Verizon boosts annual profit forecast on demand for premium plans

Verizon reported better-than-expected second-quarter earnings, raising its annual profit and free cash flow forecasts, driven by strong demand for higher-tier plans and robust broadband net additions of 293,000, which sent shares up 4% premarket. The company posted revenue of $34.5 billion and adjusted EPS of $1.22, both beating estimates, and increased its 2025 adjusted profit growth outlook to 1-3% from 0-3%. However, Verizon surprisingly lost 9,000 monthly bill-paying wireless subscribers, contrary to analyst expectations, attributed to churn following earlier price hikes, as it navigates intense competition and expands its fiber-optic assets to drive growth in a mature market.

Analysis

Verizon Communications reported a robust second quarter, beating analyst estimates on both revenue and earnings, with revenue reaching $34.5 billion against a $33.74 billion consensus and adjusted EPS at $1.22. This performance, driven by a 2.2% rise in wireless service revenue from higher-tier plans, prompted management to raise full-year guidance. The company now expects 2025 adjusted profit growth between 1% and 3%, tightening the range from 0% to 3%, and significantly increased its free cash flow forecast to between $19.5 billion and $20.5 billion. This positive financial outlook, which spurred a 4% premarket share price increase, is contrasted by a strategic weakness in its core mobile business. The company posted a surprise net loss of 9,000 monthly bill-paying wireless subscribers, missing analyst expectations for a 13,000 gain, a direct consequence of churn following recent price hikes. However, Verizon is successfully pivoting towards its internet services, evidenced by 293,000 broadband net additions and the regulatory approval for its $20 billion acquisition of fiber provider Frontier. This suggests a strategic shift to prioritize high-value services and cash flow generation over subscriber volume in a mature and intensely competitive telecom market.

Key Decisions for Investors

• Investors should prioritize Verizon's enhanced free cash flow guidance and margin strength over the headline miss on wireless subscribers, as the market is currently rewarding the company's focus on profitability.
• Monitor the integration of Frontier's fiber assets and the continued growth in broadband net additions, as these are critical to offsetting subscriber volatility and competition in the mature wireless segment.
• Consider the risk that continued price hikes could lead to further subscriber churn, and watch for stabilization in the wireless subscriber base in subsequent quarters as a key indicator of long-term health.