Key Points
Verizon added 406,000 postpaid phone customers in the third quarter, more than nine times as many as a year ago and its best third quarter in five years.
Adjusted EBITDA hit $13.8 billion, the highest quarterly figure in company history, and free cash flow rose 12.1% to $7.8 billion.
Verizon raised its full-year guidance for the third straight quarter and signed a $2 billion-plus fiber deal with Amazon Web Services.
The stock still closed 3.5% lower at $43.10 on a revenue miss of about $430 million, while the Nasdaq gained 0.8% on Anthropic's IPO filing.
The real overhang is SpaceX, which is reportedly seeking access to 80,000 U.S. cell sites to build a rival network.
Verizon just delivered the best quarter it has had in years.
Record EBITDA. A third straight guidance raise. A $2 billion-plus deal to wire Amazon's AI data centers.
The stock fell 3.5%.
On a day when the Nasdaq rose 0.8% and the S&P 500 added 0.7%, the largest U.S. cellphone carrier went the other way.
The Quarter Was Not the Problem
Verizon added 406,000 postpaid phone customers in the third quarter, up from roughly 44,000 a year ago. It also added 137,000 net postpaid accounts, which Verizon said was its best result in more than a decade.
Those customers are also staying. Postpaid phone churn improved to 0.94%. And Verizon is getting them for less: promotional acquisition costs fell 41% from a year ago, and retention costs fell 30%.
Profits followed. Adjusted EBITDA rose 8% to $13.8 billion, the highest quarterly figure Verizon has ever reported, and the margin climbed to 40.2% from 37.8%. Adjusted earnings came in at $1.31 a share, up 8.3% and ahead of the $1.28 Wall Street expected. Free cash flow rose 12.1% to $7.8 billion.
Then came the guidance. Verizon now expects to add 1.1 million to 1.2 million postpaid phone customers this year, up from 750,000 to 1 million. It lifted its adjusted EPS forecast to $5.04–$5.06 and raised its free cash flow growth target to about 12% from 9%.
So Why Did It Fall?
The headline reason was revenue. Verizon reported $34.3 billion, up just 1.5% and short of the roughly $34.7 billion analysts expected.
But look at where the shortfall came from. Service revenue from mobility and broadband grew 2.9% to $23.5 billion, its best pace of the year, and Verizon expects it to accelerate to about 4% in the fourth quarter. The weak spot was equipment revenue, which fell 9%.
That is partly by design. Customers are holding on to their phones longer, and Verizon has deliberately cut back on device subsidies. CEO Dan Schulman has argued that the industry has relied too heavily on free handsets.
In other words, Verizon missed on the least profitable line on its income statement. The market punished it anyway. That tells you the reaction wasn't really about this quarter.
The Competitor That Doesn't Exist Yet
Late last week, Bloomberg reported that SpaceX is in talks to secure access to at least 80,000 U.S. cell sites to build a wireless network from scratch. As we wrote at the time, tower stocks were already reacting before the carriers had said a word.
Monday, Schulman addressed it head-on. He said he operates under the assumption that "everything SpaceX says they will do, they will do, and that they will execute flawlessly."
Then he laid out the math. He estimated that building a competitive terrestrial network would cost SpaceX $300 billion to $500 billion over seven to eight years, and that it would take at least four to six years before SpaceX became a real competitor. By then, he argued, it would be America's "sixth — not the fourth" wireless competitor, and it would carry the same infrastructure costs as everyone else. In the suburban and urban markets that generate about 98% of Verizon's revenue, he said the company is "somewhere between 100x-1,000x more efficient" than satellite service.
The market didn't wait for the debate to play out. Last Wednesday, AT&T beat estimates and raised its outlook, and its stock fell 5% in early trading. Verizon and T-Mobile slid about 3% in sympathy. Now Verizon has beaten and raised, and it has fallen again.
What the Market Is Pricing In
Here is the uncomfortable part for anyone who owns telecom stocks for the income.
Verizon pays $2.83 a share in annual dividends, a yield above 6%. Before today, the stock was already about 14% below its 52-week high of $51.68. Its business is improving on nearly every measure, and the stock keeps getting cheaper.
Meanwhile, money is pouring into AI. Anthropic filed for its IPO Monday morning, with investors valuing it at roughly $1.5 trillion, and chip stocks rallied hard. It is the same split we saw last week, when Meta sank while Procter & Gamble surged. Investors are choosing between paying up for growth and running to safety, and steady telecom is getting neither bid.
The irony is that Verizon is now part of the AI build-out itself. Its new AWS deal will supply high-capacity fiber connections between Amazon's data centers.
What Lands Next
This is the biggest week of earnings season. Tonight, Cadence Design Systems and Nucor report after the close. Tuesday brings Seagate and NXP Semiconductors after the bell, plus durable goods orders.
Wednesday is the main event: the Fed decision at 2 p.m. Traders are pricing in a better than 90% chance the Fed holds rates at 3.75% to 4%. That puts the focus on Chairman Kevin Warsh's tone, and on Microsoft's and Alphabet's AI checkbooks when they report the same evening. Amazon and Intel follow Thursday, along with GDP and the PCE inflation report.
For Verizon, the next real test is the fourth quarter, when management says service revenue growth will accelerate to about 4%. The question is how long the market will keep ignoring them while it waits to see what SpaceX actually builds.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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