VeriSign Inc. (VRSN) saw its stock decline 2.8% on Friday to close at $269.20, underperforming the broader S&P 500, even after the company posted better-than-expected first-quarter earnings and raised its full-year guidance. The market's focus has shifted to the potential risks associated with a planned increase in wholesale .com domain prices, which could pressure renewal rates and registrar pricing strategies.
Strong First-Quarter Results
For the quarter ended March 31, VeriSign reported revenue of $429 million, a 6.6% increase from the same period last year. Operating income rose to $294 million, up from $271 million, while net income reached $215 million, or $2.34 per diluted share, compared to $199 million, or $2.10 per share, a year earlier. The results were driven by steady growth in .com and .net domain registrations, which totaled 176.1 million at quarter-end, a 3.7% year-over-year increase. New registrations hit 11.5 million, up from 10.1 million a year ago.
.com Price Hike and Renewal Risk
VeriSign announced that it will increase the annual wholesale fee for new and renewed .com domains to $10.97, up from $10.26, effective November 1. This fee is paid by accredited registrars, not directly by end users, but it could lead to higher retail prices and potentially affect renewal behavior. During the earnings call, management noted that first-time renewals typically run in the mid-40% range, compared to the mid-80% range for domains that have been renewed before. A surge in new registrations late in 2025 could create a wave of first-time renewals later this year, potentially dragging down overall renewal rates.
Raised Guidance and Market Context
Despite the near-term concerns, VeriSign raised its 2026 forecast for .com and .net domain name base growth to 3.1% to 4.3%, up from the previous 1.5% to 3.5% range. CFO John Calys set full-year revenue guidance between $1.730 billion and $1.745 billion, with operating income expected in the range of $1.170 billion to $1.185 billion. The company also highlighted strong demand across its core regions, particularly the U.S. and EMEA, and noted that registrar marketing efforts and AI-powered website tools are contributing to growth.
Analyst Reactions
Analyst responses were mixed. Baird's Robert Oliver maintained an Outperform rating and raised his price target to $355 from $305. JPMorgan's Alexei Gogolev kept a Neutral rating, increasing his target to $278 from $273. The divergent views reflect the tension between VeriSign's solid fundamentals and the potential headwinds from the price increase.
Capital Returns and Outlook
VeriSign continued its capital return program, repurchasing 0.9 million shares for $214 million during the quarter, with $863 million remaining under its buyback authorization. The company also declared a $0.81 per-share cash dividend, payable on May 27 to shareholders of record as of May 19. While the company's long-term outlook remains positive, investors are closely monitoring the impact of the .com price increase on renewal rates and the broader domain market.