Verizon Shares Up 4.6% After Earnings But Growth Is Concerning

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Verizon Communications (NYSE: VZ) reported Q3 earnings that fell short on revenue and with a slight beat on earnings per share, and the stock is moving higher pre-market. Revenue came in at $33.82 billion, missing the $35.31 billion estimate by $1.49 billion. EPS landed at $1.21, beating by $0.02 the $1.19 consensus.

Where the Strength Showed

Net income surged 48.4% to $5.06 billion from $3.41 billion a year ago. That dramatic jump masks the underlying story: one-time tax benefits inflated the bottom line, while core operations remained sluggish. Wireless service revenue grew 2.1% to $21.0 billion, and equipment revenue climbed 5.2% to $5.6 billion. Both segments showed modest momentum, but neither offset the broader revenue miss.

Free cash flow came in strong at $15.76 billion, supporting Verizon's 19th consecutive dividend increase. The company raised its quarterly payout to $0.69 per share. For investors focused on cash generation, this metric reinforces the company's ability to fund shareholder returns even as top-line growth stalls.

The Real Problem: Scale Isn't Growing

Total revenue grew just 1.5% year over year. That's the core issue. EPS edged up 1.7%, but that's largely a function of share buybacks, not earnings expansion. When you strip away the tax benefit that inflated net income, the operational picture looks flat. Verizon faces structural headwinds in a mature telecom market where pricing power has eroded and competitive intensity remains high.

The revenue miss is particularly telling. Verizon guided for $35.31 billion in consensus expectations, yet delivered $33.82 billion. That $1.49 billion gap signals either softer demand than anticipated or a revenue recognition issue worth monitoring on the earnings call.

Numbers That Matter Most

Net Income: $5.06B (+48.4% YoY); boosted by tax benefits EPS: $1.21 (vs. $1.19 estimated); +1.7% YoY Revenue: $33.82B (vs. $35.31B estimated); +1.5% YoY Wireless Service Revenue: $21.0B (+2.1% YoY) Free Cash Flow: $15.76B; operating cash flow $28.02B Capital Expenditure: $12.26B

The free cash flow number deserves attention. At $15.76 billion, it gives Verizon room to sustain dividends and manage debt, but the company needs revenue acceleration to justify premium valuations. Right now, it's generating cash from a shrinking base.

What Management Said

CEO Dan Schulman struck a notably different tone than prior quarters. He spoke of taking "bold and fiscally responsible action to redefine Verizon's trajectory at this critical inflection point." The language signals recognition that the status quo isn't working. Schulman emphasized a shift toward a "customer-first culture" and cost structure optimization.

Story Continues

That's code for restructuring. Verizon has been signaling cost discipline for quarters, but the revenue miss suggests operational execution remains uneven. Management's commentary hinted at urgency that wasn't as visible in previous earnings calls.

Forward Guidance Offers Limited Comfort

Verizon guided for adjusted EBITDA growth of 2.5% to 3.5% and adjusted EPS growth of 1.0% to 3.0%. Those ranges are narrow and uninspiring. Free cash flow is expected to reach $19.5 billion to $20.5 billion, suggesting modest improvement from current levels. Operating cash flow guidance of $37.0 billion to $39.0 billion implies stability but no acceleration.

Wireless service revenue is expected to grow 2.0% to 2.8%. That's in line with recent performance but underscores the company's reliance on incremental gains in a competitive market. You'll want to listen for whether management sees paths to faster growth or if they're resigned to low-single-digit expansion.

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