Verisign (VRSN)
TL;DR
Verisign operates the .com and .net domain registries — the exclusive, government-sanctioned monopoly behind the internet's most valuable web addresses, at a ~68% operating margin. In Q2 2026 it delivered a record 12.7M new registrations (a 179.1M domain base), revenue +6% to $435M, EPS +7.7%, and raised its full-year domain-growth guide to 5.2–6%. It also unlocked optionality — .web was delegated into the DNS root with Verisign as operator and full pricing flexibility — while returning $1.17B last year and raising buyback authorization by $884M. The one debate is valuation: 28x for a ~6% grower on regulated .com pricing is a premium that needs the moat to hold.
Summary
| Finding | Assessment |
|---|---|
| 5-Year Stock Return | $262.11 now vs $202.66 five years ago (+29%); steady compounding plus buybacks. |
| Business Model | Government-sanctioned .com/.net registry monopoly; per-domain wholesale fees to registrars. |
| Competitive Moat | WIDE Exclusive registry rights + the .com default brand + critical DNS infrastructure. |
| Past 5-YR Drivers | Contractual price increases, domain-base growth, and relentless capital return. |
| Recent Stock Move | $262.11 now vs $187.79 (Sep 2024); re-rated on record new-registration strength. |
| Revenue Trend | STABLE YoY revenue growth 6.0%→5.0% (Q2'26→Q3'26E). |
| Margin Trend | STABLE Operating margin 68.2%→68.2% (Q2'26→Q3'26E). |
| TTM OP Trajectory | STABLE TTM OP QoQ +1.4%→+1.4% (Q2'26→Q3'26E). TTM OP $1,159M. |
| Key Opportunities | Record new registrations + AI tailwind, the .web launch, and the .com pricing runway. |
| Key Risks | Regulated .com pricing (NTIA cooperative agreement), a low growth ceiling / substitution, and a premium multiple. |
| Catalysts | The .web launch, H2 domain-base and renewal trends, and the November .com price increase. |
| P/E(ttm) Valuation | 28x — a premium for a rare, predictable toll-road monopoly. |
Q2 FY2026 Key Data (Apr–Jun 2026), reported 2026.07.23
- Revenue $435M (+6% YoY) and diluted EPS $2.38 (+7.7%). Operating income was $296M at a ~68% margin; free cash flow was $213M.
- The .com/.net base hit a record 179.1M (+3.05M in the quarter) on a record 12.7M new registrations (+21% YoY); renewal held at 75.2%.
- Guidance raised: FY2026 domain-base growth lifted and narrowed to 5.2–6%; $1.17B returned over the last year (>100% of FCF) and buyback authorization raised $884M.
Guidance: Full Year 2026
- FY2026 (raised): revenue $1,745–1,755M, operating income $1,185–1,195M, and domain-base growth 5.2–6.0% (increased and narrowed from prior).
- The raise reflects record H1 new-registration strength plus the November .com price increase; operating margin stays ~68%. Capex is guided to $55–65M and the GAAP tax rate to 22–25%.
- .web is not in the guide. Because it launches late this year (after a 90-day security test), management expects no meaningful .web revenue or expense in 2026 — any costs are already absorbed.
Key Takeaways from Earnings Call
- Record new-registration strength, amplified by AI. The 12.7M new registrations were the most in Verisign's history (vs 11.5M last quarter and 10.4M a year ago, +21% YoY), led by the U.S. and EMEA. Management credits sharpened registrar marketing programs plus an AI tailwind — AI tools make it faster to find domains, build sites, and get online. First-time renewals stayed in their normal mid-40% range, signaling quality names.
- .web is finally unlocked — real long-term optionality. After all prior disputes were resolved, .web was delegated into the DNS root zone with Verisign as registry operator. Unlike the regulated .com/.net, .web carries complete wholesale pricing flexibility (only a 6-month notice) and the ability to sell premium names. Verisign will offer it through registrars later this year, with .com holders getting first claim.
- A relentless capital-return machine. Verisign returned $1.17B over the trailing year — more than 100% of free cash flow — via buybacks and its $0.81 quarterly dividend, and the board raised buyback authorization by $884M to $1.5B (no expiration). The share count shrinks every quarter, lifting EPS; Q2 operating cash flow was $232M and free cash flow $213M.
- Raised guidance on a wide-moat, high-margin base. Verisign lifted its FY2026 domain-growth guide to 5.2–6% and revenue to $1,745–1,755M, backed by 29 years of 100% .com/.net uptime and ~68% margins. The November .com wholesale price increase (+7% to $10.97) adds a further durable, high-margin lever, ~50% of which flows into 2027 revenue.
Key Segments and Revenue Mix (Q2 FY2026)
| Component / Metric | Q2 FY2026 | Detail | Key Details |
|---|---|---|---|
| .com + .net domain base | 179.1M names | +3.05M QoQ | The core monopoly; a record base. .com wholesale fee rises +7% to $10.97 effective Nov 1, 2026. |
| New registrations | 12.7M | +21% YoY | A record for any quarter in Verisign's history (11.5M last quarter, 10.4M a year ago); U.S. and EMEA led. |
| Renewal rate | 75.2% | vs 75.5% a yr ago | First-time renewals holding in the normal mid-40% range; previously-renewed base ~mid-80%. |
| .web (new TLD) | Delegated | Launch late 2026 | Root-zone delegated with Verisign as operator; full wholesale pricing flexibility + premium names. No material 2026 impact. |
| Total revenue | $435M | +6% YoY | Single-segment registry; ~68% operating margin; per-domain wholesale fees to registrars. |
Business Model
SUPPLIERS
ICANN + U.S. NTIA / Dept. of Commerce (grant exclusive registry rights)
DNS infrastructure & root servers
Only ~928 employees
Registry rights /
infra
→
VERISIGN
Operates the .com + .net registries (authoritative DNS)
Per-domain wholesale fees
~68% operating margin
29-year 100% uptime record
Wholesale
domain fees
→
$ Revenue
CUSTOMERS
ICANN-accredited registrars (GoDaddy, Namecheap, …)
who sell to ~179M domain registrants
Businesses & individuals worldwide
Moat Assessment: WIDE
- A government-sanctioned monopoly. Verisign is the exclusive operator of .com and .net under long-term agreements with ICANN and the U.S. Commerce Department, with a presumptive right of renewal — one of the widest, most durable moats in all of tech.
- Critical infrastructure + the .com default brand. A 29-year record of 100% DNS uptime, a record 179.1M .com/.net base, and every .com renewal flowing through Verisign create immense stickiness and trust; the newly-delegated .web runs on the same high-assurance infrastructure.
- But it's a capped toll road. The flip side of the regulated monopoly is that .com pricing is limited (7%/yr) and governed by the NTIA cooperative agreement, and the agreements must be renewed (the .com agreement runs to 2030) — so monetization has a ceiling and a low-probability tail risk.
Stock vs. Earnings — 5-Year Performance
- Stock currently at $262.11, up 29% from $202.66 (5 years ago). The stock peaked near $284 in mid-2025, pulled back to ~$244, and has ground back up as record new-registration strength and raised guidance reinforced the compounder narrative.
- Earnings compounded steadily: TTM operating profit reached $1,159M on a rock-steady ~68% operating margin, and EPS grew faster than revenue thanks to relentless buybacks (share count fell from ~104M to ~92M).
- The multiple re-rated modestly: P/E ranged ~22–35x and sits at 28x — a premium the market pays for one of the most predictable, highest-margin business models in tech.
Past 5-Year Key Drivers
- Contractual price increases. Verisign is permitted to raise the .com wholesale price up to 7% per year in eligible years (and .net up to 10%) — a durable, high-margin revenue lever independent of unit growth.
- Relentless capital return. Years of heavy buybacks shrank the share count from ~104M to ~92M, and in 2025 Verisign initiated its first-ever dividend — compounding per-share value.
- Monopoly economics. With only ~928 employees, ~68% operating margins, and ~98% free-cash-flow conversion, the registry throws off enormous cash with minimal reinvestment.
Quarterly Key Metrics
| Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 | Q3 2026E | |
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Jun 2024 | Sep 2024 | Dec 2024 | Mar 2025 | Jun 2025 | Sep 2025 | Dec 2025 | Mar 2026 | Jun 2026 | Sep 2026 |
| Stock Price | $175 | $188 | $202 | $247 | $284 | $282 | $244 | $249 | $252 | $262 |
| Stock QoQ | -6% | +7% | +8% | +22% | +15% | -1% | -13% | +2% | +1% | +4% |
| Rev YoY | 4% | 4% | 4% | 5% | 6% | 7% | 8% | 7% | 6% | 5% |
| OM% | 69% | 69% | 67% | 67% | 68% | 68% | 67% | 68% | 68% | 68% |
| R40 (Rev YoY + OM%) | 73% | 73% | 71% | 72% | 74% | 75% | 75% | 75% | 74% | 73% |
| TTM OP ($M) | $1,036 | $1,051 | $1,058 | $1,070 | $1,085 | $1,100 | $1,121 | $1,143 | $1,159 | $1,175 |
| TTM OP QoQ | +2% | +1% | +1% | +1% | +1% | +1% | +2% | +2% | +1% | +1% |
| FCF/OP ttm | 79% | 81% | 83% | 85% | 88% | 91% | 95% | 92% | 92% | 88% |
| Debt/EBITDA | 1.7x | 1.6x | 1.6x | 1.6x | 1.6x | 1.6x | 1.6x | 1.5x | 2.0x | 2.0x |
| P/E ttm | 22x | 23x | 26x | 31x | 35x | 34x | 28x | 28x | 28x | 28x |
Recent Stock Performance & Drivers
- Stock currently at $262.11, vs. $187.79 (Sep 2024) — up ~40% over two years; it peaked near $284 in mid-2025, corrected, and has recovered on the domain-base reacceleration.
- The re-rating is driven by the growth inflection: domain-base growth has firmed toward the raised 5.2–6% guide on record new registrations, and the dividend plus Berkshire Hathaway's continued ~13% stake reinforce the quality-compounder narrative.
- It's a cash machine: ~68% margins and ~98% free-cash-flow conversion let Verisign return more than 100% of FCF — it even runs a negative book equity from decades of buybacks, a hallmark of the model.
Opportunities
- .web launch — a new growth lever. Now delegated with Verisign as operator, .web brings complete wholesale pricing flexibility and premium-name sales (barred on .com/.net); a channel launch is planned late 2026.
- Record new registrations + AI tailwind. A record 12.7M new regs (+21% YoY) lifted the base to 179.1M and drove the raised 5.2–6% growth guide; AI tools make domains easier to find and sites faster to build.
- .com pricing runway. The +7% November increase (to $10.97), with further 7% increases available in eligible years, is a durable, high-margin revenue lever independent of unit growth.
Challenges
- Regulated .com pricing. The .com wholesale fee is capped and governed by the NTIA / Dept. of Commerce cooperative agreement (registry agreement runs to 2030) — a structural ceiling on monetization and a tail renewal risk.
- Low growth ceiling and substitution. Unit growth is mid-single-digit and domains compete with other TLDs, social/app identities, and no-domain trends; an H2 first-time-renewal mix mechanically pressures the blended renewal rate.
- Premium valuation. At ~28x P/E for a ~6% revenue grower, the multiple leaves little margin for error — it prices in the moat, ~68% margins, and the buyback continuing to compound EPS.
Next 12 Months
- .web launch late 2026. After a 90-day security test and a trademark/limited-registration period, general availability is expected late this year or early next — the key new catalyst, though not in 2026 guidance.
- Domain-base and renewal-rate trends. Whether record new-reg strength holds against the H2 first-time-renewal-mix headwind determines the revenue path against the raised 5.2–6% guide.
- Capital-return pace and the .com price increase. The pace of the enlarged $1.5B buyback plus the November .com increase beginning to flow into 2027 revenue.
Next 12-24 Months
- Compounding price increases. Successive ~7% .com increases in eligible years lift revenue at ~68% incremental margin — the core long-term earnings driver.
- Capital return shrinking the float. More than 100% of FCF returned via buybacks and a growing dividend steadily reduces the share count and lifts EPS.
- The structural question: whether domains stay central to online identity as AI, apps, and social evolve — and the eventual .com agreement renewal in 2030.
Core Metrics Scorecard
| Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 | Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | Q2'24 | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26 | Q3'26E | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | Jun24 | Sep24 | Dec24 | Mar25 | Jun25 | Sep25 | Dec25 | Mar26 | Jun26 | Sep26 |
| R40 > 40% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| R40 accelerate | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ||||||||||||||
| TTM OP QoQ > 10% | ||||||||||||||||||||
| TTM OP QoQ accelerate | ✅ | |||||||||||||||||||
| TTM FCF/OP > 60% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| Debt/EBITDA < 3.5 | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| Total passes | 3 | 3 | 5 | 3 | 4 | 3 | 4 | 3 | 3 | 4 | 3 | 3 | 3 | 4 | 4 | 3 | 3 | 3 | 3 | 3 |
| Stock QoQ | +24% | -13% | -25% | +6% | +17% | +0% | +8% | -9% | +2% | -8% | -6% | +7% | +8% | +22% | +15% | -1% | -13% | +2% | +1% | +4% |
| P/E ttm | 35x | 30x | 22x | 23x | 32x | 32x | 34x | 30x | 27x | 24x | 22x | 23x | 26x | 31x | 35x | 34x | 28x | 28x | 28x | 28x |
- Verisign is a steady-high scorecard name. R40 sits around 75% (a 68% margin plus mid-single-digit growth) and FCF/OP passes consistently, but "TTM OP QoQ >10%" never fires — growth is deliberately slow and steady — so passes cluster at 3–5 of 6.
- The stock tracks the growth trajectory, not the pass count. With the base at a record 179.1M and growth guided to 5.2–6%, R40 sits near 74% and the multiple holds — the swing factor is the growth trend, not a jump in passes.
- The model's edge is predictability: ~98% FCF conversion, contractual price increases, and buybacks compound EPS with unusually low volatility — a bond-like equity with a growth kicker.
Chart: R40 vs Stock Price (Since 2020)
Chart: Scorecard Total Passes vs Stock Price (Since 2020)
What Just Reported
- Revenue $429M (+7%) with operating income of $294M — a 68% operating margin. EPS rose +11% to $2.34, helped by a ~3% lower share count; free cash flow was $265M.
- The domain name base hit a record 176.1M (163.6M .com + 12.4M .net), up +3.7% YoY, with net adds of +2.54M — the biggest sequential gain in years and the third straight quarter of accelerating growth.
- Verisign raised its full-year guidance and announced a .com price increase. FY2026 domain-base growth was lifted to +3.1–4.3% (midpoint more than doubled), and the .com wholesale fee rises +6.9% to $10.97 effective Nov 1, 2026.
Guidance: Full Year 2026
- FY2026 (raised at Q1): revenue $1.730–1.745B, operating income $1.170–1.185B, and domain-base growth +3.1–4.3% (up from +1.5–3.5%).
- The raise reflects the domain-base reacceleration plus the November .com price increase; operating margin stays in the ~67–68% range.
- Capex is guided to $55–65M (elevated for gear refresh + infrastructure); Verisign intends to keep returning more than 100% of free cash flow to shareholders.
Key Takeaways from Earnings Call
- The domain-base reacceleration is broad and building. New registrations hit 11.5M (+14% YoY, the most since 2021) and the renewal rate rose to 76.3%; strength spanned all regions (US and EMEA led), driven by tailored registrar marketing programs launched in 2024.
- Management credits an AI tailwind — but can't cleanly separate it. CEO Jim Bidzos argues AI makes domains easier to find and sites easier to build, while agentic AI and LLM scraping lift DNS query volume; the marketing programs and AI "collide in a good way."
- The .com pricing lever remains intact. Verisign took the full ~7% increase (to $10.97) for November — framed as a modest $0.03/day — with further 7% increases available in the back years of its registry agreement.
- Capital return is relentless. Verisign returned $1.13B over the trailing year (more than 100% of free cash flow), raised its dividend +5.2% to $0.81 (the payout was first initiated in April 2025), and has $863M of buyback authorization left — shrinking the share count every quarter.
- New "high-assurance" security services are coming. Bidzos teased enhanced security offerings aligned to Verisign's core DNS mission, with a blog series rolling out — a potential new growth vector on top of the registry.
Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.
Disclaimer: This report is for educational purposes only. NO investment advice.