Verisign
Dominant Domain Tollbooth: Durable Moat & Cash Flow, But Overpriced
Verisign has a near-monopoly on the.com/.net domain registry, creating a wide and durable economic moat. It provides critical internet infrastructure – operating the authoritative registry for.com and.net, which underpin the majority of global e-commerce. This unique position entails high switching costs and regulatory barriers to entry.
Morningstar explicitly rates Verisign as wide-moat, emphasizing its control over domain registration and fixed pricing agreements. Verisign’s revenue is highly recurring (renewal rates 75–76%), and even though domain growth is modest, its cash flows are very stable due to predictable renewals.
In recent years it has grown revenue ~4-6% annually (e.g. 2024 revenue was $1.557B, +4% YoY), and Q2 ’25 revenue was $410M, +5.9% YoY) by combining small domain base declines with periodic price hikes.
Its operating margins exceed 68%) and return on capital is among the highest in tech (well above 20%, often 40%+), reflecting a powerful pricing tollbooth business. Financially, Verisign is very strong: nearly zero net debt and large cash reserves. As of 2024 year-end it had no borrowings outstanding.
Even after issuing $500M of long-term notes in 2025 (to refinance shorter debt), its cash ($650M in Q1 2025)) and operating cash flow (e.g. $902M in 2024, up 6%) are ample.
The company has returned massive capital to shareholders via buybacks and a new dividend: it repurchased 6.6M shares ($1.21B) in 2024) (since inception 260M shares for $14.9B)) and initiated a $0.77 quarterly dividend in 2025. These actions, along with disciplined investment in its core systems (R&D 6% of revenue), demonstrate prudent capital allocation.
Management is founder-led (Jim Bidzos is Chairman & CEO) and has a strong track record of strategic execution. Berkshire Hathaway’s ~13% stake in Verisign) signals confidence from one of the world’s top investors. Overall, Verisign scores very high on quality: moat, pricing power, financial strength, and capital allocation are all excellent.
However, the valuation is demanding. At $275 today the stock trades at ~P/FCF 27 (FCF yield ~3.7%)), compared with a 4.1% yield on 10-year Treasuries). This suggests the stock is priced for perfection. We recommend waiting for a lower entry price.
A reasonable buy target would be in the low-$200s (where FCF yield approaches 5–6%), providing a margin of safety before a valuation rerating.
Does Verisign have a strong competitive moat?
Verisign’s core asset is its government-sanctioned monopoly on the.com and.net top-level domains. These domains are fundamental to the internet’s architecture, creating immense switching costs and brand value. Verisign’s contracts include presumptive renewal rights far into the future, making the business very stable.
Its operation of DNS root servers and the root zone maintainer role adds an intangible trust advantage. Together these form multiple layers of moat: regulatory monopoly, a branded indispensable network service, and economies of scale. We rate the moat very high (90/100) due to this near-unique competitive position.
Does Verisign have pricing power in its industry?
Verisign has essentially unconstrained pricing power for its registry services. Domain registrations are mission-critical for businesses and extremely price-inelastic. Even small fee increases flow almost directly to profit.
For example, Verisign implemented a.com fee increase in Sept 2024 and in Q3 2024 achieved a 68.9% operating margin as these price hikes “fell to the bottom line”. Its gross margin is ~88% (dominated by fixed-cost infrastructure) which further accentuates pricing power.
Management could, in theory, raise prices substantially and still retain virtually all customers. Far from margin erosion, Verisign has consistent margin expansion whenever it raises its fixed per-domain fee. Accordingly, we score pricing power at 95/100.
How predictable is Verisign's business?
Revenues are highly predictable due to recurring renewals. The business effectively operates as a tollbooth: 170–171 million domains (as of 2024/2025) each renew annually. Renewal rates have been in the mid-70% range; for instance, Q1 2025’s final renewal was 75.5% (vs 74.1% a year earlier)).
New registrations typically grow slowly or even decline (172.7M at end-2023 vs 169.0M at end-2024), but because the base is large and sticky the underlying cash flow is stable. Verisign’s revenue grew modestly 4–6% per year recently (e.g. 2024: +4%)). This isn’t a high-growth tech story, but it is very steady and repeatable, which we value.
Business concentration (two TLDs) is a risk factor, but renewal income is extremely reliable. For such a predictable, subscription-like model we rate predictability 80/100.
Is Verisign financially strong?
Verisign’s balance sheet is strong. As of Dec 2024 it had zero outstanding debt (it used cash and short-term borrowings to retire its 2025 notes) and $600–650M in cash during 2025). It maintains a $200M credit facility as backup. Operating cash flow is large ($902M in 2024)) and free cash flow is equally robust ($195M in Q2 2025).
Debt issuance in early 2025 ($500M due 2032) was done only to extend duration, not to lever up; the company paid off the $500M 2025 maturity simultaneously). Key liquidity ratios are high (quick ratio ~0.5, but this understates its flexibility given minimal capex). We see almost no bankruptcy risk even in downturns.
Financial strength earns a high rating of 90/100.
How effective is Verisign's capital allocation strategy?
Capital allocation has been shareholder-friendly. Management consistently invests in the core registry (maintaining world-class DNS infrastructure) and then returns excess cash. R&D and capex are modest (R&D 6% of revenue), reflecting the stable nature of the service.
The company aggressively repurchases stock when valuations are reasonable: e.g. 6.6M shares ($1.21B) retired in 2024), and a new $913M authorization was added in Q2 2025 (total $1.5B authorized). In 2025 Verisign also began paying a dividend ($0.77/quarter) after a long pause, which is a signal of capital discipline given its enormous cash flow.
Dilution is minimal: stock-based comp is small relative to buybacks (authorizing 7.3M shares remains for future employee plans)). On balance this is very efficient capital use. For buybacks plus reinvestment in a high-ROIC business, we rate 85/100.
Does Verisign have high-quality management?
Leadership is experienced, founder-led, and highly aligned with shareholders. Jim Bidzos (co-founder) returned as Executive Chairman & CEO and has steered the company for decades. A strong board (7 of 8 directors independent) provides oversight, and governance policies (annual director election, stock retention) are robust.
Management has demonstrated competence: they introduced a new dividend when cash flows allowed, refinanced debt long-term, and boosted domain marketing to stabilize the base. Notably, Warren Buffett’s Berkshire Hathaway owns 13% of the stock), reflecting institutional confidence in the strategy. Compensation and ownership policies (e.g.
Bidzos’s stake and lack of entrenched high pay) align interests with shareholders. Given this stewardship record, we score management 90/100.
Is Verisign a quality company?
Verisign is a good quality company with a quality score of 88/100
- Verisign is essentially a regulated monopoly on.com/.net domains, with a wide economic moat (high switching costs, essential service for internet commerce).
- The business is subscription-like: 170M domains with ~75% renewal rates yields extremely predictable profits. Revenue grew ~4-6% per year recently (2024: +4%) despite a slight decline in domain count), driven by limited price increases.
- Margins are exceptionally high (gross 88%, operating ~68%), reflecting monopolistic pricing. In Q3 2024 Verisign expanded op margins to ~68.9% as domain price hikes “fell to the bottom line”).
- Verisign has a fortress balance sheet: virtually no net debt (cash $650M, credit line available)), strong free cash flow (~$902M in 2024) and aggressive shareholder returns (major buybacks and now a dividend).
- Management is founder-led and aligned with shareholders, backed by Berkshire Hathaway’s 13% stake, reinforcing confidence in capital allocation and strategy.
What is the fair value of Verisign stock?
Is Verisign a good investment at $249?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.