VeriSign targets 2.2%-2.5% domain name base growth for 2025 as AI drives demand

Earnings Call Insights: VeriSign (VRSN) Q3 2025

MANAGEMENT VIEW

* CEO D. Bidzos reported that VeriSign delivered growth in both its domain name base and financial performance during the third quarter, highlighting continued "return of value to shareholders through dividends and share repurchases." The domain name base for .com and .net reached 171.9 million, up 1.4% year-over-year, with 10.6 million new registrations and a renewal rate of 75.3% compared to 72.2% a year ago. Bidzos stated, "Given these continued positive domain name base trends, we now expect the growth in the domain name base to be between 2.2% and 2.5% for 2025." He also noted $618 million in cash, cash equivalents, and marketable securities, and a remaining $1.33 billion available under the current share repurchase program.
* Executive VP & CFO John Calys announced, "For the quarter ended September 30, 2025, the company generated revenue of $419 million, up 7.3% from the same quarter a year ago." Operating expenses were $135 million, with noted increases in incentive compensation and legal costs. Calys referenced net income of $213 million and diluted earnings per share of $2.27. Operating cash flow was $308 million and free cash flow reached $303 million.

OUTLOOK

* Updated full-year 2025 guidance calls for revenue between $1.652 billion and $1.657 billion and operating income between $1.119 billion and $1.124 billion. Interest expense and nonoperating net income are expected to be an expense between $50 million and $60 million, capital expenditures between $25 million and $35 million, and the GAAP effective tax rate between 21% and 24%. Growth in the domain name base is expected to be between 2.2% and 2.5% for 2025. Management stated that "we plan to provide you with 2026 guidance during our February call after we have a chance to see how domain-based trends finish out '25 and start out 2026."

FINANCIAL RESULTS

* Revenue for the quarter was $419 million. Operating expenses were $135 million. Net income was $213 million and diluted earnings per share was $2.27. Operating cash flow for the third quarter was $308 million and free cash flow was $303 million. The company returned $287 million to shareholders during the quarter, consisting of $72 million in dividends and $215 million in share repurchases. The company reported $618 million in liquidity at quarter-end. The renewal rate for the third quarter of 2025 was 75.3%.

Q&A

* Robert Oliver, Robert W. Baird & Co., asked about the drivers behind improved domain base trends and whether these were macro-related or due to internal changes. D. Bidzos responded, "We improved our programs and made them more adaptable for our channel. We got great engagement from our channel. We've been talking about a cyclical shift that we were hoping for and anticipating and that came around."
* Oliver inquired about the impact of Google AdSense changes. Bidzos explained, "Google has been making changes to their algorithm, and they've steadily eroded domain names that exist solely for ad monetization with AdSense... after a decade of these changes, we view our exposure as minimal."
* Oliver also questioned the role of AI in VeriSign's business. Bidzos said, "AI is having a positive impact on registrations as well as on the utilization of our DNS resolution services... AI companies need data, and they're continuously scouring the Internet to get it... this trend will continue growing."
* Ygal Arounian, Citigroup, asked about the effectiveness and cost dynamics of marketing programs. Calys answered, "Our marketing programs have contributed to the growth we've seen in 2025... those programs are accounted for as a reduction in revenue. So in the SG&A, there really isn't a significant change in marketing dollars in that line item... we've tried to shift our programs towards ones that yield higher quality and higher renewing names."
* Arounian requested details on the split of parked domains for resale versus advertising monetization. Bidzos replied, "I don't have a segment breakout in detail. We do some analysis, but we don't disclose that."
* Arounian asked for an update on the .web TLD and potential new gTLDs. Bidzos stated, "The final hearing is still scheduled for mid-November 2025... we intend to become the registry operator for .web."

SENTIMENT ANALYSIS

* Analysts expressed interest in the sustainability and drivers of domain growth, with follow-up questions probing for more details on marketing programs and the impact of industry changes, resulting in a neutral to slightly positive tone.
* Management maintained a confident and factual tone in prepared remarks, emphasizing positive trends and strategic engagement. During Q&A, Bidzos and Calys addressed questions directly, with Bidzos reiterating, "the trends are very positive" regarding AI's impact, and Calys highlighting adaptability in marketing programs.
* Compared to the previous quarter, both analysts and management maintained a similarly constructive and factual tone, with management showing slightly increased confidence in growth trends and program effectiveness.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for domain name base growth was raised to a range of 2.2% to 2.5%, up from the prior range of 1.2% to 2%. Revenue guidance was modestly increased, and operating income guidance was narrowed. New registrations and renewal rates both improved, with the renewal rate rising from 75.5% in Q2 to 75.3% in Q3, despite seasonal dynamics. Management now attributes more of the positive trends to channel program improvements and increased registrar engagement, with AI's impact becoming more prominent in the discussion. Analysts continued to focus on marketing program effectiveness, industry changes, and strategic domain expansion, while management's confidence in channel strategy and AI influence has become more pronounced.

RISKS AND CONCERNS

* Management cited increased operating expenses due to incentive compensation and legal costs. Analyst questions referenced potential impacts from changes in Google's AdSense, but management assessed these as being minimal to their business. The ongoing .web TLD legal proceedings were noted, with the final hearing scheduled for mid-November 2025, representing a potential risk or opportunity depending on the outcome. Management stressed continued monitoring and adaptation of marketing programs to respond to market and channel feedback.

FINAL TAKEAWAY

VeriSign's third quarter 2025 call underscored ongoing domain name base growth, robust financial performance, and positive impacts from AI-driven demand and refined marketing programs. Management raised full-year domain base growth guidance and indicated that trends remain strong across its major regions, while also providing visibility on the .web TLD and future gTLD opportunities. The company continues to prioritize shareholder returns and expects to build on these trends into 2026, with further updates to come following year-end results.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vrsn/earnings/transcripts]

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