Verizon (VZVZVerizon Communications Inc.$44.54+0.88% Valuation Verdict Undervalued ) will release third quarter 2026 results prior to market open Monday, October 26 with a webcast at 8:30 a.m. ET (Company announcement). The stock is in an interesting position. Verizon said it had record results in July and boosted its full-year forecast for the second consecutive quarter. Still, the stock is selling for roughly $43 per share, or some 16 percent off the 52-week high of $51.68.
A lot of the fall was on October 9. That day, SpaceX announced it would purchase nationwide 800 MHz spectrum from Grain Management for its proposed service, Starlink Mobile, and all three of the major U.S. carriers divested themselves of spectrum (Forbes). Part of the move is due to Verizon’s ex-dividend date of Oct. 9.
The big issue in this report: Will Verizon be able to continue to attract customers and increase cash flow while investors become increasingly concerned about competition? I believe the answer will be more in terms of subscriber growth, churn and free cash flow rather than earnings per share.
Management Raised the Bar in July and Made H2 the Proof Point
Verizon’s Q2 2026 results report included a further increase to its 2026 forecast, as follows:
- Mobility and broadband service revenues growth: 2.5% – 3.0%. Management’s guidance for Q3 growth is “in the vicinity of” 3% and about 4% for Q4.
- Wireless service revenue: about even for the year.
- Adjusted EPS: $4.99 to $5.04, or 6% to 7% growth. That is up from the $4.95 to $4.99 set in April.
- Free cash flow: $21.94 billion to $22.14 billion, or 9% to 10% growth. Original Goal was $21.5 billion.
- Postpaid phone net additions: top half of the 750,000-1,000,000 range. This was kept the same.
- Capital spending: maintained at $16.0 to $16.5 billion.
- Buybacks: increased to as high as $4.5 billion, from a minimum of $3.0 billion.
The decision to raise was supported by the Q2 results. Verizon gained 184,000 postpaid phone customers, but lost 9,000 a year ago. The percentage of postpaid phone churn dropped from 0.97% to 0.92%. Churn is the percentage of customers that cancel their services every month. The adjusted EPS was $1.30 compared to $1.22, while the adjusted EBITDA margin was 40.1%. The first half free cash flow increased 16% to $10.2 billion.
There are 2 points that need to be examined. First, total revenue declined by 0.7% to $34.25 billion, due to a decline in wireless equipment revenue of 19.7%. On the earnings call, CFO Tony Skiadas stated that upgrade volumes have declined by almost 27%. The lower amount of phone sales impacts revenue but can improve margins, as phone sales have low profit margins. Part of the record margin is attributable to the change in sales mix as well as the business improving.
Second, the growth number in the headline was bolstered by the growth of broadband as a result of Verizon’s closing of the acquisition of Frontier on January 20, 2026 (Q2 10-Q). Still, wireless service revenue is forecast to remain unchanged. The cellphone core business is growing customers, but it isn’t growing revenue just yet.
Net new accounts were positive for the last two months and CEO Dan Schulman said he expects to see positive net new accounts in Q3. He also said that the second half of 2026 will be better than the first half. Consumer postpaid phone churn was 0.84%, down from 0.90% in Q1 and 0.95% in Q4 2025.
On October 26, What to Look For: Math Behind the Guidance
The largest test is phone net adds. In the first half, Verizon’s postpaid phone count grew by 239,000. To reach the upper half of its range (875,000 to 1.0 million), it needs about 636,000 to 761,000 in the second half. The numbers equate to about 320,000-380,000 per quarter, which is almost double the number from Q2.
I’m confident that Q3 will be much better than Q2. Still, a number closer to 200,000 would seem unattainable while 300,000 or more would seem plausible. To put this in perspective, Verizon had a net consumer phone loss of 7,000 and a net business phone gain of 51,000 in Q3 2025.
The amount of service revenue is not the most important, but rather price. I’m forecasting that the revenue growth of my mobility and broadband services will be in line with what I’ve guided to, which is close to 3%. I’ll be paying closer attention to postpaid ARPA (average revenue per account) which declined 1.4% to $168.35 in Q2. Meanwhile, as ARPA continues to decline, Verizon is paying price for volume.
Earnings should be regular, not fantastic. The full year guidance is assuming $2.41 to $2.46 of second-half EPS, with first half adjusted EPS at $2.58. Q3 2025 adjusted EPS was $1.21. I think anything in the mid $1.20s would be in line with the plan, in my opinion. The quality of the quarter is more important to me than a couple of cents of upside.
The cash flow should remain in control. On spending of approximately $7.8 billion to $8.3 billion on capital, guidance suggests approximately $11.7 billion to $11.9 billion in FCF in the second half. In the 10-Q, Verizon reveals that it paid approximately $3.1 billion in July for AWS-3 spectrum licenses. The cost of the spectrum purchases does not count as capital spending, which means that it won’t affect free cash flow, but it will affect debt.
The quarter would be better than I’m expecting if phone net adds are greater than 300k, consumer churn is not worse than Q3 2025’s 0.91%, ARPA levels off and guidance is reaffirmed or increased. If net adds remain at Q2 levels, or if promotion increases or management is less aggressive about the net-add goal, it would look worse.
What Has Changed Since July
AI fiber deals. During the Q2 call, Schulman announced a deal with Google that will see Verizon’s dark fibre connecting data centres valued at over $1 billion. He anticipates other deals by year-end that could be worth “multiple billions” over a number of years, and revenue will begin in 2027.
Major fibre contract. On September 8, Verizon and Corning revealed a multi-billion dollar, multi-year supply agreement that will span from 2027 to 2032. It’s a part of Verizon’s plans to deploy 40-50mm broadband passings, which I think means that the heavy spending on fiber will continue.
Hybrid debt. In August, Verizon sold $3.75 billion of junior subordinated notes at 6.600% (due 2059) and 6.750% (due 2057). This type of debt is sometimes rated as a partial equity and thus can contribute to maintaining ratings during a high leverage period.
Leadership continuity. Schulman’s contract was renewed until 2028.
Three Things That Matter Most
1. Growth vs. price. The new deals from Verizon are Simplicity for $45 and Verizon One for $70 (mobile and home internet). Consumer promotional acquisition costs dropped approximately 15% compared to a year ago, Schulman said. If competition heats up, Verizon may be forced to make a decision between volume and price. I’ll look at churn, ARPA and the uptick or downtick in promotional spending.
2. The satellite threat. Satellite networks can’t compete with terrestrial networks in city and suburbs, Schulman said in July “because of physics. The SpaceX spectrum deal has yet to be approved by the FCC and will not impact Q3 numbers. But it’s my desire to hear if management’s outlook has changed. That risk is now taken into account when investors are valuing the stock.
3. Shareholder returns and balance sheet. The company’s leverage (net unsecured debt to adjusted EBITDA) stood at 2.5x at June 30, compared with 2.2x at year-end 2025. Management believes it is on track for achieving its target range in 2027. There are quarterly dividends of $0.7075 (declared in September), which yields approximately 6.5%. The combined amount of dividends and the buyback plan is about $16 billion per year. That means that $6 billion of guided free cash flow remains to pay off debt before any spending on spectrum. The difference isn’t so great and if cash isn’t flowing, it must be because it was not promised.
What Management Must Clarify
The cost program. Verizon expects to see operating and capital cost savings of “at least” $9 billion, Schulman said. Skiadas was a $5 billion program to improve the efficiency of operating costs. I would like to have a clear explanation how the two figures fit together.
Fixed wireless slowdown. Fixed wireless net adds decreased to 193,000 in Q2, a 30.6% decline from a year ago. An analyst lowered the trend on the call but management didn’t explain. Are Verizon pushing customers to fibre or are customers getting cooler?
Frontier. The management stated that integration is “ahead of plan,” with expectations of seeing more than $1 billion of run-rate cost synergies by 2028, and also more than 32 million fiber passings by the end of the year. I want to see the fiber net adds continue to be greater than Q2’s 155,000.
Before making your next move, analyze the stock in detail. See what the fundamentals suggest, where momentum is building or weakening, how the company compares against competitors, and whether insiders are buying or selling into the current trend into a single report in seconds.
AI deals. Will the pledged year-end agreements still be happening?
My Takeaway
I believe that Verizon has a lot to show for in this report – positive phone net adds, declining churn, best margins and growing free cash flow. People in the market are now concerned about competition and price rather than execution. The Starlink discussion is not about to be over with a good quarter.
Until I see phone net adds trending towards the top half of the range, ARPA holding up and free cash flow trending towards $22 billion, I need to get more positive. If net adds don’t come in, or if Verizon is charging for growth through bigger discounts, I would expect that the market would continue to price the stock primarily on the dividend. I think the second half is the time when Verizon needs to prove that this is a structural change and not a single quarter.
Discussion & Perspectives
Join the conversation and share your valuation thesis or technical insights.
Sign in to join the discussion
Only verified Tickzen members can publish comments and share research perspectives.
Loading comments…