Verizon’s fourth-quarter revenue rose 2.0% to $36.4bn. This was driven almost entirely by a 9.1% uplift in wireless equipment revenue to $8.2bn.
Underlying cash profit (EBITDA) remained broadly flat at $11.9bn, as higher costs offset revenue growth. Consumer post-paid phone subscriptions remained fairly steady at 74,772.
Full-year free cash flow rose 6.0% to $19.8bn, driven by lower levels of capital expenditure. Net unsecured debt totalled $110.1bn, down 3.2%.
For 2026, wireless service revenue is expected to be flat. Free cash flow is expected to rise by around 7% to at least $21.5bn.
The shares rose 2.5% in pre-market trading.
Our view
Verizon’s new CEO came out swinging on the fourth-quarter earnings call. Performance hasn’t been good enough for some time, and meaningful change is needed. We were pleased to hear that early signs of progress are already pulling through, and guidance looks more upbeat than it has for some time.
His call for a bold transformation includes better marketing, cost cuts, a narrowed focus on growth areas, and exiting legacy businesses.
Consumer is by far the larger of its two primary segments. It provides mobile and landline services directly to individuals and wholesalers, as well as selling devices like smartphones and laptops. Mobile subscriber growth, or lack of, is the key concern.
Recovery efforts include bundles, locked-in prices, perks, and better service via AI and 24/7 access. This all makes sense, but competition is using the same strategy, so we’ll have to see if it yields the intended results.
There's scope to grow with increased 5G adoption, through traditional mobile and fixed wireless broadband products. Verizon's putting a lot of eggs in this basket and has thrown billions at the task. We think this is the right move. Growth in the wireless broadband space, which is much more popular in the US, is picking up nicely but it’s only a small part of the overall picture.
Wireless data is a notoriously competitive market. The same can be said of traditional broadband offerings. It's hard to offer something meaningfully unique, so telecoms groups often end up competing mainly on price, which is rarely a good thing for profit margins – which have dipped over the past few years.
Verizon's debt pile is eye-watering and the chequebook’s got more work to do too, with the $20bn acquisition of Frontier Communications now complete. Integrating Frontier’s infrastructure into its own network should help accelerate its fibre buildout, but it’ll push debt above the target level. The plan is to reduce debt and grow free cash flow, which would be a great result if achieved.
For now, the 7.0% forward dividend yield looks well covered and maintaining strong cash flows is a priority. Dividends are right up at the top of the list, too. Of course, nothing is guaranteed.
We don’t think the valuation is overly demanding, and strong cash flows with a healthy yield are certainly attractive. 2026 guidance looks attractive on paper, but the new CEO now has a difficult task of executing in a very competitive market.
Environmental, social and governance (ESG) risk
The telecom industry is low/medium in terms of ESG risk. Data privacy and security is the most significant risk driver, not only because customers are increasingly concerned about privacy, but also because cybersecurity breaches can be costly. Product quality is another key risk, particularly given the networks they manage are considered critical infrastructure. Carbon emissions, human capital and business ethics are also risks worth monitoring.
Verizon’s overall management of material ESG issues is strong.
Verizon has officers responsible for security and privacy, and its cybersecurity centre meets international standards. Climate risks are reported, and it conducts annual impact assessments. The company offers employee development programs, including tuition assistance, and ensures equal pay for women and men.
Verizon key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.