VZ

Turnaround & Transformation Progress

• The company's turnaround is gaining momentum after a strong Q4 2025, with Q1 2026 delivering positive postpaid phone net ads for the first time in 13 years, and results ahead of initial 2026 guidance in key metrics.
• East unions ratified a new four-year contract, enabling more consistent customer service delivery. The Frontier Communications acquisition closed on January 20, 2026, and integration is on track to hit $1 billion in run-rate operating cost synergies by 2028.
• Consumer customer service delivered its best-ever quarter for customer satisfaction, driven by improved issue resolution, fewer handoffs, and faster response times.

Core Strategic Priorities

• Healthier growth: Prioritize long-term customer lifetime value over short-term promotional revenue, focusing on adding higher-quality customers via converged mobility + broadband offerings, simplified customer experiences, and improved value propositions instead of chasing competitive promotions. Fiber expansion is on track to hit 32 million passings by end of 2026, with a medium-term target of 40-50 million passings.
• Better economics: A 10-workstream company-wide transformation is underway to become an AI-first organization, reduce customer friction, eliminate bureaucratic bloat, and simplify products, with clear monthly/annual targets for each dedicated cross-functional workstream. The transformation is on track to deliver $5 billion in total 2026 operating expense savings. Q1 acquisition and retention costs are down ~35% from Q4 2025, with sustainable improvements from micro-segmented customer offers instead of across-the-board free handset promotions. Churn has reversed multi-year upward trends, delivering compounding benefits to margin and cash flow by reducing the need to spend to replace lost customers.
• Stronger cash generation: Disciplined capital prioritization and operating cost efficiency are driving consistent free cash flow growth, supporting the company's capital allocation priorities: network investment, maintaining the dividend, deleveraging, and returning capital to shareholders. The company is progressing on reducing exposure to non-core legacy assets, with more details to come shortly.

Capital Allocation Update

• The company delivered the 20th consecutive annual dividend increase, with a $0.07 per share annualized raise (2.5% increase). $2.5 billion in share repurchases were completed in Q1, the first Verizon buyback in over a decade. Half of Frontier's acquisition debt has already been repaid, with full repayment expected by end of 2026, and the company remains on track to hit its target 2.0-2.25x net unsecured leverage ratio in 2027.

• Adjusted EPS growth: Raised to 5% to 6% from the prior 4% to 5% range, driven by better-than-expected Q1 operational performance and transformation cost savings.
• Postpaid phone net ads: Management now expects full-year 2026 net ads to land in the upper half of the existing 750,000 to 1,000,000 range, reaffirming the original range.
• Mobility and broadband service revenue growth: Reaffirmed the prior 2% to 3% full-year guidance, with management noting Q1 2026 will be the low point for growth for the full year, as the 80 bps one-time outage drag is not repeated.
• Free cash flow growth: Reaffirmed the prior guidance of ~7% or more year-over-year growth, with a full-year free cash flow target of $21.5 billion or more.
• Full-year CapEx: Reaffirmed the prior $16 to $16.5 billion range.
• FWA subscriber target: Reaffirmed the 2028 target of 8 to 9 million FWA subscribers, noting there may be a small mix shift toward fiber over FWA but the overall target remains unchanged.
• Share buyback: The full-year 2026 target of at least $3 billion in repurchases remains in place, aligned with the company's four-pillar capital allocation framework.

1. Mobility:

• Postpaid phone: Added 55,000 net ads, the first positive Q1 postpaid net ads for Verizon since 2013; consumer postpaid phone net losses were 35,000, a 321,000 year-over-year improvement; consumer postpaid phone churn was 0.90% (5 bps improvement sequentially), falling below 85 bps by the end of March.
• Prepaid: Grew 115,000 net ads, marking the seventh consecutive quarter of growth.
• Wireless service revenue: $20.6 billion, down 1% year-over-year; a one-time 80 bps drag from the January network outage customer credits explains the decline.

1. Broadband:

• Added 341,000 net ads (excluding the first 20 days of Frontier's results, which were consolidated after the January 20, 2026 close); 214,000 net ads came from fixed wireless access (FWA) and 127,000 from fiber.
• Total broadband subscribers reached ~16.8 million as of quarter end.

1. Consolidated:

• Total Q1 2026 revenue: $34.4 billion, up 2.9% year-over-year.
• Combined mobility and broadband service revenue: $22.9 billion, up 1.6% year-over-year.
• Consolidated adjusted EBITDA: $13.4 billion, up 6.7% year-over-year, with a 38.9% adjusted EBITDA margin (140 bps expansion, a Verizon record).
• Adjusted EPS: $1.28, up 7.6% year-over-year, the highest growth rate in over four years.
• Free cash flow: $3.8 billion, up 4% year-over-year.
• Capital expenditure: $4.2 billion for the quarter, on track for full-year 2026 CapEx of $16-$16.5 billion.

• A material January 2026 network outage created a one-time 80 bps drag on Q1 wireless service revenue from required customer credits, though management absorbed the cost transparently and does not expect lingering impacts.
• The business operates in a dynamic, competitive macro, political, and economic environment, and the updated guidance retains a prudent view of ongoing competitive and market risks.
• The company faces transitional revenue headwinds from legacy promotional amortization, though these are expected to fade and turn into tailwinds as the company reduces reliance on expensive promotions.
• Full realization of Frontier integration synergies and 2026 transformation cost savings requires continued execution against integration and transformation workstreams, with more work remaining to hit long-term targets.

Q: How are account-level and ARPA performance trending, and how are the promotional environment and pricing strategy impacting these metrics going forward?

A: Verizon has shifted from a line-focused growth strategy to a customer/account-centric approach, which has driven year-over-year improvements in consumer and total retail postpaid account net ads in the same quarter Verizon delivered its first positive Q1 postpaid net ads in 13 years. New accounts have more lines per account on average, and the share of new-to-Verizon customers continues to climb, supporting positive ARPA momentum going forward. The only material ARPA headwind in Q1 was a one-time impact from network outage customer credits, which will not recur for the rest of the year. Reduced reliance on expensive promotional offers will ease amortization headwinds on ARPA, and convergence and customer perk adoption will further support ARPA growth through 2026 and 2027.

Q: How is Verizon changing its approach to device subsidies and upgrade activity, and how do you balance better unit economics from lower subsidies with gross ad growth?

A: Recent improvements in acquisition and retention costs are structural, not temporary, driven by micro-segmentation that tailors offers to individual customer needs instead of relying on the one-size-fits-all approach of free handsets for all retention and acquisition cases. For example, resolving a customer's service issue with a low-cost femtocell instead of giving an unnecessary free handset solves the problem at a much lower cost, improving customer satisfaction and unit economics. Upgrade volumes grew 6% year-over-year in Q1, but growth has slowed in subsequent months as customers keep handsets longer and Verizon maintains its disciplined segmented approach, which is expected to sustain improved unit economics going forward.

Q: How much progress has been made on the $5 billion 2026 OpEx savings target, and what is the outlook for broadband growth as Frontier is integrated?

A: Verizon is off to a strong start on cost savings, with realized savings already in Q1 across network operating costs, advertising and marketing, acquisition/retention, and workforce costs, following a 13,000 headcount reduction completed before the quarter. Remaining savings for the full year will come from customer experience simplification that reduces call volumes, IT platform rationalization enabled by AI, real estate footprint reduction, and the ramp of Frontier integration synergies. Verizon continues to gain broadband market share, has a large cross-sell opportunity with only 20% of the existing wireless base currently subscribed to Verizon broadband, and will prioritize fiber deployments where available while continuing to grow FWA. Q1 net adds were 341,000 even without a full quarter of Frontier results, and growth is expected to accelerate through the year. Verizon maintains its 2028 FWA subscriber target of 8 to 9 million, with only a minor expected mix shift toward fiber.

Q: What tangible AI use cases is Verizon deploying to reduce costs and drive growth, and what is the outlook for network and fiber investment?

A: Verizon is building a full four-layer AI tech stack (data layer, development layer, deployment runtime, and security control plane) that will be substantially complete by July 2026 and fully done by November, using best-of-breed tools from Google, Anthropic, and other partners. Tangible Q1 benefits already include a 1,280 basis point improvement in customer service satisfaction scores from AI-powered voice support, 85% autonomous resolution of network issues, reduction of 1 million+ network part combinations to 20 standardized kits, $200 million in annual network energy savings, and a projected 40% increase in software delivery speed plus 70% reduction in vendor support costs. Verizon is also positioned to capture new multi-billion revenue opportunities supporting AI infrastructure for hyperscalers and enterprises via its fiber and 5G edge network assets, with more details coming in the next 3-6 months.