Verizon Communications (VZ) 3Q 2026 Earnings Call Transcript

And we now expect our 2026 full-year adjusted EPS growth to be 7% to 7.5%, up from our previous range of 6% to 7%.

Free cash flow of $7.8 billion was our highest quarterly free cash flow since 2020, growing more than 12% year-over-year in Q3. Consequently, we are raising our full-year guidance for free cash flow growth to approach 12%, up from our previous guidance of 9% to 10%. We anticipate our full-year free cash flow will also be our highest total since 2020.

To summarize, this quarter we delivered our strongest 3rd quarter line and account growth in years at our lowest cost to acquire and retain in more than 3 years. Our mobility and broadband service revenue growth continues to accelerate, and our free cash flow and adjusted EPS continue to grow.

This is high-quality growth delivered in a fiscally responsible manner. We are not buying customers. We are winning them on revenue-positive terms and keeping them longer.

When you compound stronger net adds with net account growth, sequential ARPA growth, structurally lower churn, and healthier unit economics, you get exactly the kind of operating leverage you’re seeing in adjusted EBITDA, adjusted EPS, and free cash flow this quarter, and in our raised full-year guidance.

Key Strategic Initiatives

Let me spend a moment on a few key strategic initiatives.

First, the customer value proposition we launched in mid-June continues to deliver beyond our expectations. Simplicity, Verizon One, and our loyalty program are resonating with our customers.

Our loyalty program enrollment is scaling quickly across our base, and the customer feedback data, whether it be Net Promoter Score, overall customer satisfaction, or first-call resolution is moving in the right direction on every dimension we track.

All of our extensive efforts to focus on the end-to-end customer experience are paying off and showing up in our year-over-year improvements in our churn rate, our increasing postpaid phone net adds and accounts and the simultaneous reduction in our cost to acquire and retain customers. This is a fundamentally different financial and operational model than in years past.

Second, convergence continues to compound. Our Frontier integration remains ahead of plan. Postpaid phone customers are attaching our broadband solutions, and our broadband customers are attaching postpaid phone service, with both cohorts churning materially less than single-product customers.

And we are seeing over 55% of our new fiber broadband customers take 1 gig or more download speeds, driving significant incremental ARPA and customer satisfaction. In Q3, our overall broadband ARPU increased year-over-year.

We continue to anticipate our fiber passings will exceed 32 million by year-end. And over the medium term, we remain on track to deliver 40 to 50 million fiber passings, with an incremental 10 to 15 million premises covered by our new high-speed FWA technology. Our goal is to have the largest footprint in the country of premises covered with at least 1 gig of download speeds.

Third, our transformation program is on track. And it is delivering results earlier than we initially expected. The 10 transformation workstreams we launched earlier in the year are producing tangible improvements for customers and meaningful cost reductions across the business.

Our $9 billion cost reduction plan across our opex and capex remains fully on track. And the operating leverage in this quarter results reflects the pace at which those savings are showing up.

We are increasingly running our transformation through our newly completed AI tech stack for applications that help us better serve customers, increase our network performance and drive cost reductions and productivity increases.

Fourth, our network performance continues to improve. Customers notice and they’re voting with their wallets by staying. The spectrum we won in the AWS-3 auction is already enhancing our network. And it will enable us to further improve our capabilities and performance in key metro areas as we continue to deploy it.

AI Connect and Hyperscaler Agreements

Finally, AI infrastructure is becoming a real growth driver for Verizon. Today we announced that we have signed a dark fiber agreement with Amazon Web Services valued at over $2 billion, building on the Google agreement we announced last quarter.

These 2 contracts are a clear signal that the largest builders of AI infrastructure in the world are choosing Verizon as a strategic connectivity partner. We now have an active pipeline of additional hyperscalers, neo-cloud providers, and large enterprise clients who are in negotiations to have us supply them with either dark or lit fiber connectivity.

I’m also pleased to report that we are seeing momentum with numerous partners to use our network hubs for AI inference edge computing. And that momentum is already turning into signed deals. Our first long-term contracts are expected to generate hundreds of millions of dollars in revenue over their term.

We now have signed contracts for approximately $4 billion. And based on the demand we are seeing, we expect both our fiber and edge computing to add meaningfully to our future growth.

All of these revenues come with attractive margins, and we will begin to see their impact in 2027. These are long-duration contracts with high-quality counterparties that leverage our fiber capabilities and existing real estate assets.

The incremental capital required to deliver against these agreements is modest and success-based and tied to defined contracts. And we’ve locked in the fiber to deliver.

Last month, we announced a multi-year, multi-billion-dollar agreement with Corning for more than 80 million miles of fiber through 2032, supporting both our fiber broadband expansion and the long-haul backbone that AI hyperscalers need.

Taken together, this opportunity significantly extends our addressable market, our revenues, and our profits. And we will talk about how it helps to drive our 2027 growth on our next earnings call.

Outlook and Momentum Into 2027

In the past year, we have delivered on our promises and raised the bar every single quarter. Given the strength of the 3rd quarter and our visibility into the 4th, we are raising our annual guidance for postpaid phone net adds, adjusted EPS, and free cash flow. And we now expect mobility and broadband service revenue growth to be in the upper half of our 2.5% to 3% range.

We are growing the right way, through healthier customer relationships, stronger network performance, disciplined execution, lower costs with revenue-positive net adds, and now account growth.

In many ways, we have redefined how we compete with a new business model for the mobile industry. When we put our customers front and center, the aperture for growth at Verizon opens substantially.

We believe that the momentum we are seeing in Q3 will continue. Our leading indicators— churn, net adds, customer satisfaction, network performance, broadband cross-sell, cost-out execution— and our hyperscaler pipeline all point in the same positive direction.

This is a multiyear story, and we are just getting started. We have not yet captured the full multiyear benefit of the $9 billion cost transformation. We have not yet fully scaled our new consumer value proposition. We have not yet begun to recognize significant revenue from our AI Connect business.

And we have meaningful additional capacity to return capital to shareholders through both our growing dividend and incremental buybacks. Each of those is a tailwind into 2027, and we look forward to sharing our 2027 outlook with you at our next earnings call.

I’d like to thank all of our employees. Your efforts to satisfy our customers are inspiring. The customer-first mindset, the operational rigor, and the urgency you are bringing every day, that is what is showing up in our results.

And to our shareholders, we are hyperfocused on earning your confidence with continued execution. Over the past year, we have delivered a step function improvement in our competitive positioning and our financial profile. And we believe the trajectory from here is even more compelling.

And with that, let me turn the call over to Tony.

CFO Tony Skiadas on Postpaid Performance

Tony Skiadas, Chief Financial Officer – Verizon Communications: Thanks, Dan, and good morning.

Our 3rd quarter represents another key milestone in our transformation as we continue to see the benefits from our efforts reflected in our operational and financial results.

This starts with our significantly improved performance in both postpaid phone and postpaid account net adds. Growing both lines and accounts is important to us, and we delivered our best account growth in over a decade.

Postpaid phone net adds are almost 900,000 better than in the same period last year, with broad-based improvement across our consumer and business segments. This gives us significant flexibility to deliver on our increased guidance of 1.1 to 1.2 million postpaid phone net adds for the full year and do it in a fiscally responsible manner.

Continuing our momentum from the 3rd quarter, we also expect to have positive account growth in the 4th quarter.

Our investments in the customer experience and innovation are working. Customers love our Simplicity plan. We are writing high-quality business, and we’re pleased with how it’s driving both account and line gross adds.

This successful launch delivered 266,000 consumer postpaid phone net adds in the period. This represents our best 3rd quarter performance in 5 years.

The strong uptake of Simplicity enabled us to accelerate our plan for volume growth in a meaningfully more cost-effective way compared to the more seasonally aggressive offers that we’ve historically relied on. In fact, our cost of acquisition in the 3rd quarter declined 41% year-over-year.

The subsidy-free, flexible, and transparent nature of Simplicity has allowed us to win customers in a financially disciplined manner. We are also winning across customer groups where we have historically underindexed.

We also had solid performance in Mobility for Business with 140,000 net adds in the period. Enterprise and small business customers continued to have strong demand in the period, and we returned to growth in the public sector.

Together with our lower cost of acquisition, we are reducing churn while spending less to win and keep customers. For the 2nd quarter in a row, we drove year-over-year improvements in retention with the overall cost of retention declining by 30%.

Our continued focus on microsegmentation, our disciplined approach to upgrades, and our customer-first focus all contributed to this result. This approach contributed to lower 3rd quarter upgrade volumes year-over-year and consequently lower equipment revenue. Notably, upgrade volumes were down over 20% from the prior year.

Additionally, with the success of Simplicity and our focus on giving more choice to customers, we expect the trend of lower upgrades to continue in the 4th quarter.

Broadband and Fiber Progress

In broadband, we continue to take share and we’ve now added over 1 million customers year-to-date. Similar to mobility, we’re taking steps to improve the overall customer experience, including simplifying our fiber pricing.

We are looking to compete more on our value proposition and less on promotions. Our 3rd quarter fiber net adds reflect sustained demand for our product while also driving towards better customer lifetime values and margin performance.

Our fiber build is on track. We continue to expect to end the year with over 32 million fiber passings.

We continue to see a shift in the net add mix between fiber and fixed wireless access. We are focused on growing our FWA base and further segmenting the market.

We see opportunity to meet the rise of AI-based applications and are bringing gigabit speeds to more and more consumers and businesses. We are scaling our MDU program, which will enable us to deliver fiber-like speeds over an FWA connection.

Overall, our operational results continued to outpace our expectations. We are very pleased to have added nearly 1.7 million mobility plus broadband subscribers in the first 9 months of the year and are confident that we will finish 2026 strong.

3rd Quarter Financial Results

The improvements in our volumes in the 3rd quarter are reflected in our financial results. The benefits of writing better business and cost savings efforts continue to drive adjusted EPS growth and strong free cash flow generation.

Additionally, in the quarter, we saw our mobility and broadband service revenue growth improve as volumes continue to scale and promo amortization headwinds moderate.

Total revenue for the 3rd quarter was $34.3 billion, up 1.5% year-over-year. Similar to last quarter, mobility and broadband service revenue growth of 2.9% was offset by lower equipment revenue, which was down 9% from the prior year as we drove significantly lower upgrade volumes.

Additionally, wireless service revenue was just over $20.9 billion. We continue to expect to return to wireless service revenue growth in the 4th quarter.

Our improving revenue profile and cost efficiency work continues to drive strong profitability. Our 3rd quarter adjusted EBITDA was $13.8 billion, up 8% year-over-year.

Our adjusted EBITDA margin of 40.2%, up 240 basis points year-over-year, is our highest reported and demonstrates the power of our business transformation. We saw improvements in both consumer and business as we continued to write profitable growth.

We are also continuing to make great progress on our $5 billion operating cost efficiency program and expect to meet our goal for this year. Our efforts on cost of acquisition and retention drove our lowest net equipment subsidy in 2 years.

We are also making meaningful strides on network modernization, copper decommissioning, and advertising and marketing spend to optimize our expense profile. As we look ahead to 2027, we expect to drive further efficiency gains in our cost structure.

The Frontier integration is also on track to deliver over $1 billion in run-rate operating cost synergies by 2028.

Our 3rd quarter adjusted EPS of $1.31 was up 8.3% year-over-year and reflects our continued progress on profitable growth. We now expect adjusted EPS to grow 7% to 7.5% for the full year.

Cash Flow, Leverage, and Capital Allocation

As mentioned, our cash flow generation remained very strong in the period. Cash flow from operations was $29.9 billion for the first 9 months of the year, up over $1.9 billion or nearly 7% year-over-year. We continue to benefit from working capital improvements due to our ongoing cost efficiency work as well as lower upgrades.

Capital expenditures were $11.9 billion through the end of the 3rd quarter. We are on track to meet our full-year guide of $16 to $16.5 billion, inclusive of success-based capital related to AI Connect.

The net of these resulted in free cash flow of $18 billion, up 14.3% for the first 9 months of the year. We expect this to be an industry-leading result, and it represents both the strength of our year-to-date results and the operational momentum of the business.

With this strong result and the underlying performance of the business, we are now raising our free cash flow guidance to approach 12% growth for the full year.

The strength of our cash flow allows us to execute on all aspects of our capital allocation framework, which remains unchanged. Our first priority continues to be investing in the business, and we remain on track with our mobility and fiber builds.

Further, customers are already realizing the network performance enhancements being delivered by the AWS-3 spectrum licenses we won during FCC Auction 113.

We also continued to execute on our deleveraging plan in the period. Our net unsecured debt to consolidated adjusted EBITDA ratio at the end of the quarter was 2.3x, which represents a 0.2x improvement from the prior quarter. We remain on track to reach our target leverage range during the 2027 timeframe.

Lastly, year-to-date, we’ve returned $12.8 billion of capital to shareholders, up 49% year-over-year. This includes $8.8 billion of dividends and $4 billion of share repurchases.

We remain committed to growing the dividend and delivering enhanced returns to our shareholders through share repurchases. We continue to expect to repurchase up to $4.5 billion for the full year.

To summarize, our 3rd quarter results demonstrate our continued progress in delivering for our customers and our shareholders. Our transformation continues to progress, and we have good momentum heading into the 4th quarter and beyond.

We’ve added nearly 1.7 million mobility and broadband subscribers this year, a major improvement year-over-year. We’re driving improved retention. We’re drastically reducing our cost of acquisition and cost of retention.

We’re driving some of the best account growth we’ve seen in years, and we’re doing all of this while producing record-high margins and strong free cash flow.

We continue to execute on all 4 pillars of our capital allocation framework, delivering improved shareholder returns while investing in the business to ensure our network excellence. And we are well positioned to capture future growth opportunities, including within our AI Connect business.

Our plan is working. Customers are responding positively and we’re driving meaningful returns for our shareholders. We’re pleased with the progress we’ve made and there’s more to come. We are playing to win.

With that, I will now hand the call over to Colleen to take your questions.

Question-and-Answer Session

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: Thank you, Tony. Brad, we are now ready to take questions. As a reminder, we would ask you to please limit yourself to one question. Thank you.

OPERATOR: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 on your touchtone phone. Please unmute your phone and record your name clearly when prompted, as your name is required to introduce your question.

If at any point your question has been answered or you would like to withdraw your request, you may remove yourself by pressing star 2. One moment, please, for the first question.

And the first question will come from John Hodulik of UBS. Your line is open, sir.

Postpaid Pricing, Volumes, and Pricing Power

John Hodulik, Analyst – UBS: Great. Thanks. Good morning, everyone. Can we talk about pricing and volumes in the postpaid market and continue with that commentary? It looks like you’ve got some nice momentum on the volume side, both from a cash flow accounts and gross adds. Can that continue as we look out into ’27? And can you talk about what’s resonating with customers that you’re seeing such strong demand?

And then on the pricing side, I think you guys have talked about some potential room for targeted price increases as churn came down. Could you just talk about your overall view on sort of pricing power in the industry? Thanks.

Dan Schulman, Chief Executive Officer – Verizon Communications: All right. Hey, John, it’s Dan. Thanks for your question.

We obviously had a good strong quarter on both lines and accounts. And that’s the first thing. We’ve had that kind of account growth in over a decade.

But the thing that I’m most proud about in the quarter is kind of the way that we did it. I always tell the team that “our business model is a multivariable equation. Solving for just one variable is insufficient. It’s not acceptable.”

I mean, net adds are easy. If your cost of acquisition goes way up and you give away a free line, I don’t consider free lines to even be net adds. I think they’re churn waiting to happen.

And this quarter, if we operated the same way that we did a year ago, we could do multiple hundreds of thousands more net adds. So if you give away free lines and free phones, that’s why I’m so proud of the Q3 results because not only were our postpaid net adds up 9-fold from last In fact, when we presented that to the board, they questioned whether that was a typo or not.

So, and our postpaid net accounts, best in a decade. But the quality of all those were exactly what we wanted. No free lines. Every single line and account came with revenue. And the costs to acquire those net accounts and net lines were down 41%.

Postpaid churn continues to come down. It’s down 4 points. I think we can continue to do year-over-year declines as I look ahead, and I think we can even do better than where we are. But cost of retention was also down 30%. And if you remember last year, churn rose every single quarter.

And I said a year ago that we were no longer going to be prey, that we were going to stop losing market share. And that was true this quarter. And we did all that in what I think was a very fiscally responsible manner.

I mean, we’re competing the right way to win in the market. We aren’t competing on promotions or free phones or subsidies, which, by the way, to me gives no one in the market any competitive advantage. If anybody launches something against us, we can respond in 2 hours.

And if somebody tries to hit us, we hit back harder. There’s no competitive advantage gained. The way to gain competitive advantage is to make sure that you look at your overall end-to-end customer experience, your value proposition, the strength of your network. Because there you can create sustainable and lasting competitive advantage.

And clearly our value proposition is resonating with our customers. Verizon One, our loyalty plan. As Tony said in his remarks, our customers love it and we’re seeing it in all of our results.

And what I really like about it is for that segment of the market, it’s ARPA accretive. And as we look ahead, we expect to see net account growth in Q4 as well.

In terms of pricing, I’ve always said I’m not against taking up pricing as long as we add value to that. In the past, we took up pricing without adding any value to customers, and eventually that comes back to haunt you. Your churn starts to go up. You lose the trust of your customers.

We’ve added a tremendous amount of value in the last year. And there’s potentially room for us to adjust that price-to-value equation by increasing pricing as well. I think we’re in a place where we can start to think about that.

Tony Skiadas, Chief Financial Officer – Verizon Communications: Great. Thanks, Dan. John, just to add a couple of things. Our gross adds were up 11% in the quarter, and that’s driven by new to Verizon.

And Simplicity being subsidy-free and transparent for customers, as Dan mentioned, allowed us to win in a fiscally responsible way. And across segments where we’ve underindexed, for example, in single line and 2-line accounts, we performed extremely well.

And we also delivered very strong margins in the quarter as well. Our EBITDA margin was over 40%, 40.2%, and our reported EBITDA was the highest that we’ve reported. So we’re really proud of that and doing it in a responsible way.

John Hodulik, Analyst – UBS: Thanks, Dan.

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: Brad, let’s take the next question, please.

OPERATOR: The next question comes from Frank Louthan of Raymond James. Your line is open.

Mr. Louthan, please check the mute button on your phone.

And we’ve had no response from Frank. We’ll move on to Michael Ng of Goldman Sachs. Your line is open.

AI Connect Pipeline and Deal Economics

Michael Ng, Analyst – Goldman Sachs: Hi, good morning. Thanks for the question. I just had 2 on Verizon AI Connect. First, great to see the momentum in that business. Could you talk a little bit more about the pipeline line, the opportunity for the future hyperscale and neo-cloud deals that you talked about in prepared remarks for both distributed compute but also edge.

And then second, anything you could share as it relates to the details of these deals? For instance, how long are the typical deal lengths? And anything you could share as it relates to the expected cash margins? Thank you.

Dan Schulman, Chief Executive Officer – Verizon Communications: Yeah, thanks, Mike, for that. I’ll start off and then maybe Tony can add.

I guess the way I would put it is AI Connect is a real business for us and a tremendous opportunity. And we’re seeing that momentum, customer demand across dark fiber, lit fiber, our edge compute locations is exceptionally strong.

I mean, obviously, it represents a significant growth opportunity for us and a large new— and it’s a rapidly growing TAM for us, addressable market.

As I mentioned, we already have approximately $4 billion of signed deals. And we’re just getting started on that. And that includes hundreds of millions of dollars in revenues from our edge computing locations. And we’re just scratching the surface there.

Obviously, with the explosion of agents right now, the need for distributed inference computing, a move from GPUs to CPUs, assets we have for that edge computing are exactly in the right place, and we’re seeing a ton of demand for what are scarce assets.

From a financial point of view, these revenues come with attractive margins because of the demand and the scarcity of that. And we will begin to see their impact in 2027. There’s no change to our 2026 capex envelope. And as I said in my remarks, we’ll see some modest success-based capex associated with AI Connect in 2027.

We are clearly an attractive option and partner for the most demanding of customers. We know how to build networks. We have assets in place. We are amongst, if not the best in class, in terms of service and performance.

We have a solid balance sheet and we now have plenty of supply because fiber itself is a scarce commodity as well. We’re obviously really pleased to be partnering with Google and Amazon and others. And this is going to be an exciting new growth vector for us over the years to come.

Tony Skiadas, Chief Financial Officer – Verizon Communications: Yeah, just to add to that, on your question on the deals themselves, the deals are very customer-specific. So no 2 deals are alike. So it’s very much to customer specifications.

As Dan mentioned, we’re very happy with the Amazon deal that we announced this morning. And on the Google deal, we’ve already— we’re already processing orders for fiber. So we’re moving along there.

And as Dan mentioned, these are very good margin deals for us, and they’ll start layering into the results in 2027. And it’s growth on top of our core business as well, which is really important for us. And we’re really excited about the potential.

Michael Ng, Analyst – Goldman Sachs: Great. Thank you, guys.

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: Brad, let’s take the next question, please.

OPERATOR: The next question will come from Michael Rollins of Citi. Your line is open.

SpaceX, Starlink, and Satellite Competition

Michael Rollins, Analyst – Citi: Thanks and good morning. So I’m curious if you could discuss your latest thoughts on the potential impacts from a possible LEO and Starlink entry into the core mobile business.

And if there’s any developments on how you’re looking at strategic alliances with LEO constellations in the category and whether or not you would offer an MVNO to LEO constellations, including a Starlink. Thank you.

Dan Schulman, Chief Executive Officer – Verizon Communications: Thanks, Mike. I’ll take that. First of all, I appreciate the question and the concern.

I’d just start off by saying my operating philosophy in general is to be very thoughtful, be analytic, and to never take anything for granted. I always have my eyes wide open. Clearly, the tech and the wireless landscape is rapidly evolving. And we need to rapidly evolve along with that.

That’s why I’ve been so demanding from everyone at Verizon. I mean, I just don’t want us to get incrementally better. I want us to leapfrog. I want us to think about not improving by 10%, which is great, but how do we improve by 10x? How do we do that in months, not years?

And I’m pushing hard on everyone so that we can shape the market and not react to it. And I want to be sure that we’re always in a position to play to win.

I also operate under the assumption that everything SpaceX says they will do, they will do. And that they will execute flawlessly. That’s my operating assumption on it. I think to assume anything else makes no sense from my perspective.

And everything that we’ve seen so far, all of their announcements, everything we’re hearing in the market, and I’ll talk about that in just a second, is so far the path that we’ve basically predicted that they would do. We always knew that they needed a terrestrial network to have any chance at providing a competitive service.

I don’t really need to re-review the satellite beam physics, but just suffice to say that without a terrestrial network, their addressable market for broadband services is relatively small. It’s in very rural areas. And their service just can’t compete with a terrestrial network.

In suburban and urban areas where 98% of our revenues are, we’re somewhere between 100 to 1,000 times more efficient than they are. And when you think about wireless, it’s even more difficult with them to compete on a satellite basis.

And so I think that SpaceX realizes this. And they’re exploring a potential path to creating a terrestrial network. It’s not surprising. They said it on their call. So I think we should take it quite seriously.

And from what we see and what we hear in the market, because there are no secrets in the market, we know exactly what they’re going to do. We know what their RFIs are. We know who they’re talking to on towers. We know who they’re talking to to put terrestrial equipment in place. Inside the industry, we know exactly what they’re thinking about doing it.

And if they build a terrestrial network, it will basically look and feel like every other network. There’s no magic wand. There’s no secret sauce. There’s no shortcut. There’s no radically lower structural cost advantage.

If they build one, they’re going to look at 65,000 to 80,000 macro sites. They’re going to need backhaul, some combination of fiber and maybe some satellite. They’re going to need RAN. They’re going to need a tremendous amount of spectrum.

And assuming that’s the case and assuming they try to go do that, it’s going to take a minimum of 4 to 6 years to fully build that out. It’s going to cost hundreds and hundreds of billions of dollars. I assume somewhere between $300 billion and half a trillion over the next 7 or 8 years.

And then they need to build retail customer service, back-office systems, et cetera. And all of that gets them basically the same network and same capabilities and same cost structure as what we have today.

And then sometime over the next 4 to 6 years, they have the possibility of becoming the 6th, not the 4th, the 6th competitor in the market. And frankly, at that point, I welcome the opportunity to compete against them.

Yeah, it’s very hard to throw a punch against something that doesn’t exist. But once they come into the market, we will be ferociously competitive.

We already have America’s best network in terms of coverage, performance, and reliability. We already compete against free. I mean, 2 of our competitors out there offer free wireless service, and we are not only competing extremely well, but we’re now holding share and beginning to gain share.

And you can be sure over these next 3 to 5 years or 6 years, we’re not going to be standing still. I mean, 4 to 5 years from now, we will be 2 to 3 generations better than where we are today.

We’ll have high-speed broadband, gig-plus coverage across the country with our millimeter wave, which has now become a tremendous advantage for us. We have 1,700 megahertz of millimeter wave, 2 times that of any of our competitors. We’ll put that and deploy that. We are ahead of most people and already experimenting with what 6G applications will look like.

We are going to have a host of AI-enabled new value propositions using our data, our information, our AI tech stack to create new products, new services, is to be able to play into edge computing and all of the applications around that, whether it be robotics or agents.

In 3 to 5 years, most of our base will be fully bundled and we will be massively more efficient and massively more optimized in terms of our cost structure. And of course, AI Connect is going to be a major business for us.

So we are more than ready to compete on our network, on our value prop, on our service, and much more. And there’s no reason to think that with the same network, same cost structure, that we won’t be very successful at continuing to grow our business and compete strongly.

I do think there is a role for satellite for sure. In remote areas, it’s a great service for those customers. And I do think there are ways that we can work together, either directly or through our JV with satellite providers, to provide a complementary service and a different differentiated value proposition.

I will say, and I’ll repeat it again, that there are no backdoors to any of our MVNO agreements. And I see absolutely no benefit whatsoever to extending an MVNO deal to any satellite provider.

I don’t buy into the idea of this prisoner’s dilemma. That’s ridiculous. There is no benefit to Verizon extending an MVNO deal. And we look forward to being able in 4 to 6 years to finally punch back, and we’ll punch back hard when that happens.

Michael Rollins, Analyst – Citi: Thank you.

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: Brad, let’s take the next question, please.

OPERATOR: The next question will come from Sean Diffley of Morgan Stanley. Your line is open.

Fixed Wireless Access, Millimeter Wave, and Spectrum Strategy

Sean Diffley, Analyst – Morgan Stanley: Great. Thanks very much, team. And that was very clear. Dan, I wanted to hear your thoughts on where you see fixed wireless fitting into the broader equation in the next 3 to 5 years. You mentioned you hit some speed standard issues, I guess, intra-quarter. Maybe just double-click on that, walk us through what those are.

And then you mentioned a kind of 1 gig fixed wireless product in metros. If you could elaborate. And do you guys have enough spectrum to scale where you want to be in this business?

Dan Schulman, Chief Executive Officer – Verizon Communications: Yeah. Okay. Those are a lot of questions. Let me try and get at as many of them as I can.

First of all, on broadband fixed wireless access and convergence, look, we continue to take share. We did 314,000 FWA and fiber net adds. We’ve done over 1 million year-to-date. We have 17.4 million broadband subs in our base.

We have strong ARPU. We actually have growing ARPU in our broadband service. We’re up year over year in Q3, and we’re seeing no discernible impact from any alternative providers.

So broadband and convergence are going to be key priorities for us. They’ll be substantial growth drivers in both the short and the medium term. There’s strong consumer demand. Really pleased with the uptake of Verizon One and increasing demand for higher download speeds.

And I think that will just continue to increase with what’s happening with AI. And I’d just point out, when I was talking about satellite, their physics get even worse as you have higher and higher broadband speeds to serve, the congestion happens much quicker at that— at those levels.

So there are 2 implications that became very clear to me. One is we need to be way more sophisticated and segmented in our go-to-market approach. I want to assure we sell consumers the right service to meet their needs versus selling what we have available in our network.

If a customer needs a gig of speed and we can only offer them 300 meg, we shouldn’t sell the service. It’s just going to be something that disappoints a customer. And a customer need is always going to supersede any internal metric from my perspective.

And then the second implication was we need a much wider footprint in which we can provide 1 gig or more of speed. And that really was the genesis of our millimeter wave solution.

So how could we take this massive spectrum holding that we have, 1,700 megahertz of spectrum that was largely underutilized, and turn it into a competitive and differentiated advantage for us, not just against competitors, but in serving our customers as well.

And our goal now with this new service, and we trialed it and now we’ve been having operational success with it, we’ll start to roll it out this quarter into ’27 and beyond, is to have the nation’s largest high-speed footprint with a medium-term target of 50 to 65 million premises passed with 1 gig or more of download speed.

People ask me, “Are you still comfortable with the 8 to 9 million of FWA by 2028?” The answer would be absolutely we are. But the truth of the matter is now that we have a high-speed FWA offer, we’ll go well beyond that now because we have a lot more capabilities. We have a lot more capacity to do that.

And clearly, another obvious and ancillary benefit is it makes our entire network more efficient. It offloads C-band capacity. It gives our network more capacity and runway. And it significantly alters our spectrum positioning.

And by the way, that rollout, which will start in Q4 and again do it market by market in ’27 and beyond, is much more cost efficient than rolling out fiber. Significantly so. There’s no right-of-way, no digging, no permitting.

And so we would expect to see our broadband pick up throughout 2027 and beyond on both fiber and a revamped high-speed FWA service. I think you’ll see— we see broadband convergence be a substantial growth driver for us. And these new solutions provide a technological competitive advantage that others don’t have.

And when it comes to spectrum in general, I think there’s a lot of thought around spectrum, obviously a lot of speculation. You got upper C-band coming on the first half of next year. That’s 160 MHz speculation. Will SpaceX be a part of that or not?

Remember on that, that that will take 4 to 5 years to clear. So, and you need different equipment associated with that.

So even if SpaceX— and I’m assuming they bid in it. I’m not sure one way or another what we will do given our new spectrum position. But say they get some spectrum, they can’t deploy that for 4 or 5 years. I mean, it’s just— it is spectrum that is, I think, reasonable spectrum. But it takes quite some time to clear.

And we’ll evaluate our spectrum needs. We always look at build versus buy. We look at densification alternatives. I’m really pleased with the network efficiencies that our guys have done in terms of improving our network capacity.

And now we have the ability to put our millimeter wave spectrum to use. I mean, it’s early days, but it is a technological breakthrough and it’s very exciting. So we have basically 2 times that of our competitors. I like the way our millimeter wave spectrum is laid out. It’s a real competitive advantage. It will offload C-band and it reframes the way that we’re thinking about our spectrum needs.

The good news is, as Tony has pointed out, is we have plenty of flexibility. We have very strong free cash flow. Our balance sheet is in really good shape. We’ll hit our leverage targets early next year.

And our priority is to invest in our business and keep the growth in our dividend per share, pay down our debt, return to our leverage ratios, and return capital to shareholders.

I think at the end of the day, as I think about all the things the team has done, all the work they’ve done around creating some innovative solutions and capabilities, is all of a sudden our spectrum position is suddenly in a much better place than we expected, and there’s a robust pipeline of upcoming spectrum auctions beyond ’27 that give us additional flexibility.

So all in all, the picture’s changed quite a bit for us. We have a lot of flexibility, and we’ll be thoughtful about how we approach the market.

Sean Diffley, Analyst – Morgan Stanley: Thank you.

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: Brad, I believe we have time to take one more question.

OPERATOR: Your final question will come from Greg Williams of TD Cowen. Your line is open, sir.

Agentic AI and the Impact on ARPU

Greg Williams, Analyst – TD Cowen: Great. Thanks for taking my questions. Just had one on the rise of agentic AI and the talk about [Muse] and potential impacts on ARPU. Thanks.

Dan Schulman, Chief Executive Officer – Verizon Communications: I’ll take that one, I guess.

Look, clearly we are entering into the age of AI, of agents. I think agents AGI depends on who you talk to. It’s 1 to 3 years away. I mean, it’s clearly upon us. Quantum hitting shortly thereafter, robotics after that.

That all of these things are going to fundamentally change the face and nature of every single business. And I’m pretty excited about the opportunity that that affords us.

We have an opportunity to dramatically improve our productivity and our cost structure. We are already utilizing AI to increase customer satisfaction, whether that be fixing issues before they even pop up to customers in our network through our customer service. It’s going to open tremendous new TAMs for us.

AI Connect, I already talked, in 6 months we’ve already signed up almost $4 billion of signed contracts. There are going to be all sorts of new value props that we develop using our data, our network infrastructure, our quite extensive customer relationships, and our trusted brand. And so you’re going to see a very different Verizon going forward with all sorts of new adjacencies opening up for us.

Look, I think as I look out over the next couple of years, there’ll be something like 8.5 billion people in the world. I think there could be at least 100 billion agents. There is going to be an explosion in data traffic.

And our network will become a scarce and crucial asset. And we will price it as such. You’ll see different pricing plans. You’ll see us take advantage of our national fiber network backbone to be competitively differentiated.

Consumers and agents will need a trusted and safe and secure environment to protect against fraud and to protect their privacy. And we’ll be sure that we won’t allow agents to access our platforms unless we’re 100% certain that it’s truly a customer and not a rogue agent. And that the purchase decisions that that agent is doing are aligned with what a customer has given them permission to go do so.

I do think purchase decisions in wireless are complex. They have to do a lot with coverage and quality, speeds, family plans, perks, loyalties, converged bundles. It’s not just a straight-to-straight price comparison.

And I do think that’s possibly a huge opportunity for us to deliver agents to our consumers to sell more. You think about our bundles, our bundles are always better than any standalone offer out there.

I mean, you can imagine how much more bundles and how much more subscriptions we could get utilizing agents who can go and find the right password, which is typically why people don’t change because they don’t remember their passwords.

And so I think there’s a huge opportunity for us to drive incremental revenues, for us to be able to utilize Verizon Dollars, our new loyalty structure with agents so they can go out and purchase things with that.

And so overall, I see a tremendous opportunity and it is something that we are doubling down on to take full advantage of everything going on, agentic commerce, but with AI in general.

Greg Williams, Analyst – TD Cowen: All right, thank you.

Closing Remarks

Dan Schulman, Chief Executive Officer – Verizon Communications: Yeah, you bet.

I’d say just to wrap up, I think there are really 3 big takeaways for the quarter. I mean, obviously our results were really strong for the quarter. And what I’m most pleased about is the momentum that we see as we’re going into the 4th quarter. As Tony mentioned, we’re off to a strong start. And we have strong momentum going into 2027.

Second thing is that AI Connect is now real. Now in 6 months, we have $4 billion of signed contracts. It’s a large and growing TAM, and we have strong momentum in that.

And finally, this technological breakthrough with millimeter wave is now a real substantial strategic asset and competitive advantage for us. And our whole relative spectrum position has flipped. And our goal there now is to be the largest high-speed provider in the country at the lowest cost. So when I say lowest cost, it’s to deploy.

So thank you, everybody, for your time. We appreciate it. And look forward to conversations in the future.

Colleen Ostrowski, Senior Vice President, Treasurer, and Head of Investor Relations – Verizon Communications: That’s all the time we have. Thank you all for your time today.

OPERATOR: This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

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