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VI

VERISIGN INC/CA (VRSN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered steady growth with revenue of $409.9M (+5.9% YoY) and diluted EPS of $2.21 (+9.9% YoY); operating margin remained ~68.5% while net margin was 50.6% . Against S&P Global consensus, EPS was a small beat (+$0.03), revenue was roughly in line/slight miss (-$1.1M), and EBITDA missed more meaningfully versus consensus (details below; S&P Global) .*
  • Management raised full-year 2025 guidance: revenue to $1.645–$1.655B (from $1.635–$1.650B), operating income to $1.117–$1.127B (from $1.110–$1.125B), and lowered capex to $25–$35M (from $30–$40M); tax rate and OI&E unchanged .
  • Key operating KPIs improved: 10.4M new .com/.net registrations (+1.2M YoY), domain base rose by 0.66M QoQ to 170.5M, and renewal rate for the prior quarter finalized at 75.5% vs 74.1% a year ago; strength was broad-based with notable APAC momentum .
  • Capital returns broadened: dividend of $0.77 per share declared and buyback authorization increased by $913M to $1.5B; Q2 repurchases were 0.6M shares for $163M . A DNIB industry report showed 371.7M global domain registrations at Q2-end (+0.9% QoQ, +2.6% YoY), adding support for industry demand .
  • Potential stock catalysts: raised 2025 guidance, improving domain trends and APAC strength, newly initiated dividend with commitment to continue, and $1.5B buyback capacity; near-term technical overhang from a post-quarter Berkshire Hathaway secondary offering reducing its stake below 10% (non-dilutive) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based demand recovery with APAC leading: “Each of our geographic regions has shown improvement… with particular new registrations strength from Asia-Pacific” . New .com/.net registrations rose to 10.4M (vs 9.2M YoY), and the domain base increased by 0.66M QoQ to 170.5M .
  • Improved retention: renewal rate for Q1 2025 finalized at 75.5% vs 74.1% in the prior-year period; management highlighted registrar refocus on customer acquisition and engagement with Verisign’s marketing programs as tailwinds .
  • Shareholder returns diversified and enhanced: cash dividend of $0.77 per share declared, and buyback authorization lifted to $1.5B; 0.6M shares repurchased for $163M in Q2 .

What Went Wrong

  • EBITDA underperformed consensus despite solid GAAP metrics, implying higher costs or mix vs expectations (see Estimates Context; S&P Global).*
  • Domain base still down slightly YoY (-0.1%) at 170.5M despite sequential improvement, underscoring gradual recovery trajectory .
  • Structural balance sheet optics: continued stockholders’ deficit (-$1.99B) and higher long-term senior notes ($1.79B), though cash and marketable securities were $594M (down $6M from YE 2024) .

Financial Results

Income Statement and Margins (GAAP)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)$387.1 $402.3 $409.9
Operating Income ($M)$266.2 $271.2 $280.7
Net Income ($M)$198.8 $199.3 $207.4
Diluted EPS ($)$2.01 $2.10 $2.21
Operating Margin %68.8% 67.4% 68.5%
Net Income Margin %51.4% 49.5% 50.6%

Q2 2025 Actual vs S&P Global Consensus

MetricEstimateActualSurprise
Revenue ($M)$411.0*$409.9 -$1.1
EPS ($)$2.18*$2.21 +$0.03
EBITDA ($M)$314.4*$289.0*-$25.4

Values marked with * are retrieved from S&P Global.

KPIs and Cash Returns

KPIQ4 2024Q1 2025Q2 2025
.com/.net Domain Base (M)169.0 169.8 170.5
Net Change in Domain Base (M)-0.5 +0.78 +0.66
New Registrations (M)9.5 10.1 10.4
Renewal Rate (final, prior qtr)72.2% (Q3’24) 74.0% (Q4’24) 75.5% (Q1’25)
Deferred Revenues ($B)1.30 1.36 1.38
Cash from Operations ($M)232 (Q4’24) 291 (Q1’25) 202 (Q2’25)
Free Cash Flow ($M)222 (Q4’24) 286 (Q1’25) 195 (Q2’25)
Share Repurchases ($M)260 (Q4’24) 230 (Q1’25) 163 (Q2’25)
Dividend/Share ($)—0.77 declared 0.77 declared

Guidance Changes

MetricPeriodPrevious Guidance (Q1 call)Current Guidance (Q2 call)Change
Revenue ($B)FY 20251.635–1.650 1.645–1.655 Raised
Operating Income ($B)FY 20251.110–1.125 1.117–1.127 Raised
OI&E (net) ($M, expense)FY 202550–60 50–60 Maintained
Capex ($M)FY 202530–40 25–35 Lowered
GAAP Tax RateFY 202521%–24% 21%–24% Maintained
Domain Name Base GrowthFY 2025-0.7% to +0.9% +1.2% to +2.0% Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
Registrar behavior (ARPU vs acquisition)ARPU focus pressured new regs; new marketing programs launched Signs of shift back to customer acquisition; early program adoption Clearer shift to acquisition; stronger engagement with programs Improving
Regional trends (APAC/China)China declines, smaller base share; EMEA up Broad regional improvement; cautious macro All regions up YoY; APAC strongest; China improving but monitored Improving
Guidance philosophyInitial FY25 guide, cautious on macro Raised revenue/OI; reiterated caution Raised revenue/OI again; capex reduced Improving
AI/technologyNot a focusNot a focusAI seen as positive for domain suggestions/content; internal AI use cautious Emerging Positive
Regulatory/legal (ICANN/NTIA/.web)ICANN & NTIA renewals highlighted .web IRP update; desire to operate .web New gTLD round timing; .web IRP hearing mid-Nov 2025; intent to operate Active
Capital returns$1B buyback remaining YE’24 Dividend initiated; $793M buyback remaining Dividend maintained; buyback authorization lifted to $1.5B Increasing

Management Commentary

  • “We marked 28 years of 100 percent availability of the .com and .net domain name resolution system… We delivered steady financial performance… including a newly initiated quarterly dividend.” — Jim Bidzos, CEO .
  • “Each of our geographic regions has shown improvement year over year in both new registrations and renewal rates, with particular new registrations strength from Asia-Pacific.” — Jim Bidzos .
  • “Second quarter diluted earnings per share was $2.21… Operating cash flow… $202 million… Free cash flow was $195 million.” — John Calys, CFO .
  • On AI: “We do not see it as a negative… AI can be positive for domain name suggestions… We are taking a very cautious… approach internally.” — Jim Bidzos .
  • On .web: “We intend to become the registry operator for .web… final hearing is currently scheduled for mid-November 2025.” — Jim Bidzos .

Q&A Highlights

  • Marketing programs and registrar shift: Management views registrar refocus on customer acquisition and Verisign’s marketing programs as concurrent and synergistic; programs are success-based and “baked into guidance” .
  • Regional dynamics: APAC led YoY growth in new registrations; China included within APAC shows improvement but remains monitored given historical volatility .
  • 2026 outlook/programs: Too early for specifics; learning from 2025 programs to improve design and broaden engagement in 2026 .
  • New gTLDs/.web: ICANN application window targeted for Q2 2026; no auctions expected; .web IRP final hearing mid-Nov 2025; Verisign intends to operate .web .
  • Guidance clarity: Conservatism remains due to macro/geopolitical uncertainty; positive domain trends drove guidance raise .

Estimates Context

  • Q2 2025 vs S&P Global consensus: EPS $2.21 vs $2.18 (+$0.03), revenue $409.9M vs $411.0M (~-$1.1M), EBITDA $289.0M vs $314.4M (-$25.4M). Limited estimate breadth (EPS: 1 estimate; revenue: 2) underscores thin coverage and higher variance risk .*
  • Implications: Small EPS beat and in-line revenue suggest core trends tracking expectations; EBITDA shortfall vs consensus may reflect higher-than-modeled operating expenses or non-operating items relative to sell-side models. Guidance raises likely necessitate upward revisions to FY revenue and operating income models, while EBITDA modeling may need expense sensitivity.

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential and YoY improvement in domain activity (new regs, renewal rates) with APAC leadership validates marketing program traction and registrar shift back to customer acquisition .
  • FY25 guidance raised (revenue and operating income) and capex trimmed, signaling confidence in trajectory while maintaining prudent macro caution .
  • Capital return story strengthened: dividend now recurring and $1.5B buyback capacity; $163M repurchased in Q2 .
  • EBITDA miss vs consensus warrants monitoring of expense cadence and non-operating line; however, GAAP operating margin remains robust near ~68% .*
  • Regulatory path stable (.com ICANN & NTIA renewals in 2024); .web decision could offer optionality in 2026 pending IRP outcome .
  • Industry demand supportive: global domains reached 371.7M at Q2-end (+0.9% QoQ), aligning with Verisign’s improving metrics .
  • Technical overhang risk: Berkshire’s post-quarter secondary reduces its stake below 10% (non-dilutive), but could affect near-term trading dynamics .