VRSN · Research
VeriSign's .com Fee Steps Carry Growth as the Registry Adds .web to Its Balance Sheet
VeriSign runs the .com and .net registries under contract, with 182.5 million names and the right to raise the .com fee up to 7% a year. Operating margin is 66.93%.
| Scorecard | Read |
|---|---|
| Thesis | Contracted .com price steps and a domain base growing 6.1% keep revenue compounding at mid single digits with almost no capital needs |
| What proves it wrong | The domain base starts shrinking again, or renewal rates fall well below 75%, or ICANN or the Commerce Department limits price steps |
| Next catalyst | Q4 2026 results in early 2027, with the year-end domain base and the Q3 renewal rate; the .com agreement runs to Nov 30, 2030 |
| Key multiple | 24.09x EV / GAAP EBITDA of $1.20B |
| Debt | $1.79B carrying value of senior notes: 2.70% $750M, 5.25% $500M and 5.10% due 2031 $550M. A $200M facility to 2028 is undrawn |
| Stock pay | $76.70M from the cash flow line, 4.43% of revenue |
What VeriSign sells
VeriSign operates the registries for .com and .net. Every registrar that sells a .com name pays VeriSign a fixed annual fee for it, and VeriSign keeps the authoritative database that the internet uses to find those names [1].
Q3 2026 revenue was $443.0M, up 5.70% from $419.1M. Nine-month revenue was $1,306.5M, up 6.11% [1].
There is one business. Revenue is registry fees, and the drivers are the number of names and the price per name.
Volume: the domain base is growing again
There were 182.5 million .com and .net names at Sep 30, 2026, up 6.1% from a year earlier and up 3.4 million in the quarter [1].
New registrations were 13.1 million in Q3 against 10.6 million a year earlier [1]. The renewal rate for Q2 2026 was 75.2% against 75.5% a year earlier.
A base growing 6.1% with new registrations up nearly a quarter is the main reason revenue growth moved back above 5%.
Price: the contract allows step-ups
The .com Registry Agreement with ICANN was renewed in November 2024 and runs to Nov 30, 2030 [1]. VeriSign is the sole registry operator for .com through that date.
VeriSign may raise the .com wholesale fee by up to 7% in each of the final four years of each six-year period. The current period began Oct 26, 2024 [1].
The fee rose from $9.59 to $10.26 per name, a 6.99% increase [1]. Price and volume together explain nearly all revenue growth.
Margins are the moat in numbers
Q3 operating income was $296.5M, a margin of 66.93% [1]. Cost of revenue was $49.8M, R&D $26.5M and SG&A $70.2M.
Twelve-month GAAP EBITDA was $1.20B, 69.16% of revenue [1]. D&A is small at $26.50M because the registry needs little physical equipment.
R&D is 5.98% of revenue and SG&A 15.85% in Q3 [1]. Interest expense was $59.3M over nine months, and the Q3 effective tax rate was 23.96%.
Twelve-month revenue spread over 182.5 million names is roughly $9.49 per name, below the current $10.26 fee. The gap reflects .net names, which carry a different fee, and fee steps that are still working through the renewal base.
The toll-gate test
A toll gate owns the record, owns the connection, prices on outcomes and spends R&D on the gate. VeriSign passes the record and connection tests as clearly as any company in software.
Pricing is the partial pass. VeriSign charges per name under a contract, not per lookup.
The fee can step up, but only within the limits ICANN and the US government set.
That contract is also the risk. The moat is legal, not technical.
A change in the cooperative agreement with the Commerce Department could cap prices again.
The owner-cash staircase
Start with GAAP EBITDA of $1.20B: operating income of $1.17B plus D&A of $26.50M over the twelve months [1]. Each step down the staircase removes one thing an owner cannot spend.
Step one is operating cash flow of $1.06B, below EBITDA by $135.80M. Operating cash ran below EBITDA mainly because of cash taxes and interest on the senior notes [1].
Step two subtracts stock pay of $76.70M, taken from the cash flow line. That leaves $985.20M.
Stock pay is 7.22% of operating cash flow, small for a software company [1].
Step three subtracts all capex of $38.10M, including capitalized software. Owner cash is $947.10M, or 54.69% of revenue and 79.08% of EBITDA.
Capex is mostly data center and network equipment for the registry. It stays low relative to revenue [1].
| Step | Twelve months | What the gap is |
|---|---|---|
| GAAP EBITDA | $1.20B | Operating income plus D&A |
| Operating cash flow | $1.06B | Working capital, cash taxes, interest and non-cash items |
| After stock pay | $985.20M | Stock pay treated as a real cost |
| After all capex | $947.10M | What an owner could take out |
Balance sheet and debt
Senior notes carried at $1,785.9M at Sep 30, 2026, with fair value of $1.67B [1]. The notes are 2.70% notes of $750M, 5.25% notes of $500M and 5.10% notes of $550M due Jul 15, 2031, issued Jun 26, 2026.
The 4.75% notes of $550M were redeemed on Jul 20, 2026 [1]. A $200M revolving facility maturing in 2028 is undrawn.
Cash was $206.8M and marketable securities $269.3M [1]. Stockholders' equity is negative because buybacks over many years exceeded retained earnings.
In nine months VeriSign spent $620.0M on buybacks and $220.8M on dividends [1]. In Q3 it repurchased 0.7 million shares for $189.1M, and $1.36B of authorization remains.
A dividend of $0.81 per share was declared on Oct 19, 2026.
What the multiple measures
EV is $28.85B: equity value at the Oct 27, 2026 close on 89.70M cover-page shares, plus debt of $1.79B at carrying value, less cash and equivalents of $206.80M.
On GAAP EBITDA of $1.20B that is 24.09x. On operating cash flow of $1.06B it is 27.17x.
Owner cash of $947.10M is 3.28% of EV.
Net debt is $1.58B, or 1.32x GAAP EBITDA.
What gets overlooked
VeriSign recorded a new intangible asset of $171.4M. It reclassified $145.2M of deposits to acquire intangible assets to intangible assets after signing the Registry Agreement for .web, and capitalized $26.2M of other costs [1].
The asset has an indefinite life and is not amortized. It is the cost of the .web registry rights.
The filing does not show what revenue .web will bring, so this is flagged.
Nine-month operating cash flow was $772.3M against $801.5M a year earlier [1]. It fell while revenue grew, a gap worth watching in the 10-K.
The cover-page share count is 89.7 million as of Oct 16, 2026 [1]. VeriSign files only this rounded figure, on the cover and in its XBRL tag, so no exact count exists to use.
EV uses that rounded figure, so the multiples carry a small rounding error of up to 0.06% of equity value.
Dividends of $220.8M in nine months were up from $144.1M a year earlier [1]. Cash returned now runs ahead of operating cash flow.
Peers
The peer set is Akamai, F5 and Tyler Technologies: internet infrastructure and contract-based software.
Peer figures come from each company's latest periodic filing [2][3][4]. Figures are derived from filed statements, and nothing here is a price view.
VeriSign has the highest margin in the group by far, and the lowest stock pay share of revenue.
Bull, base and bear
| Case | What happens | What the filings would show |
|---|---|---|
| Bull | Domain base keeps growing 5% and fees step up 7% a year | Revenue growth near 10% |
| Base | Base grows 3% to 4% and fee steps continue | Revenue growth of 5% to 7% |
| Bear | Base shrinks again or fee steps are capped | Revenue growth of 0% to 3% |
The base case is the contract working as written: modest volume growth plus scheduled price steps.
The bear case is regulatory. A cap on .com fees would remove most of the price engine.
The bull case needs new registrations to keep running above 13 million a quarter while renewals stay near 75%.
What to watch
Watch the renewal rate for Q3, published with Q4 results. A drop well below 75% would mean the new names are lower quality [1].
Watch the cash use. Buybacks and dividends of $840.8M in nine months exceeded nine-month operating cash flow of $772.3M, with the balance funded from cash and the refinancing [1].
Watch the cost lines. SG&A grew 15.84% in Q3, faster than revenue, and a sustained gap would erode the margin that makes the registry model distinctive.
Watch what .web becomes. It is the first new registry asset VeriSign has added in years.
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