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VI

VERISIGN INC/CA (VRSN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid top-line and EPS growth: revenue $419.1M (+7.3% YoY) and diluted EPS $2.27 (+9.7% YoY), both modestly above S&P Global consensus; revenue beat by ~$2.3M and EPS beat by $0.03, while EBITDA came in below consensus, reflecting higher incentive comp and legal costs . Revenue consensus $416.85M*, EPS consensus $2.24*, EBITDA consensus $315.35M*; actual EBITDA $291.6M*.
  • Management raised full-year guidance ranges again (third straight quarter): revenue $1,652–$1,657M, operating income $1,119–$1,124M; capex held at $25–$35M; tax rate 21–24% . Prior updates were $1,645–$1,655M in Q2 and $1,635–$1,650M in Q1 .
  • Domain KPIs strengthened: .com/.net base reached 171.9M (+1.4% YoY), net adds 1.45M, new regs 10.6M; preliminary Q3 renewal rate expected 75.3% (vs. 72.2% a year ago) and Q2 final renewal rate was 75.5% .
  • Capital return consistent: $215M buybacks (0.8M shares) and $0.77 dividend declared for Nov. 25; $1.33B remains authorized for repurchases (no expiration) .
  • Tone: confident on marketing program impact and AI-driven DNS usage; .web legal process final hearing mid-November 2025; ICANN’s next gTLD round targeted to open in Q2 2026, earliest deployments likely 2027 .

What Went Well and What Went Wrong

What Went Well

  • Strong revenue/EPS growth with beat vs consensus; CFO: “Operating cash flow $308M and free cash flow $303M” in Q3; guidance raised again . Revenue $419.1M (+7.3% YoY), EPS $2.27 (+9.7% YoY) .
  • KPIs improved: “10.6 million new registrations… net registrations added… 1.45 million names,” renewal rate expected 75.3% vs 72.2% YoY; U.S. and EMEA were strongest .
  • AI tailwinds: “AI is having a positive impact on registrations as well as on the utilization of our DNS resolution services… over 450 billion DNS transactions per day” .

What Went Wrong

  • EBITDA miss vs consensus as expenses rose: operating expense $135M vs $121M YoY; increases “include incentive compensation and legal costs” . EBITDA actual $291.6M* vs $315.35M*.
  • Asia Pac growth moderated vs H1: “Asia Pac… did grow again, but it wasn’t as strong as the growth we saw during the first half of 2025” .
  • Investor concern on AdSense: management views exposure as minimal, but acknowledged long-term erosion in ad-monetized parked domains; “downhill slide for 15 years… Panda, Penguin” (context, potential overhang for some ecosystem players) .

Financial Results

Core Financials vs Prior Periods

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$402.3 $409.9 $419.1
Operating Income ($USD Millions)$271.2 $280.7 $284.3
Net Income ($USD Millions)$199.3 $207.4 $212.8
Diluted EPS ($)$2.10 $2.21 $2.27
Operating Margin (%)67.4% (computed from )68.5% (computed from )67.9% (computed from )
Net Margin (%)49.5% (computed from )50.6% (computed from )50.8% (computed from )

Notes: Margins are computed from cited revenue and income figures.

KPIs

KPIQ1 2025Q2 2025Q3 2025
.com/.net Domain Base (M)169.8 170.5 171.9
Net Adds (M)0.78 0.66 1.45
New Registrations (M)10.1 10.4 10.6
Renewal RateQ1 final 75.5% Q2 final 75.5% Q3 prelim 75.3%

Cash Flow and Capital Returns

MetricQ1 2025Q2 2025Q3 2025
Cash from Operations ($M)$291.3 $202.0 $308.0
Free Cash Flow ($M)$286.0 $195.0 $303.0
Shares Repurchased (M)1.0 0.6 0.8
Buyback Spend ($M)$230 $163 $215
Dividend per Share ($)$0.77 (May 28) $0.77 (Aug 27) $0.77 (Nov 25)

Results vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue – Actual ($M)$402.3 $409.9 $419.1
Revenue – Consensus ($M)401.80*410.97*416.85*
EPS – Actual ($)$2.10 $2.21 $2.27
EPS – Consensus ($)2.09*2.18*2.24*
EBITDA – Actual ($M)280.10*289.00*291.60*
EBITDA – Consensus ($M)303.90*314.35*315.35*

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricQ1 2025 Guidance (Apr 24)Q2 2025 Guidance (Jul 24)Q3 2025 Guidance (Oct 23)Change (Q3 vs Q2)
Revenue ($M)$1,635–$1,650 $1,645–$1,655 $1,652–$1,657 Raised
Operating Income ($M)$1,110–$1,125 $1,117–$1,127 $1,119–$1,124 Slightly Raised (tightened)
Interest & Non-Op (Expense, $M)$50–$60 $50–$60 $50–$60 Maintained
Capital Expenditures ($M)$30–$40 $25–$35 $25–$35 Maintained (lower vs Q1)
GAAP Effective Tax Rate (%)21–24% 21–24% 21–24% Maintained
Dividend ($/share)Initiated $0.77 $0.77 $0.77 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Apr)Q2 2025 (Jul)Q3 2025 (Oct)Trend
Marketing programs & channelEarly adopters driving improved new regs; programs rolled out late ’24/early ’25 Registrars refocusing on customer acquisition; programs accretive; Asia-Pac strongest region Programs contributing; 2026 offerings rolled out; costs treated as revenue reductions Improving effectiveness, broader engagement
Renewal ratesExpected 75.3% vs 74.1% YoY Final Q1 renewal 75.5%; momentum continues Preliminary Q3 renewal 75.3% Sustained improvement
AI impactCautious internal use; security priority Growth in DNS queries (>460B/day); AI-positive for domain suggestions and content AI driving registrations and DNS usage; ~450B queries/day Positive tailwind building
Regional trendsBroad-based improvement across U.S., EMEA, APAC Asia-Pac strongest; monitoring China volatility U.S. strengthened; APAC grew but slower vs H1 Mixed: U.S./EMEA strong; APAC moderating
Regulatory/legal (.web, ICANN)IRP procedural update; final hearing in Nov. IRP participation granted; final hearing mid-Nov 2025 Final hearing mid-Nov; ICANN 2026 round, no auctions, earliest deployments 2027 Pending resolution; 2026 gTLD process shaping

Management Commentary

  • “VeriSign delivered both growth in a domain name base and solid financial performance… We also continued our consistent return of value to shareholders through dividends and share repurchases.” – Jim Bidzos .
  • “Operating expense… $135M… increases include incentive compensation and legal costs… Operating cash flow $308M, free cash flow $303M.” – John Calys .
  • “We now expect the growth in the domain name base to be between 2.2% and 2.5% for 2025.” – Jim Bidzos .
  • “AI is having a positive impact on registrations… infrastructure processes over 450B DNS transactions per day… trend will continue and be additive.” – Jim Bidzos .

Q&A Highlights

  • Marketing programs: Designed to yield “higher quality and higher renewing names”; accounted as a revenue reduction; 2026 programs broaden choices and remain accretive .
  • Regional performance: EMEA consistent; U.S. strengthened; APAC grew but slower than H1; renewal rates improved across first-time and previously renewed names .
  • Google AdSense changes: Minimal exposure for VRSN; ad-monetized parked domains have eroded for ~15 years (Panda/Penguin); distinguishes resale/defensive parked domains from ad-monetized .
  • .web and gTLDs: .web IRP final hearing mid-Nov 2025; ICANN’s next round targeted Q2 2026; earliest deployments likely 2027; no auctions in new process .
  • AI: Positive for domain suggestions, provisioning, content generation; domain names as “digital trust anchors” in an agentic AI world .

Estimates Context

  • Q3 2025 beat on revenue and EPS vs S&P Global consensus; EBITDA missed. Revenue: $419.1M actual vs $416.85M* consensus; EPS: $2.27 actual vs $2.24*; EBITDA: $291.6M* actual vs $315.35M*. Q2 showed a slight revenue miss ($409.9M actual vs $410.97M*) with an EPS beat ($2.21 vs $2.18*) . Values marked with * retrieved from S&P Global.
  • Company guidance now implies FY revenue midpoint ~$1,654.5M vs FY consensus ~$1,655.1M*, suggesting consensus may hold or modestly rise if domain base trends persist . Values marked with * retrieved from S&P Global.
  • Target price consensus $295.5*; limited number of covering estimates (# of estimates: EPS 1–3; revenue 2–4), indicating sparse coverage and potentially higher sensitivity to quarterly outcomes*. Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential momentum intact: revenue, EPS, and cash flow strengthened; operating and net margins remained ~68% and ~51%, respectively, with disciplined expense control despite legal/incentive cost pressure .
  • Marketing programs are working and accretive; renewal rates continue to improve, supporting FY domain base growth of 2.2–2.5% and underpinning guidance raises .
  • AI-driven DNS usage is a durable tailwind for VRSN’s core infrastructure; management sees positive trends in registrations and resolution activity tied to AI .
  • Capital return is robust (buybacks + dividend), with $1.33B repurchase authorization and a consistent $0.77 quarterly dividend, offering downside support .
  • Watch APAC moderation and expense cadence: APAC growth slowed vs H1 and SG&A stepped up due to incentives/legal; EBITDA underperformed consensus, a point for near-term estimate calibration .
  • Regulatory milestones ahead: .web IRP final hearing mid-Nov; ICANN gTLD round in 2026 (no auctions) could open optionality; resolution timelines can be catalysts for sentiment .
  • Near-term trading lens: modest beat/raise profile and AI narrative likely supportive; any update on .web outcome and sustained KPI strength (new regs/renewals) are key stock drivers in coming weeks .

Appendix: Additional Context

  • DNIB report: Industry-wide domain name registrations reached 378.5M (+4.5% YoY); .com/.net combined base 171.9M; new .com/.net regs 10.6M in Q3 2025—consistent with VRSN-reported KPIs, reinforcing demand backdrop .
  • Balance sheet notes: Cash, cash equivalents, and marketable securities $618M at quarter end; deferred revenues $1.38B; long-term senior notes $1,787.6M .