Verizon Earnings: Customer Metrics Improve as Cost-Cutting Offsets Weak Revenue

Key Morningstar Metrics for Verizon Communications

• Fair Value Estimate
  : $53.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Verizon Communications’ Earnings

Verizon Communications VZ grew revenue 2.9% during the first quarter, but we estimate sales would have been down about 1.0% excluding the Frontier acquisition. Adjusted EBITDA expanded 6.7% (about 3.0% excluding Frontier) on strong cost-cutting following a large workforce reduction last year.

Why it matters: Wireless customer churn remains elevated, reflecting the tough competitive environment, but Verizon is doing a much better job attracting new customers than a year ago. The firm added 55,000 net postpaid phone customers, far better than its 289,000 loss last year.

• Lower pricing has helped with customer acquisition. Average revenue per postpaid wireless account declined 1.9%, the first drop since the onset of the pandemic. About half the decline was due to credits issued following a network outage. Heavy phone subsidies last year have also pressured this metric.
• Management expects wireless service revenue growth to rebound over the remainder of the year as phone subsidy amortization abates. Still, we don’t expect Verizon to grow wireless service revenue in 2026 after a 1.7% decline this quarter.

The bottom line: We maintain our $53 fair value estimate and narrow economic moat rating.

• Verizon reiterated several times that it has the capacity to respond to increased competition while still meeting its financial forecasts. To us, this commentary is intended to reduce competitive intensity.
• Verizon expects to introduce new wireless plans shortly, providing more insight into its effort to reduce phone promotions. AT&T and T-Mobile are moving in the same direction, which bodes well for the industry.

Key stats: Verizon repurchased $2.5 billion of its shares during the quarter, its first buyback in a decade. As with AT&T, we would prefer the firm focus on debt reduction to prepare for future capital needs, including spectrum auctions.