Executive Summary / Key Takeaways

• Verizon Communications Inc. is undergoing a significant strategic transformation under new CEO Dan Schulman, shifting from a technology-centric approach to a customer-first, financially disciplined growth model.
• The company is leveraging its robust 5G network, expanding fiber footprint, and advanced AI capabilities to enhance value propositions, reduce churn, and drive profitable subscriber growth across mobility and broadband.
• Recent financial performance demonstrates strong momentum, with Q3 2025 adjusted EBITDA up 2.3% year-over-year and free cash flow for the nine months ended September 30, 2025, increasing 9% to $15.8 billion.
• Strategic initiatives like the pending Frontier acquisition, continued Fixed Wireless Access (FWA) expansion, and the "AI Connect" offerings are poised to create new revenue streams and significant convergence opportunities.
• Verizon maintains an "ironclad commitment" to its dividend, has significantly reduced its net unsecured debt to 2.2x adjusted EBITDA, and is focused on operational efficiencies to fund growth and accelerate shareholder returns.

A Legacy of Connectivity, A Future Reimagined

Verizon Communications Inc. stands as a foundational pillar in the U.S. telecommunications landscape, providing essential communications, technology, information, and streaming products and services to a vast array of consumers, businesses, and government entities worldwide. Its journey began in 1983 as Bell Atlantic Corporation, evolving through strategic mergers and acquisitions, including MCI Corporation in 2006 and Alltel Wireless Corp. in 2009, to become a dominant force in wireless and data services. Over two decades ago, the company initiated the build-out of its extensive Fios fiber-optic network, a testament to its long-standing commitment to advanced infrastructure.

The company now finds itself at a critical inflection point, as articulated by its new Chief Executive Officer, Dan Schulman, who took the helm in October 2025. Schulman's mandate is clear: to unlock the growth potential of Verizon's platform and deliver strong financial results. This marks a fundamental shift from a historical reliance on network superiority alone and, at times, price increases, to a renewed focus on customer-centric growth, operational efficiency, and disciplined capital allocation. This strategic pivot aims to redefine Verizon's trajectory, ensuring sustainable value creation for shareholders.

Technological Edge: The Foundation of Verizon's Ambition

Verizon's competitive strength is deeply rooted in its advanced technological infrastructure, which serves as the bedrock for its service offerings and future growth. The company's core differentiated technology lies in its extensive 5G network, powered by significant investments in C-Band and millimeter wave spectrum, alongside its robust fiber-optic network, Fios.

The tangible benefits of this technology are substantial. Verizon's 5G network consistently delivers top performance, earning accolades for network quality, speed, and reliability. The C-Band deployment is ahead of schedule, with plans to cover 80% to 90% of planned sites by year-end 2025, and nearly all sites are now standalone capable. This expansion not only enhances mobile connectivity but also underpins the rapid growth of its Fixed Wireless Access (FWA) broadband service. Fios, with its 100% fiber-optic network, offers superior reliability and speed, contributing to high customer satisfaction and low churn rates. The company is accelerating its Fios expansion, targeting 650,000 incremental passings in 2025.

Beyond core connectivity, Verizon is aggressively pursuing AI-powered innovation. Its AI strategy, branded "AI Connect," is three-pronged: enhancing experiences and driving efficiencies (e.g., FastPath in call centers for intelligent customer-representative pairing), personalizing products and solutions (e.g., Segment of Me for unique offers), and connecting to the burgeoning AI ecosystem. The AI Connect offerings leverage Verizon's existing fiber and edge compute assets, providing lit and dark fiber services, edge-to-cloud connectivity, and programmable network capabilities. The company possesses thousands of distributed telco facilities with available power, space, and cooling, or which can be retrofitted, to support the increasing demand for distributed computing as AI workloads shift from centralized training to real-time deployment at the edge. Verizon reports having 2 to 10+ megawatts of usable power across many sites and 100 to 200 acres of undeveloped land suitable for data center builds. This strategic positioning has already generated a sales funnel of over $1 billion for AI Connect offerings, with major players like Google (GOOGL) and Meta (META) purchasing network capacity for AI workloads. A partnership with Vultr, a GPU as a service provider, further solidifies Verizon's role in the AI infrastructure.

For investors, these technological differentiators translate into a significant competitive moat. The superior network quality supports premium pricing and customer loyalty, while the FWA and fiber expansion drive broadband market share gains. The AI Connect strategy opens new, high-growth revenue streams, leveraging existing assets to capitalize on the estimated $1 trillion investment in AI infrastructure over the next decade, with AI network traffic projected to grow at a 35%+ CAGR over the next five years. These initiatives contribute directly to Verizon's long-term growth strategy and financial performance by enhancing competitive positioning and operational efficiency.

Strategic Imperatives: Customer-First Growth and Operational Discipline

Under Dan Schulman's leadership, Verizon is embarking on a fundamental cultural and strategic transformation. The new CEO has explicitly stated that reliance on price increases without corresponding subscriber growth is "not a sustainable strategy" and has led to higher churn. The core strategic imperative is to grow the customer base profitably across mobility and broadband, aiming to "meaningfully increase our share of net adds, particularly in postpaid" and achieve the "lowest churn rate in the industry". This will be achieved by building the industry's best overall value proposition and customer experience, rather than through "onetime noneconomic promotional activities".

A critical component of this pivot is aggressive cost transformation. Verizon aims to become a "simpler, leaner and scrappier business" by significantly reducing its entire cost base. These savings will fund incremental investments in customer experience and value propositions, ensuring that volume growth and profitability growth "can go and will go hand-in-hand". The company also plans to "aggressively sunset or exit legacy businesses where we don't see a clear path, profitable market leadership". This multi-year effort is expected to unleash meaningful margin improvement.

Convergence and Broadband: Expanding the Ecosystem

Verizon's growth strategy is heavily anchored in expanding its broadband offerings and driving convergence between its wireless and wireline services. The pending acquisition of Frontier Communications Parent, Inc. (FYBR) for $20 billion (including debt), expected to close in early 2026, is a cornerstone of this strategy. This transaction will enable Verizon to serve approximately 29 million fiber passings, creating a "massive cross-sell opportunity". Converged customers on fiber exhibit a mobility churn rate nearly 40% lower than the overall mobility base, validating the strategic importance of these integrated offerings.

The company is also expanding its fiber footprint through organic builds, targeting 650,000 new passings in 2025. A new agreement with Tillman will further expand Fios broadband offerings to new markets outside the current Verizon and Frontier footprints through a capital-light partnership. In Fixed Wireless Access (FWA), Verizon's base has surpassed 5 million subscribers, with annualized revenue exceeding $3 billion in Q3 2025. The company is on track to achieve its goal of 8 million to 9 million FWA subscribers by 2028. The acquisition of Starry Group Holdings, Inc. (STRY) in October 2025 will enhance Verizon's MDU (Multi-Dwelling Unit) capabilities for fixed wireless broadband. These initiatives collectively position Verizon to be "the most covered broadband supplier in the market".

Financial Performance: A Story of Resurgence

For the three months ended September 30, 2025, consolidated operating revenues reached $33.82 billion, a 1.5% increase year-over-year, primarily driven by the Consumer segment. Wireless service revenue for the quarter was $20.34 billion, up 2.1% year-over-year, benefiting from targeted pricing actions and increased adoption of FWA and add-on services. Wireless equipment revenue also saw a healthy increase of 5.2% to $5.62 billion, driven by a shift to higher-priced devices and increased upgrade rates.

Profitability metrics show a positive trend. Consolidated adjusted EBITDA for Q3 2025 increased 2.3% year-over-year to $12.81 billion, with year-to-date adjusted EBITDA growth of 3.5% reaching $38.37 billion, at the top end of the company's guided range. Adjusted EPS for Q3 2025 was $1.21, up 1.7% year-over-year, primarily due to EBITDA growth. The Business segment, in particular, has shown consistent improvement, with EBITDA growing for three consecutive quarters year-over-year as of Q2 2025, driven by a shift towards a more wireless mix, contributions from private 5G networks and AI Connect, and disciplined cost-cutting.

The company's TTM (trailing twelve months) gross profit margin stands at 46.08%, operating profit margin at 23.04%, net profit margin at 14.43%, and EBITDA margin at 40.46%. These figures underscore Verizon's ability to drive profitability despite competitive pressures.

Cost management has been a key focus. Selling, general and administrative expenses decreased in Q3 2025, largely due to lower severance charges from the 2024 voluntary separation program and asset and business rationalization charges. Depreciation and amortization expense, however, increased by 3.6% in Q3 2025, influenced by the continued deployment of C-Band and FWA network assets.

Liquidity and Capital Allocation: Strengthening the Balance Sheet

Verizon's robust cash flow generation provides significant financial flexibility. Cash flow from operating activities for the nine months ended September 30, 2025, was $28.02 billion, a 5.8% increase over the prior year. This strong operational cash flow translated into free cash flow of $15.76 billion for the same period, representing a 9% year-over-year increase. For Q3 2025 alone, free cash flow was $7 billion, a nearly 17% improvement year-over-year.

The company has made substantial progress in strengthening its balance sheet. Net unsecured debt at the end of Q3 2025 was $112 billion, a $9.4 billion improvement year-over-year. Crucially, the net unsecured debt to consolidated adjusted EBITDA ratio dropped to 2.2x as of Q3 2025, placing Verizon within its target leverage range of 2.0x to 2.25x ahead of schedule. While the Frontier acquisition is expected to temporarily increase this ratio by approximately 0.25 turn, the company remains committed to its long-term leverage target and continued debt repayment.

Verizon maintains an "ironclad commitment" to its dividend, having raised it for the 19th consecutive year in September 2025. Capital expenditures for 2025 are expected to be between $17.5 billion and $18.5 billion, with management anticipating to deliver at the lower end of this range or better, reflecting ongoing efficiency in network deployment.

Competitive Landscape: Redefining the Fight

Verizon operates in a highly competitive telecommunications market, facing direct challenges from major players like AT&T (T), T-Mobile US (TMUS), and cable operators such as Comcast (CMCSA). Historically, Verizon has been recognized for its network quality and reliability, a key differentiator that has fostered customer loyalty. However, new CEO Dan Schulman acknowledged that Verizon has been "clearly losing share" and that the company "will no longer be the hunting ground for competitors looking to gain share".

In wireless, T-Mobile has aggressively pursued subscriber growth with value-driven pricing and rapid 5G expansion, while AT&T leverages its extensive network and bundled offerings. Verizon's response under its new leadership is a strategic pivot to a "customer-first focus," aiming to win responsibly by offering the "best overall value proposition and the best customer experience". This includes initiatives like the "Verizon Value Guarantee," offering a three-year price lock and free phone guarantee, which is resonating well with customers. The company's diversified brand portfolio, including TracFone, positions it to compete across every price point in the market.

Quantitatively, Verizon's TTM EBITDA margin of 40.46% compares favorably to T-Mobile's TTM P/E ratio of 19.92 and AT&T's TTM P/E ratio of 14.06, suggesting a more stable profitability profile. While direct margin comparisons for competitors are not available, Verizon's focus on cost transformation and operational efficiencies aims to further enhance its profitability relative to peers. In broadband, Verizon is taking market share with its dual Fios and FWA strategy, positioning itself as "the most covered broadband supplier". The convergence strategy, particularly with the Frontier acquisition, is a significant competitive differentiator, as converged customers exhibit substantially lower churn.

Indirect competitors, such as satellite-based providers and VoIP services, also present challenges by offering alternative connectivity and communication solutions. However, high barriers to entry in the telecom sector, including substantial infrastructure costs and spectrum license requirements, continue to favor established players like Verizon. The company's leadership in enterprise connectivity and its new AI Connect offerings provide a unique advantage in the burgeoning AI ecosystem, a market where its extensive fiber and edge compute assets are critical differentiators against competitors.

Outlook and Risks: A Path Forward

Verizon's management has provided a clear outlook for 2025, reflecting confidence in its strategic pivot. The company expects total wireless service revenue to grow between 2% and 2.8%, with underlying growth nearly double this range when excluding promo amortization headwinds. Consolidated adjusted EBITDA is projected to grow between 2% and 3.5% compared to 2024, and adjusted EPS growth is expected to be in the range of flat to up 3%. Free cash flow for 2025 is guided between $19.5 billion and $20.5 billion, an increase driven by strong operations and tax reform benefits. The company anticipates higher free cash flow in 2026, even with the inclusion of Frontier.

Key assumptions underpinning this guidance include mid-single-digit growth in upgrade activity for the full year, an improving prepaid revenue profile expected to turn positive in the second half of 2025, and the completion of C-Band deployment to 80% to 90% of planned sites by year-end. The Frontier acquisition remains on track for an early 2026 close.

Despite this positive outlook, several risks warrant attention. Postpaid churn remained elevated in Q3 2025, attributed to past pricing actions and public sector pressures, although management expects this to be transitory and improve by the second half of the year. The execution risk associated with the new CEO's ambitious restructuring and renewed marketing efforts is also a factor. The Frontier acquisition, while strategic, brings with it integration challenges and is noted to have high debt and ongoing losses, with no EPS accretion expected until 2027. Macroeconomic uncertainties, including potential impacts from tariffs and government efficiency initiatives, could affect the business, though Verizon is actively working to mitigate these. Litigation and regulatory proceedings also present ongoing, albeit currently non-material, risks.

Conclusion

Verizon Communications Inc. is at a pivotal juncture, embarking on a bold strategic transformation under new leadership. The core investment thesis centers on the company's ability to leverage its unparalleled network infrastructure, expand its broadband reach through strategic acquisitions and organic growth, and harness the power of AI to drive a customer-first agenda. The shift from a reliance on price increases to a focus on value, retention, and operational efficiency is a critical step towards sustainable, profitable growth.

With strong financial performance in 2025, including robust free cash flow generation and a significantly de-leveraged balance sheet, Verizon is well-positioned to fund its strategic initiatives and maintain its commitment to shareholders through a growing dividend. While competitive pressures and execution risks exist, the company's technological leadership, particularly in 5G, fiber, and emerging AI solutions, provides a formidable competitive advantage. Verizon's renewed focus on delighting customers and disciplined financial management offers a compelling narrative for long-term investors seeking a stable, income-generating asset with significant upside potential in an evolving digital landscape.