grow their businesses. At a very broad level, how do you see AI impacting small business creation in the US right now?

Mark McCaffrey: When you think about it, and again, when we say micro businesses, we're probably smaller than the small businesses others refer to. They don't think about AI as to, oh, my God, I want to use AI, but they want to have help. They don't want to hire necessarily more employees. But yet, for example, they have to respond across multiple different social media platforms to inbounds, and our tools do that automatically. They write in their voice. They allow them to be in multiple places at multiple times. I was just meeting with, I call them the pizza guys, but they're two guys who run a mobile pizza oven, and between putting a pizza in for 90 seconds, they're on our conversations tool just clicking Send to make sure that they're setting up their next gig. That's the type of customer we want. They don't sit there and think about, oh, my God, I'm using AI. They're sitting there going, oh, my God, this just works better. That is the customer we want. That's what our product does, Airo, A-I-R-O, just for the record. It allows our customers using AI to respond more effectively and more efficiently within their customer base to grow. It works because we have so much data around it.

Ricky Mulvey: This is a zone where Shopify also plays. We talk about Shopify a lot on the show. What's the differentiation of Airo? If I'm a micro business, if I'm starting my own pizza business with my brother, why would I do it on GoDaddy's platform instead of Shopify?

Mark McCaffrey: Number 1, it's a seamless experience for us. You come to one place and you're able to get all the functionality. Number 2, the cost effectiveness of it. We do it at such a good price point for the value our customers are getting. It allows them to start up, be more successful, and quite frankly, manage across one application. When you think about it, we're the only company in the world that has the technology stack all the way from the domain to the transaction. Because we can combine that into one seamless experience with them, they don't have to manage eight apps. They manage one app, and when they need help, they go to our care organization, and our care organization is designed to work with this customer base, work with the micro business. This is what they do best and why they're so effective. Between the technology itself and our ability to guide them through all of this, I always say, you can be up and running with a business in 15 minutes. I get corrected by my internal people to say, no, actually, we can do it in three minutes. Can you stop saying it takes so long. But you can get everything you need almost instantaneously bundled together as a great price, be up and running with website, transactions, professional email, and a domain, and you can be getting all your traffic across multiple social media platforms. That's what we offer. It's simple. It's easy. It's easy to use, and it's easy to maintain.

Ricky Mulvey: One of the reasons I'm happy to have you on the show is that GoDaddy has a very interesting capital allocation story. There's a long-term outperformance for your stock since GoDaddy IPOed. But 2023 is when a lot of that performance came, and that's in line with when you started a stock repurchase authorization program. Since 2022, GoDaddy bought back four billion dollars worth of stock. I don't want to dismiss the growth in the actual business, but there's a capital allocation story here that's important for shareholders. As CFO, you've really focused on share buybacks. You've got another three billion dollar authorization plan moving forward for the next few years. But just conceptually you've got a lot of options at your disposal. You can buy back stock. You can pay a regular dividend. You can pay a special dividend. Why stick with the buyback so much?

Mark McCaffrey: I'll start with the underlying premise that we think investing in our own stock is one of the most attractive returns we have out there. We've shown that we've been able to execute on this buyback strategy very effectively. Thank you for pointing out. We've done it over four years, four billion dollars. Not many companies have reduced their fully diluted share account by 25% over a period of time such as this. We're very proud of that, and we're very proud to not only share the success we've had, obviously, we generate a lot of free cash flow that allows us to have these options, but also return that value back to our shareholders and do it in a manner that we continue to, I would say, create this great model. I'll even take it a step further, how many companies out there today are growing 6-8%, have expanded their normalized EBITDA margins by 900 basis points in five years, and then bought back 25% of their fully diluted shares over a similar period of time and still are able to compound to free cash flow per share on a CAGR of 20%. That whole model works together for us fantastically. It's durable. It's resilient, and we continue to put it forward because it works, and our investors keep giving us the feedback. They really like the program. They really like how we do this, and they want us to continue doing this.

Ricky Mulvey: Since GoDaddy's IPO 10 years ago, I mentioned this at the top, it's been a quiet market beater, and a lot of that performance has come within the past few years, so I don't want to dismiss that. But when you look at the overall results, the S&P 500 compound annual growth rate of about 12%, the Nasdaq about 16%, and GoDaddy at 25%, smashing the return of the S&P 500. When you look back on 10 years as a public company, any reflections on the outperformance or maybe what's been the recipe for that at GoDaddy?

Mark McCaffrey: The recipe is focusing on what we call our North Star and making sure that everything we do is in honor of that North Star. We call our North Star free cash flow per share. We generate free cash flow, whether it's growth, whether it's profitability. We're always looking to do that in a way to maximize that equation, understanding that our model is durable, it's predictable, and we can use the levers to make sure we continue to compound into that equation and drive that value. As we've done that, as we've grown as a company, as we've hit this milestone, because we are a very large tech company, we know that hey, 90% of our revenue starts with our existing customer base. We know we have great products and innovation that bring people into our funnel. We know this model compounds on itself year after year as our customer retention rates get stronger. That compounding free cash flow is what creates the value within the business itself, and that's the same value we can use to return to our shareholders.

I would say the model works. Our execution of our strategy works. Our model works behind it, and it's about the compounding effect of layering on every year just to be a little bit better and to grow based on these metrics that just continue to generate cash flow. I would also say, three years ago, we took an effort to really simplify our infrastructure so that our operating leverage just supported this going forward. We're growing revenue at over two times. We're growing our operating expenses right now. That allows us to be so efficient in how we do things. When we're efficient, we can do what we do best, which is focus on our customers. Again, it all holds together, but it all compounds on each other. The balance sheet gets stronger. We're able to generate free cash flow. We're able to look at the options for capital allocation, and it puts us in a great spot going forward.

Ricky Mulvey: Good place, send it. Mark McCaffrey. That is the chief financial officer of GoDaddy. Appreciate your time and your insight. Thanks for joining us on Motley Fool Money.

Mark McCaffrey: Thanks, Ricky. Thanks for having me.

Dylan Lewis: As always, people in the program may have interests in the stocks they talk about, and Motley Fool may have formal recommendations for or against, so don't buy sell anything based solely on what you hear. All personal finance content follows Motley Fool editorial standards. It's not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. To see our full advertising disclosure. Please check out our show notes. For the Motley Fool Money team, I'm Dylan Lewis. We'll be back tomorrow.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Dylan Lewis has positions in Shopify. Jason Moser has positions in Amazon, Shopify, and Wayfair. Ricky Mulvey has positions in Shopify. The Motley Fool has positions in and recommends Amazon, Microsoft, Palantir Technologies, Shopify, and Walmart. The Motley Fool recommends Alibaba Group, GoDaddy, and Wayfair and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Fox Corp. Readies Fox One Streaming Service was originally published by The Motley Fool