Verizon Earnings Call Flags Turnaround Momentum

Verizon Communications ((VZ)) has held its Q4 earnings call. Read on for the main highlights of the call.

Management struck an upbeat tone around operational momentum, highlighting the strongest net-add performance since 2019, resurgent free cash flow, and renewed cost discipline, yet tempered that optimism with reminders of a February network outage, elevated churn and revenue headwinds that must be overcome for the turnaround to stick.

Strong Quarterly and Annual Net Adds

Verizon booked over 1 million mobility and broadband net adds in the fourth quarter, including 616,000 postpaid phone additions and 551,000 from the consumer segment, reinforcing management’s claim of regaining subscriber velocity ahead of a projected 1.9 million combined FWA, Frontier and fiber net adds in 2025 that would push total broadband connections beyond 16.3 million.

Record Fixed Wireless and Fios Performance

Fixed wireless access remained a standout with 319,000 Q4 net adds, while Fios Internet delivered 67,000 additions—the best fourth-quarter haul since 2020—showcasing how converged offerings are cushioning revenue while wireline churn stabilizes.

Frontier Acquisition and Fiber Expansion

Frontier supplied 125,000 fiber net adds, up 29% year over year, and 1.3 million new passings in 2025, expanding Verizon’s fiber footprint to more than 30 million passings and setting the stage for at least 2 million additional passings in 2026 en route to a 40–50 million medium-term goal.

Financial Results: EBITDA, EPS and Cash Flow

Full-year adjusted EBITDA rose 2.5% to $50 billion, Q4 adjusted EBITDA reached $11.9 billion, adjusted EPS landed at $4.71, and free cash flow totaled $20.1 billion, underscoring improving profitability even as revenue growth was constrained by pricing lags and promotional amortization.

Ambitious 2026 Guidance and Step-Change Targets

Management framed 2026 as a “step-change” year, guiding to 750,000–1,000,000 consolidated postpaid phone net adds, 2%–3% service-revenue growth to roughly $93 billion, adjusted EPS of $4.90–$4.95, CapEx trimmed to $16.0–$16.5 billion, and free cash flow of at least $21.5 billion, with adjusted EBITDA growth slated to outrun earnings.

Cost Transformation and OpEx Savings Target

A sweeping $5 billion OpEx reduction program spanning headcount cuts, marketing efficiencies, real estate rationalization, contract renegotiations and automation is underway, complemented by Frontier synergies now projected above $1 billion by 2028—double prior targets—though execution risk looms after approximately 13,000 employees exited in Q4.

Capital Allocation and Shareholder Returns

The board authorized up to $25 billion in buybacks over three years, beginning with at least $3 billion in 2026, and accelerated a $0.07 annualized dividend hike marking 20 consecutive years of increases, signaling confidence that cash generation can fund both growth and shareholder payouts.

Balance Sheet Improvements

Net unsecured debt fell $3.6 billion year over year to $110.1 billion, putting leverage at 2.2x adjusted EBITDA ahead of the Frontier consolidation; management expects the ratio to rise roughly 0.25x post-Frontier but still aims to return to the 2.0–2.25x range by 2027 through disciplined deleveraging.

Operational Progress on Network Builds

The C-band deployment is about 90% complete, covering roughly 300 million points of presence, while Fios build targets for 2025 were exceeded, underscoring Verizon’s emphasis on network superiority even as it trims non-core initiatives.

Customer-Impacting Network Outage

Leadership acknowledged a recent outage that undermined Verizon’s reliability reputation, apologized to customers and pledged remedial actions, recognizing that service lapses could jeopardize the hard-won gains in subscriber momentum.

Elevated Postpaid Phone Churn

Postpaid phone churn stayed stubbornly high in Q4 due to earlier pricing moves and intense competition, with management labeling churn reduction a central focus for 2026 as it seeks to translate gross additions into durable revenue.

Revenue Transition Headwinds

Executives warned that lapping last year’s price increases will create roughly 180 basis points of revenue drag in 2026, while promotional amortization will keep wireless service revenue roughly flat despite healthier volumes.

Promotional and Amortization Pressures

The company intends to absorb ongoing promotional amortization costs to drive subscriber growth, accepting near-term revenue suppression in exchange for future lifetime value, a strategy that requires disciplined execution to avoid margin erosion.

Leverage Impact from Frontier Inclusion

Incorporating Frontier’s EBITDA will temporarily lift unsecured leverage by about a quarter turn in 2026, yet Verizon reiterated plans to migrate back to its 2.0–2.25x target by 2027 through free cash flow deployment and debt reduction.

Public Sector and Legacy Disconnects

The business unit’s public-sector performance remained pressured by federal budget constraints and lingering disconnects from government efficiency programs, although sequential improvement hints at stabilization once political headwinds abate.

Workforce Reductions and Execution Risk

The elimination of roughly 13,000 positions in Q4—80% already off payroll—underscores management’s resolve to streamline operations, but simultaneous transformation, integration and morale management elevate execution risks.

Guidance Outlook

Verizon’s 2026 playbook calls for accelerated postpaid phone growth, modest service-revenue expansion, flat wireless service revenue, mid-single-digit EPS gains, $16.0–$16.5 billion in CapEx, at least $21.5 billion in free cash flow, $5 billion in OpEx cuts and over $1 billion in Frontier synergies by 2028, all while managing leverage back toward 2.0–2.25x and funding a $25 billion buyback plus a higher dividend.

Closing sentiment remains cautiously optimistic: robust net adds, cost discipline and shareholder returns show a tangible turnaround path, but sustained progress hinges on fixing churn, preventing outages and navigating revenue headwinds without sacrificing the financial rigor investors now expect.