VERIZON COMMUNICATIONS INC Q3 FY2026 earnings call

• Customer Acquisition & Retention: Postpaid phone net additions surged 820% YoY to 406,000, driven by the 'Simplicity' plan launch. Postpaid net account additions reached 137,000, the best performance in over a decade. Cost of acquisition declined 41% and retention costs dropped 30% YoY.
• Broadband Strategy Shift: Fiber now constitutes nearly half of broadband net adds. The company is shifting away from promotional-heavy FWA sales toward high-value offerings. A new 1 Gigabit FWA product using millimeter wave spectrum is being scaled in metro areas.
• AI Connect Growth: Signed dark fiber agreements with AWS (>$2 billion) and Google. Total signed contracts for AI infrastructure connectivity and edge computing have reached approximately $4 billion, expected to generate meaningful revenue starting in 2027.
• Financial Discipline & Transformation: The $9 billion cost reduction plan remains on track. Adjusted EBITDA margins expanded by 240 basis points. Net unsecured debt-to-EBITDA ratio improved to 2.3x.
• Network & Spectrum Advantage: Leveraging 1,700 MHz of millimeter wave spectrum as a competitive differentiator to offload C-band capacity and deliver high-speed broadband at lower deployment costs than fiber.

Total Revenue: $34.3 billion (up 1.5% year-over-year). Mobility and Broadband Service Revenue: Grew 2.9%, continuing sequential improvement from prior quarters. Wireless Service Revenue: Just over $20.9 billion. Equipment Revenue: Down 9% year-over-year due to significantly lower upgrade volumes. Adjusted EBITDA: $13.8 billion (up 8% year-over-year), with an adjusted EBITDA margin of 40.2%. Adjusted EPS: $1.31 (up 8.3% year-over-year). Free Cash Flow: $7.8 billion for the quarter, representing a >12% year-over-year growth.

• Postpaid Phone Net Adds: Raised full-year guidance to 1.1 million–1.2 million, more than triple the previous year's result.
• Adjusted EPS: Raised full-year growth expectation to 7%–7.5%, up from the previous range of 6%–7%.
• Free Cash Flow: Raised full-year growth guidance to approach 12%, up from 9%–10%, anticipating record-high total free cash flow since 2020.
• Revenue Growth: Expects mobility and broadband service revenue growth to accelerate to approximately 4% in Q4, with full-year growth landing in the upper half of the 2.5%–3% range.
• CapEx: Maintains full-year CapEx guidance of $16 billion–$16.5 billion, inclusive of success-based capital for AI Connect.

• Competitive Landscape: Potential entry of LEO/Starlink into the core mobile market, though management views this as a long-term threat (4-6 years) requiring massive capital expenditure.
• Operational Execution: Risk associated with scaling the new high-speed FWA service and integrating the Frontier acquisition to deliver synergies.
• Technology Adoption: Dependence on successful deployment of millimeter wave spectrum to achieve broadband speed targets.
• Regulatory/Auction Uncertainty: Future spectrum auction outcomes and potential participation by competitors like SpaceX in upcoming auctions.

Q: John Hodulik asked about the sustainability of postpaid volume momentum and potential pricing power given improved churn metrics. / A: Dan Schulman emphasized that growth is driven by high-quality, revenue-positive net adds without free lines or subsidies, supported by the 'Simplicity' value proposition. He noted that while they are not against price increases, any increase must be accompanied by added value to maintain customer trust and low churn. Management expects continued year-over-year churn declines and positive account growth in Q4, signaling strong pricing power rooted in superior customer experience rather than promotional discounts.

Q: Michael Ng inquired about the details, deal lengths, and margins of the AI Connect business pipeline. / A: Management highlighted that AI Connect is a rapidly growing TAM with $4 billion in signed contracts, including dark fiber and edge computing deals with hyperscalers like AWS and Google. Tony Skiadas noted that deals are highly customized to customer specifications with attractive margins. Dan Schulman clarified that these revenues will begin impacting results in 2027, with modest success-based CapEx required, positioning AI infrastructure as a key long-term growth vector.

Q: Michael Rollins asked about the strategic response to potential LEO/Starlink entry into the terrestrial mobile market and MVNO possibilities. / A: Dan Schulman dismissed immediate threats, stating that building a terrestrial network would take 4-6 years and hundreds of billions in investment, making Starlink unlikely to compete effectively in urban/suburban areas where Verizon dominates. He firmly rejected extending MVNO deals to satellite providers, citing no strategic benefit. Instead, Verizon plans to leverage its superior network, mmWave spectrum, and AI capabilities to outcompete any future entrants.

Q: Sean Diffley sought clarification on the role of Fixed Wireless Access (FWA) and the scalability of the new 1 Gigabit FWA product. / A: Schulman explained that FWA is evolving from a basic offering to a high-speed competitor via millimeter wave technology, aiming to pass 50-65 million premises with gigabit speeds. This strategy allows Verizon to serve high-demand customers who need speeds beyond current FWA capabilities, effectively competing with fiber in metros. The mmWave solution is more cost-efficient to deploy than fiber and helps offload congestion on C-band networks.

Q: Greg Williams asked about the impact of agentic AI on ARPU and business models. / A: Dan Schulman described AI agents as a transformative force that will drive significant data traffic growth and open new revenue streams through 'agentic commerce.' Verizon aims to monetize this by providing secure, trusted platforms for agent transactions and leveraging AI to enhance customer service and bundle adoption. The company anticipates that agents will facilitate higher-value subscriptions and bundles, driving incremental ARPU growth as the ecosystem matures.