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Item 2. Management’s Discussion and Analysis

2026-07-23 compared with 2026-04-23 · 74 added, 58 removed, 138 unchanged (49% of the section changed)

12 unchanged sentences

We are a global provider of critical internet infrastructure and domain name registry services, enabling internet navigation for many of the world’s most recognized domain names.

We help enable the security, stability, and resiliency of the Domain Name System and the internet by providing Root Zone Maintainer Services, operating two of the thirteen global internet root servers, and providing registration services and authoritative resolution for the .

We help enable the security, stability, and resiliency of the Domain Name System (“DNS”) and the internet by providing Root Zone Maintainer Services, operating two of the thirteen global internet root servers, and providing registration services and authoritative resolution for the .

net generic top-level domains (“gTLDs”), which support the majority of global e-commerce.

As of March 31, 2026, we had 176.1 million .com and .net registrations in the domain name base.

As of June 30, 2026, we had 179.1 million .com and .net registrations in the domain name base.

The number of domain names registered is largely driven by continued growth in online advertising, e-commerce, and the number of internet users, which is partially driven by greater availability of internet access, as well as marketing activities carried out by us and our registrars.

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Business Highlights and Trends

• We recorded revenues of $428.9 million during the three months ended March 31, 2026, which represents an increase of 7% compared to the same period in 2025.

• We recorded operating income of $293.6 million during the three months ended March 31, 2026, which represents an increase of 8% compared to the same period in 2025.

• As of March 31, 2026, we had 176.1 million .com and .net registrations in the domain name base, which represents a 3.7% increase from March 31, 2025, and a net increase of 2.5 million domain name registrations from December 31, 2025.

• During the three months ended March 31, 2026, we processed 11.5 million new domain name registrations for .com and .net compared to 10.1 million for the same period in 2025.

• We recorded revenues of $434.6 million and $863.5 million during the three and six months ended June 30, 2026, which represents an increase of 6% compared to the same periods in 2025.

• We recorded operating income of $296.3 million and $589.9 million during the three and six months ended June 30, 2026, which represents an increase of 6% and 7%, respectively, compared to the same periods in 2025.

• As of June 30, 2026, we had 179.1 million .com and .net registrations in the domain name base, which represents a 5.1% increase from June 30, 2025, and a net increase of 3.0 million domain name registrations from March 31, 2026.

• During the three months ended June 30, 2026, we processed 12.7 million new domain name registrations for .com and .net compared to 10.4 million for the same period in 2025.

• The final .

net renewal rate for the fourth quarter of 2025 was 75.0% compared to 74.0% for the fourth quarter of 2024.

net renewal rate for the first quarter of 2026 was 76.3% compared to 75.5% for the first quarter of 2025.

Renewal rates are not fully measurable until 45 days after the end of the quarter.

• We generated cash flows from operating activities of $272.4 million during the three months ended March 31, 2026, compared to $291.3 million for the same period in 2025.

• During the three months ended March 31, 2026, we repurchased 0.9 million shares of common stock for an aggregate cost of $214.4 million.

As of March 31, 2026, there was $862.8 million remaining for future share repurchases under the share repurchase program.

• On April 20, 2026, the Board of Directors declared a cash dividend of $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the close of business on May 19, 2026, payable on May 27, 2026.

• On April 23, 2026, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $10.26 to $10.97 effective November 1, 2026.

• We generated cash flows from operating activities of $504.0 million during the six months ended June 30, 2026, compared to $493.8 million for the same period in 2025.

• During the three months ended June 30, 2026, we repurchased 0.7 million shares of common stock for an aggregate cost of $196.8 million.

As of June 30, 2026, there was $666.0 million remaining for future share repurchases under

the share repurchase program.

Effective July 23, 2026, the Board of Directors authorized the repurchase of common stock in the amount of $884.2 million, in addition to the $615.8 million that remained available for repurchases under the prior share repurchase authorization, for a total repurchase authorization of up to $1.50 billion under the program.

• On June 26, 2026, we issued the 2026 Notes.

On July 20, 2026, we used the net proceeds from the 2026 Notes and cash on hand to redeem all of our 2017 Notes.

• On July 20, 2026, the Board of Directors declared a cash dividend of $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the close of business on August 19, 2026, payable on August 27, 2026.

• On July 22, 2026, we announced that the .

web TLD has been delegated into the global DNS root zone, with Verisign as the designated registry operator.

Pursuant to our agreements with ICANN, we make available files containing all active domain names registered in the .com and .net registries.

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The update times may vary each day.

The number of domain names provided in this Form 10-Q are as of midnight of the date reported.

The number of domain names provided in this Form 10-Q is as of midnight of the date reported.

Results of Operations

The following table presents information regarding our results of operations as a percentage of revenues:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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The current such six-year period began on October 26, 2024.

We increased the annual registry-level wholesale fee for each new and renewal .

We increased the annual registry-level wholesale fee for each new and

com domain name registration from $9.59 to $10.26 effective September 1, 2024.

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com domain name registration from $10.26 to $10.97 effective November 1, 2026.

Under the .net Registry Agreement, we are permitted to increase the price of .net

domain name registrations by up to 10% each year during the term of our agreement with ICANN, through June 30, 2029.

Under the .net Registry Agreement, we are permitted to increase the price of .net domain name registrations by up to 10% each year during the term of our agreement with ICANN, through June 30, 2029.

We increased the annual registry-level wholesale fee for each new and renewal .net domain name registration from $9.92 to $10.91 effective February 1, 2024.

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A comparison of revenues is presented below:

Three Months Ended March 31,

2026 % Change 2025

Three Months Ended June 30, Six Months Ended June 30,

2026 % Change 2025 2026 % Change 2025

(Dollars in millions)

1 unchanged sentence

The following table compares the .com and .net domain name registrations in the domain name base:

March 31, 2026 % Change March 31, 2025

June 30, 2026 % Change June 30, 2025

.com and .net domain name registrations in the domain name base

179.1 million 5% 170.5 million

Revenues increased during the three months ended March 31, 2026, as compared to the same period last year, primarily due to an increase in the domain name base as of March 31, 2026 compared to March 31, 2025 and the .com and .net price increases.

Revenues increased during the three and six months ended June 30, 2026, as compared to the same periods last year, primarily due to an increase in the domain name base as of June 30, 2026 compared to June 30, 2025 and the .com price increases.

Demand for .com and .net domain names has been primarily driven by continued internet growth and marketing activities carried out by us and our registrars.

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net domain names.

Our domain name base increased during the three months ended March 31, 2026 compared to March 31, 2025, as the positive domain name base trends that began in 2025 continued into 2026 with higher new registrations and renewal rates.

Our domain name base increased during the three and six months ended June 30, 2026 compared to June 30, 2025, as the positive domain name base trends that began in 2025 continued into 2026 with higher new registrations and renewal rates.

Growth in the domain name base has been positively impacted by continued registrar focus on customer acquisition and engagement with our marketing programs, as well as the evolution of AI tools used in content and website creation.

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The following table presents a comparison of our geographic revenues:

Three Months Ended March 31,

2026 % Change 2025

Three Months Ended June 30, Six Months Ended June 30,

2026 % Change 2025 2026 % Change 2025

(Dollars in millions)

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EMEA 75.9 10% 68.8 149.4 10% 135.8

47.5 4% 45.5 95.5 6% 89.9

Other 23.5 (6)% 25.1 47.5 (5)% 49.9

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Revenue growth for each region may also be impacted by registrars domiciled in one region, registering domain names in another region.

Our revenue growth was generated from registrars based in the U.S., EMEA and APAC during the three months ended March 31, 2026, compared to the same period in 2025.

Our revenue growth was generated from registrars based in the U.S., EMEA and APAC during the three and six months ended June 30, 2026, compared to the same periods in 2025.

Cost of revenues

1 unchanged sentence

A comparison of cost of revenues is presented below:

Three Months Ended March 31,

2026 % Change 2025

Three Months Ended June 30, Six Months Ended June 30,

2026 % Change 2025 2026 % Change 2025

(Dollars in millions)

Cost of revenues $ 50.0 2% $ 49.1 $ 99.2 1% $ 98.5

Cost of revenues remained consistent during the three months ended March 31, 2026, compared to the same period last year.

Cost of revenues increased slightly during the three months ended June 30, 2026, compared to the same period last year, due to a combination of individually insignificant factors.

Cost of revenues increased slightly during the six months ended June 30, 2026, compared to the same period last year, due to a combination of individually insignificant factors, partially offset by a decrease in depreciation expenses.

Although purchases of property and equipment increased in the six months ended 2026, depreciation expenses decreased by $3.6 million due to a decrease in capital expenditures in recent prior periods.

Research and development

1 unchanged sentence

A comparison of research and development expenses is presented below:

Three Months Ended March 31,

2026 % Change 2025

Three Months Ended June 30, Six Months Ended June 30,

2026 % Change 2025 2026 % Change 2025

(Dollars in millions)

Research and development $ 27.5 7% $ 25.7 $ 55.0 6% $ 51.7

Research and development expenses increased slightly during the three months ended March 31, 2026, compared to the same period last year, due to a combination of individually insignificant factors.

Research and development expenses increased during the three and six months ended June 30, 2026, compared to the same periods last year, due to a combination of individually insignificant factors.

Selling, general and administrative

1 unchanged sentence

A comparison of selling, general and administrative expenses is presented below:

Three Months Ended March 31,

2026 % Change 2025

Three Months Ended June 30, Six Months Ended June 30,

2026 % Change 2025 2026 % Change 2025

(Dollars in millions)

Selling, general and administrative $ 60.8 12% $ 54.4 $ 119.4 8% $ 110.1

Selling, general and administrative expenses increased during the three months ended March 31, 2026, compared to the same period last year, primarily due to an increase in compensation and benefits expenses, including stock-based compensation expenses.

Compensation and benefits expenses, including stock-based compensation expenses, increased by $2.8 million, primarily due to annual salary increases and an increase in the total projected achievement levels on certain performance-based RSU grants.

Selling, general and administrative expenses increased during the three months ended June 30, 2026, compared to the same period last year, primarily due to an increase in stock-based compensation expenses and a combination of several other individually insignificant factors.

Stock-based compensation expense increased by $3.1 million primarily due to an increase in the total projected achievement levels on certain performance-based RSU grants.

Selling, general and administrative expenses increased during the six months ended June 30, 2026, compared to the same period last year, primarily due to increases in stock-based compensation expenses, compensation and benefit expenses, and equipment and software expenses, partially offset by an increase in overhead expenses allocated to other cost types.

Stock-based compensation expense increased by $4.3 million primarily due to an increase in the total projected achievement levels on certain performance-based RSU grants.

Compensation and benefits expenses increased by $3.6 million, primarily due to higher expenses for certain employee health-insurance related benefits and annual salary increases.

Equipment and software expenses increased by $3.6 million primarily due to increases in expenses related to network security and other software services.

Overhead expenses allocated to other cost types increased by $3.2 million due to an increase in total allocable expenses.

Interest expense

Interest expense decreased slightly during the three months ended March 31, 2026, compared to the same period last year, primarily due to the period of overlap between the issuance of $500.0 million of 5.25% senior unsecured notes due June 2032 (“2032 Notes”) and repayment of $500.0 million aggregate principal amount of outstanding senior unsecured notes due April 2025 (“2025 Notes”) in March 2025.

Interest expense decreased slightly during the six months ended June 30, 2026, compared to the same period last year, primarily due to the period of overlap in 2025 between the issuance of $500.0 million of 5.25% senior unsecured notes issued in 2025 (“2025 Notes”) and repayment of $500.0 million of outstanding 5.25% senior unsecured notes issued in 2015 (“2015 Notes”).

Non-operating income, net

Non-operating income decreased during the three months ended March 31, 2026, compared to the same period last year, primarily due to a decrease in interest income as a result of lower amounts invested in debt securities in the current period compared to the prior period and a decrease in interest rates on the Company’s investments in debt securities.

Non-operating income decreased during the three and six months ended June 30, 2026, compared to the same periods last year, primarily due to a decrease in interest income as a result of lower amounts invested in debt securities in the current period and a decrease in interest rates on the Company’s investments in debt securities.

Income tax expense

The following table presents income tax expense and the effective tax rate:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

(Dollars in millions)

5 unchanged sentences

The following table presents our principal sources of liquidity:

March 31, December 31,

June 30, December 31,

(In millions)

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Treasury bills purchased with original maturities of three months or less.

As of March 31, 2026, all of our debt securities have contractual maturities of less than one year.

As of June 30, 2026, all of our debt securities have contractual maturities of less than one year.

Our cash and cash equivalents are readily accessible.

For additional information on our investment portfolio, see Note 2, “Financial Instruments,” of our Notes to Condensed Consolidated Financial Statements in Part I, Item I of this Quarterly Report on Form 10-Q.

Effective July 24, 2025, the Board of Directors authorized the repurchase of common stock in the amount of $913.1 million, in addition to the $586.9 million that remained available for repurchases under the share repurchase authorization, for a total repurchase authorization of up to $1.50 billion under the program.

During the three months ended March 31, 2026, we repurchased 0.9 million shares of common stock for an aggregate cost of $214.4 million.

As of March 31, 2026, there was $862.8 million remaining available for future share repurchases under the share repurchase program.

In the three months ended March 31, 2026, we paid dividends of $74.2 million.

On April 20, 2026, the Board of Directors declared a cash dividend of $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the close of business on May 19, 2026, payable on May 27, 2026.

During the three months ended June 30, 2026, we repurchased 0.7 million shares of common stock for an aggregate cost of $196.8 million.

As of June 30, 2026, there was $666.0 million remaining available for future share repurchases under the Company’s share repurchase program.

In the six months ended June 30, 2026, we paid dividends of $147.8 million.

On July 20, 2026, the Board of Directors declared a cash dividend of $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the

close of business on August 19, 2026, payable on August 27, 2026.

We intend to continue to pay a cash dividend on a quarterly basis, subject to market conditions and approval by the Board of Directors.

As of March 31, 2026, we had $500.0 million principal amount outstanding of the 2032 Notes, $750.0 million principal amount outstanding of 2.70% senior unsecured notes due 2031, and $550.0 million principal amount outstanding of 4.75% senior unsecured notes due 2027.

As of March 31, 2026, we had no outstanding borrowings and $200.0 million in borrowing capacity under our credit facility which matures in 2028.

On June 26, 2026, we issued $550.0 million of the 2026 Notes.

As of June 30, 2026, we also had $550.0 million principal amount outstanding of the 2017 Notes, $750.0 million aggregate principal amount of outstanding 2.70% senior unsecured notes issued in 2021, and $500.0 million principal amount outstanding of the 2025 Notes.

On July 20, 2026, we used the net proceeds from the 2026 Notes and cash on hand to redeem all of our $550.0 million aggregate principal amount outstanding of the 2017 Notes.

As of June 30, 2026, we had no outstanding borrowings and $200.0 million in borrowing capacity under our credit facility, which matures in 2028.

We believe existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our ability to arrange for additional financing should be sufficient to meet our working capital, capital expenditure requirements, fund our quarterly dividend, and to service our debt for the next 12 months and beyond.

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Our cash requirements have not changed materially since the 2025 Form 10-K.

In summary, our cash flows for the three months ended March 31, 2026 and 2025 were as follows:

Three Months Ended March 31,

In summary, our cash flows for the six months ended June 30, 2026 and 2025 were as follows:

Six Months Ended June 30,

(In millions)

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Our primary uses of cash from operating activities are for personnel-related expenditures and other general operating expenses, as well as payments related to taxes, interest and facilities.

Net cash provided by operating activities decreased during the three months ended March 31, 2026, compared to the same period last year, primarily due to increases in cash paid to employees and vendors and cash paid for income taxes, and a decrease in cash received from customers, partially offset by a decrease in cash paid for interest.

Cash paid to employees and vendors increased primarily due to the timing of payments.

Cash paid for income taxes increased primarily due to comparatively higher federal, state and non-US income tax payments.

Cash received from customers decreased primarily due to timing of payments from certain large customers.

Cash paid for interest decreased due to the payment of interest accrued on the 2025 Notes in March 2025, prior to their maturity date of April 1, 2025.

Net cash provided by operating activities increased during the six months ended June 30, 2026, compared to the same period last year, primarily due to decreases in cash paid for income taxes and cash paid for interest and an increase in cash received from customers, partially offset by an increase in cash paid to employees and vendors.

Cash paid for income taxes decreased primarily due to the final installment payment for the transition tax on accumulated foreign earnings resulting from the 2017 Tax Cuts and Jobs Act in 2025.

Cash paid for interest decreased primarily as a result of the final payment of interest on our 2015 Notes in 2025.

Cash received from customers increased primarily due to the .com price increases and higher .com domain name registrations and renewals.

Cash paid to employees and vendors increased primarily due to an increase in operating expenses and the timing of payments.

Cash flows from investing activities

The changes in cash flows from investing activities primarily relate to purchases, maturities and sales of marketable securities, and purchases of property and equipment.

Net cash provided by investing activities decreased during the three months ended March 31, 2026, compared to the same period last year, primarily due to a decrease in proceeds from maturities and sales of marketable securities, net of purchases of marketable securities.

Net cash provided by investing activities decreased during the six months ended June 30, 2026, compared to the same period last year, primarily due to a decrease in proceeds from maturities and sales of marketable securities, net of purchases of marketable securities, and an increase in purchases of property and equipment.

Cash flows from financing activities

The changes in cash flows from financing activities primarily relate to proceeds from and repayment of borrowings, share repurchases, dividend payments, and proceeds from our employee stock purchase plan.

Net cash used in financing activities increased during the three months ended March 31, 2026, compared to the same period last year, primarily due to dividend payments to shareholders, partially offset by a decrease in share repurchases and the net impact of the redemption of our 2025 Notes and the issuance of our 2032 Notes in March 2025.

The changes in cash flows from financing activities primarily relate to proceeds from and repayment of borrowings, share repurchases, dividend payments, payment of excise tax on share repurchases, and proceeds from our employee stock purchase plan.

Net cash used in financing activities decreased during the six months ended June 30, 2026, compared to the same period last year, primarily due to the proceeds from the issuance of our 2026 Notes, the net impact of the redemption of our 2015 Notes and the issuance of our 2025 Notes in 2025, and a decrease in the payment of excise tax on share repurchases, partially offset by increases in dividend payments to stockholders and increases in share repurchases.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis