Verizon (VZ) Q3 2026 earnings review
Verizon adds more phone customers, but revenue per account falls
Verizon added wireless customers at its fastest third-quarter pace in five years while spending less on phone discounts. Cutting promotional subsidies by 41% and trimming overhead lifted operating profit margins to a company record and pushed free cash flow up 12% to $7.8 billion. Chief executive Dan Schulman raised the full-year outlook for a third straight quarter and signed a $2 billion artificial intelligence fiber deal with Amazon.
| Mobility and broadband service revenue | $23.5B +2.9% from a year ago |
|---|---|
| Postpaid phone net additions | 406,000 44,000 a year ago |
| Profit per share, excluding one-offs | $1.31 +8.3% from a year ago |
| Full-year outlook | Raised 3rd straight raise on profit, cash flow and phone additions |
⚖️ Verdict: 🟢 Bullish
The story got better because the low-subsidy model passed its first autumn phone-launch test without losing customers to rivals, and the Amazon contract proves the Google fiber deal was not a one-off. One caution: average monthly wireless revenue per account fell 2% from a year ago, and slowing fixed-wireless sign-ups pulled total broadband additions down slightly.
The question now is whether these new subscribers will lift underlying wireless revenue once the Frontier fiber acquisition passes its one-year mark in January. If new customers spend enough to offset fee cuts, service revenue will keep accelerating; if cheaper plans dilute the average bill, revenue growth will stall after the acquisition effect fades. Fourth-quarter revenue per account and the 2027 outlook will decide it.
🐂 Bull Case
Lower Phone Subsidies Lifted Subscribers and Margins
Verizon is trying to win wireless subscribers with simpler pricing and loyalty rewards instead of expensive free phones. A key concern was that rivals would use autumn phone launches to steal customers if the US telecom group held back on promotions. Instead, the third quarter delivered the strongest subscriber growth in years while cutting promotional spending.
- Postpaid phone additions (customers billed monthly): 406,000, up from 44,000 a year ago
- Postpaid net account additions: 137,000, the best quarter in over a decade
- Postpaid phone churn (monthly cancellations): 0.94%, down 0.04 percentage points from a year ago
- Promotional acquisition and retention costs: down 41% and 30% from a year ago
This matters because retaining existing customers costs much less than buying new ones with discounted hardware. The phone upgrade rate fell to 2.6% from 3.3% a year ago, which cut wireless equipment revenue by 9.0%. Because customers kept their devices longer, the company saved money on phone subsidies and still grew its customer base.
What to watch: fourth-quarter postpaid phone additions during the holiday shopping season. Delivering the 505,000 additions implied by the full-year outlook would show that the low-subsidy model holds up during the heaviest promotional quarter of the year.
Cost Cuts Drove Record Operating Profit Margins
Verizon is running a multi-year cost-cutting programme alongside its push to reduce phone subsidies. Those two efforts lifted Consolidated Adjusted EBITDA (operating profit before depreciation, taxes and one-off items) by 8.0% from a year ago to $13.8 billion. That pushed the Adjusted EBITDA margin up 2.4 percentage points to 40.2%, the highest level the carrier has ever reported.
Two expense lines drove the improvement. The cost of wireless equipment — what the business pays for phones sold to customers — dropped by 2.2 percentage points of revenue to 17.0%, thanks to the "strategic decision to reduce spending on device subsidies". Selling, general and administrative expense (sales and overhead costs) fell by 1.1 percentage points of revenue to 21.8%.
Those savings easily covered a 0.9-point rise in the cost of services and a 1.2-point increase in depreciation and amortization from the expanded fiber network. Unlike last quarter, when $1.8 billion of restructuring and disposal charges depressed reported profit, third-quarter one-off charges were just $57 million, so reported net income rose 5.2% to $5.3 billion.
What to watch: fourth-quarter selling and overhead expenses as a share of revenue. Holding that ratio down during holiday marketing will show whether the cost programme is delivering lasting savings.
Amazon Deal Adds a Second AI Customer
Verizon wants to rent its high-speed fiber cables to technology companies building artificial intelligence data centres, a programme it calls AI Connect. Chief executive Dan Schulman said "technology leaders are choosing our fiber network to power the next generation of AI infrastructure." Critics argue that leasing fiber is a standard telecom service and that the programme lacks any disclosed revenue or backlog figures.
This quarter Verizon signed an agreement valued at over $2.0 billion with Amazon Web Services (AWS) "to scale distributed compute and meet the real-time demands of agentic and generative AI workloads". Following last quarter's $1 billion Google contract, the AWS deal delivers on management's promise to announce multi-billion-dollar agreements before year-end, while keeping full-year capital spending unchanged.
What to watch: any disclosure of AI Connect revenue or contracted backlog in the full-year results. Seeing a separate revenue number for 2027 would show how quickly these multi-year contracts turn into annual sales.
Full-Year Plan Raised, Fourth-Quarter Cash Slows
Stronger subscriber additions and lower phone subsidy spending allowed Verizon to raise its full-year 2026 outlook for the third quarter in a row. The wireless carrier lifted its targets for postpaid phone additions, profit per share excluding one-offs, operating cash flow, and free cash flow (cash left after capital spending). Free cash flow rose 12.1% from a year ago in the third quarter to $7.8 billion.
Because the first nine months of the year already delivered $18.0 billion of free cash flow, the raised full-year forecast of $22.44 billion to $22.54 billion leaves about $4.5 billion for the fourth quarter by our math. That implies fourth-quarter free cash flow growth slows to 2.6% from a year ago, as capital spending steps up in the final months.
What to watch: fourth-quarter capital expenditures against the unchanged $16.0 billion to $16.5 billion annual budget. Spending near the top of that range will test whether AI fiber builds are taking a larger share of cash.
🐻 Bear Case
Wireless Revenue Per Account Keeps Falling
"By prioritizing customer-first offerings like Simplicity and our expanded loyalty program over heavy subsidies, we are winning loyal, high-value customers while expanding margins, reducing churn, and generating strong sustained cash flow," chief executive Dan Schulman said. Simplicity is Verizon's newer mobile pricing plan, and Schulman wants subscriber growth rather than price hikes to drive revenue.
The quarter's billing metrics test that claim. Wireless retail postpaid ARPA — the average monthly service revenue per account — fell 1.9% from a year ago to $168.08. By our math, it also slipped $0.27 from the second quarter's $168.35, even though total postpaid accounts grew. In addition, the press release dropped the full-year outlook for wireless service revenue, which previously called for roughly flat sales.
This matters because adding subscribers only accelerates revenue if new customers pay as much as existing ones. If fee removals and cheaper plans lower the average bill, volume gains just offset lower prices, leaving total revenue growth at a modest 1.5%.
What to watch: average monthly revenue per postpaid account in the fourth quarter. A further sequential drop would indicate that the new pricing plans are diluting account revenue faster than extra phone lines can rebuild it.
Fixed Wireless Slowdown Offsets Fiber Gains
Verizon sells home internet in two ways: fiber-optic cables and fixed wireless access (FWA), which beams internet to homes over mobile towers. While the January acquisition of Frontier expanded the fiber footprint to over 11 million connections, total broadband additions slipped 2.5% from a year ago to 314,000, and fell from 348,000 in the second quarter.
- Fixed wireless net additions: 159,000, down 39.1% from 261,000 a year ago
- Fiber broadband net additions: 155,000, up 154.1% from 61,000 a year ago (includes acquired Frontier markets)
- Total broadband net additions: 314,000, down from 322,000 a year ago and 348,000 last quarter
This matters because fiber gains only accelerate total broadband growth if they exceed the slowdown in fixed wireless. This quarter, the 102,000 year-over-year drop in fixed wireless additions more than wiped out the 94,000 increase in fiber additions, so total internet customer growth went backward.
What to watch: fourth-quarter fixed wireless additions alongside fiber additions. If fixed wireless keeps shrinking below 150,000 per quarter, Verizon will struggle to grow total broadband volumes once the Frontier acquisition passes its one-year mark in January.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new figures in the third-quarter earnings release and remain open ahead of the quarterly filing.
- Underlying service revenue growth: the release reports 2.9% mobility and broadband service growth including Frontier, leaving the growth rate from businesses owned a year ago unreadable until the 10-Q filing.
- Loyalty programme costs: management did not quantify the expense of cash-back rewards and waived fees, though overall selling and overhead costs fell.
- Simultaneous execution risks: the company is running a ten-part cost overhaul, the Frontier integration, and a British Telecom joint venture at the same time.
- Legacy business wireline erosion: the release no longer breaks out Enterprise and Wholesale wireline revenue, which shrank in 2025.
💲 Other KPIs
Net unsecured debt — debt not backed by specific assets, minus cash and equity credit for junior notes — fell by $5.0 billion (3.9% by our math) from the second quarter. That brought the ratio of net unsecured debt to Adjusted EBITDA down to 2.3 times from 2.5 times last quarter, moving closer to the 2.0 to 2.25 target range despite $4.4 billion of nine-month wireless spectrum purchases.
Operating profit in the Business division rose 19.4% from a year ago on revenue that grew 2.6% to $7.0 billion. Lower selling and overhead expenses (-4.8% from a year ago) and the reclassification of international wireline assets held for sale lifted the segment operating margin by 1.7 percentage points to 12.2%.
The average number of diluted shares fell 1.7% from a year ago (down 72 million shares). Verizon bought back $500 million of stock in the third quarter by our math, bringing nine-month repurchases to $4.0 billion against its unchanged full-year cap of up to $4.5 billion.
🔮 Guidance
Raised. The middle of the range moved up by about 212,500 subscribers to 1.15 million, more than triple the 362,000 added in 2025. With 645,000 added in the first nine months, the plan leaves 505,000 additions for the fourth quarter by our math, which is 18% below last year's fourth quarter (616,000).
Raised. This is the third raise in three quarters, lifting the middle of the range to $5.05 (+7.2% from a year ago): +$0.045 in Q1, +$0.045 in Q2, and +$0.035 in Q3 by our math. After $3.89 in the first nine months, the outlook leaves $1.16 for Q4, or 6.4% growth from a year ago.
Raised. The middle of the range moved up by $450 million to $38.74 billion, or 4.3% growth for the year. Because the first nine months already generated $29.94 billion (+6.8% from a year ago), the full-year plan leaves $8.80 billion for the fourth quarter by our math, a 3.4% decline from a year ago.
Raised. The middle of the range rose by $450 million to $22.49 billion (+11.7% from a year ago), after a $540 million raise last quarter. By our math, that leaves $4.48 billion for Q4, slowing growth to 2.6% from a year ago against 14.3% across the first nine months.
Raised for the full year and unchanged for the fourth quarter. The carrier tightened the annual target to the top half of its 2.5% to 3.0% range after delivering 2.9% in the third quarter. The 4.0% fourth-quarter target benefits from an easier comparison against late-2025 promotional discounts.
Unchanged. The budget remains at $16.0 billion to $16.5 billion "inclusive of success-based investments for AI Connect". With $11.93 billion spent in the first nine months, the middle of the range leaves $4.32 billion for the fourth quarter by our math, down 8.9% from a year ago.
❓ Key Questions
Why did the release drop the wireless service revenue outlook?
In the first and second quarters, Verizon guided full-year wireless service revenue to be roughly flat, which required positive growth in the second half. The third-quarter release omitted that line, leaving unclear whether falling revenue per account kept wireless service sales negative.
What is service revenue growth excluding the Frontier acquisition?
Mobility and broadband service revenue grew 2.9%, but that figure includes Frontier fiber networks acquired in January 2026. Without the growth rate from businesses owned a year ago, investors cannot see how much growth will slow when the deal anniversaries in the first quarter.
When will the Google and Amazon AI deals generate revenue?
Verizon has now announced over $3 billion in AI fiber contracts across Google and Amazon Web Services. The company has not disclosed how many years those contracts span, how much revenue they add in 2027, or how much new capital spending they require after 2026.
Does the 2028 target for fixed wireless subscribers still stand?
Fixed wireless additions fell 39% from a year ago to 159,000, shrinking for a third consecutive quarter. With the base at 6.37 million connections, reaching the previously stated goal of 8 million to 9 million subscribers by 2028 would require a stabilization in quarterly additions.