Verizon's Q3 2025: Contradictions Emerge in Churn Reduction, AI Strategy, Fiber Expansion, and Cost Cuts

Date of Call: October 29, 2025

Financials Results

• Revenue: $33.8 billion, up 1.5% YOY
• EPS: $1.21 adjusted EPS, up 1.7% YOY

Guidance:

• Reiterated full‑year 2025 guidance (adjusted EBITDA, adjusted EPS and free cash flow), including free cash flow target of $19.5B–$20.5B.
• Expect higher free cash flow in 2026 year‑over‑year, "all in" including Frontier, driven by cost transformation and capital efficiency.
• 2026 formal guidance will be provided on the January earnings call.

Business Commentary:

• Customer Subscriber Trends and Strategy:
• Verizon reported a decrease in postpaid phone net losses, with 7,000 losses in Q3, compared to a net gain of 70,000 in the same period last year.
• There was a 8.4% increase in postpaid phone gross adds and a churn rate of 0.91%.

• The decrease in net adds and increase in churn were attributed to pricing strategies and competitive pressure, prompting a shift to a customer-centric focus to improve retention and share capture.

• Revenue and Financial Performance:

• Verizon's consolidated revenue was $33.8 billion, up 1.5% year-on-year, driven by a 5.2% increase in wireless equipment revenue and a 2.1% rise in wireless service revenue.
• The revenue growth was partly due to increased wireless service revenue and higher gross adds, despite promotional amortization headwinds.

• The company noted strong cash flow from operating activities at $28 billion for the first nine months, representing a 5.8% increase year-on-year.

• Broadband and Convergence Expansion:

• Verizon delivered 306,000 broadband net adds, reaching 13.2 million subscribers, with 61,000 FiOS internet net adds.
• The expansion is supported by plans to bring FiOS to more households via partnerships, such as the one with Tillman, and the acquisition of Frontier, which will provide access to 29 million fiber passings.

• The focus on convergence aims to drive revenue synergies and customer retention by bundling mobility and broadband services.

• Cost Management and Efficiency Initiatives:

• Verizon's adjusted EBITDA was $12.8 billion, up 2.3% year-on-year, with a goal to achieve significant cost savings across all aspects of the business.
• The company is planning a comprehensive review of its capital spend and portfolio to optimize growth investments and reduce costs associated with non-strategic ventures.
• These efforts are part of a broader strategy to fund growth investments and enhance shareholder returns, emphasizing financial discipline.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted Q3 revenue of $33.8B (+1.5% YOY) and adjusted EPS of $1.21 (+1.7% YOY), said they are "on track to deliver our full year financial guidance," expect 2026 free cash flow growth "all in, including Frontier," and emphasized a customer‑centric, cost‑transformation strategy to drive growth and higher cash flow.

Q&A:

• Question from John Hodulik (UBS): Expand on your vision and first 100 days; how do you expect to turn consumer volumes?
  Response: Shift to a customer‑centric strategy focused on reducing churn and growing via retention, fund customer investments through OpEx/CapEx reductions, and pursue portfolio rationalization; immediate actions underway to start improving volumes.

• Question from Benjamin Swinburne (Morgan Stanley): Is the back book overpriced and how will you gain consumer share without heavy back‑book repricing? Also, would you flex leverage higher for opportunities?
  Response: Plan is to win via targeted value propositions, convergence and superior experience rather than wholesale back‑book repricing; balance‑sheet target remains (2.0–2.25x) but CFO says flexibility exists opportunistically with Frontier adding ~0.25x temporarily.

• Question from Michael Ng (Goldman Sachs): Any parallels to PayPal that inform your turnaround and is Perks/MIPlan moving Verizon toward a super‑app strategy?
  Response: Yes—apply a customer‑champion approach learned at PayPal: invest in value propositions funded by cost cuts; Perks/MIPlan is part of that thinking but strategic details (super‑app considerations) remain under development and will be shared later.

• Question from Michael Rollins (Citigroup): Where do you want convergence/fiber passings to go, and how do you view fixed wireless vs fiber and legacy vs strategic portfolio?
  Response: Convergence is a priority—expand fiber and fixed wireless to drive cross‑sell and ~40% lower churn for converged customers; will continue organic builds, partnerships and M&A (Frontier), and divest or exit non‑strategic legacy businesses.

• Question from Sebastiano Petti (JPMorgan): How should we think about 2026 free cash flow growth given fiber/Frontier and the quarter's account declines?
  Response: Company expects 2026 FCF growth year‑over‑year including Frontier, backed by cost transformation and capital efficiency; account declines are a driver for the customer‑experience push to reduce churn and improve net adds.

• Question from Michael Funk (BofA): What specific strategies/tools will reduce churn and how will you use AI; what is the AI infrastructure opportunity?
  Response: Use targeted segmentation, improved offers and proactive service to reduce churn; AI will be implemented to predict and prevent churn, personalize offers at scale, increase efficiency and drive new service opportunities across the business.

• Question from Peter Supino (Wolfe Research): What are the nature of cost opportunities and how do you reconcile modest organic fiber build with the Frontier acquisition?
  Response: Fiber expansion will proceed via organic builds, capital‑light partnerships (e.g., Tillman) and acquisitions (Frontier) to expand passings; cost opportunities span OpEx and CapEx reductions, technology enablement and portfolio pruning to redeploy savings into growth.

Contradiction Point 1

Churn Reduction and Customer Experience Improvement

It involves the strategies and expectations for reducing churn and improving customer experience, which are critical for maintaining market share and customer satisfaction.

What strategies and tools will be used to reduce churn? How can AI help, and what opportunities does it present for Verizon? - Michael Funk(BofA Securities)

2025Q3: We aim to address customer pain points proactively, enhancing retention and customer experience. Verizon will aggressively compete to delight customers and reduce churn. - Daniel Schulman(CEO)

Can you discuss free cash flow, capital allocation, and consumer wireless outlook? How will incremental capital be used, particularly post-2025 tax benefits? Should we expect improvement in consumer net adds in 2025 compared to 2024? What’s the churn outlook for H2? - Ben Swinburne(Morgan Stanley)

2025Q2: Churn is expected to normalize over time with AI-driven customer experience improvements. - Hans E. Vestberg(CEO)

Contradiction Point 2

AI Application and Potential

It involves the expectations and plans for leveraging AI in various aspects of the business, which are crucial for competitive advantage and operational efficiency.

Can you compare Verizon and PayPal to identify growth opportunities? How does AI factor into Verizon's growth strategy? - Michael Ng(Goldman Sachs Group, Inc.)

2025Q3: There's significant opportunity to be more efficient and reduce churn using AI. We're investing heavily in our value proposition and AI applications to simplify offers and improve customer satisfaction. - Daniel Schulman(CEO)

How sustainable is the 19% increase in consumer phone gross adds? What are the specifics of the customer experience improvements, such as AI-powered customer service? - Greg Williams(TD Cowen)

2025Q2: We are starting to see the first results of that with AI, and I'm very excited about that. It's starting now. - Hans E. Vestberg(CEO)

Contradiction Point 3

Fiber Expansion Strategy

This contradiction involves the company's approach to fiber expansion, with differing views on the role of organic growth versus acquisitions.

What are the key strategies behind Verizon's cost reduction initiatives? How does Verizon balance its slow organic fiber growth with aggressive acquisition-driven expansion? - Peter Supino (Wolfe Research, LLC)

2025Q3: We're on track with our plans for fiber build and organic expansion. - Anthony Skiadas(CFO)

Are there SG&A savings in 2Q, and should we expect accelerating fiber footprint through partnerships with providers? - Sebastiano Petti (JPMorgan)

2025Q1: We are focused on the fiber build with Frontier, targeting 650,000 OFS. - Hans Vestberg(CEO)

Contradiction Point 4

Cost Reduction and Efficiency Initiatives

It highlights differing approaches and priorities regarding cost reduction and efficiency initiatives, which are crucial for driving financial growth and operational efficiency.

What is the revised composition of the "other" category after insurance reclassification, and how might a Comcast-Charter merger impact Verizon? - David Barden (Bank of America)

2025Q3: We are remaining focused on our efficiency program, which we now estimate to be a run rate of roughly $10 billion of annual benefits by the end of the year. - Anthony Skiadas(CFO)

Can you discuss the upgrade environment and drivers, and your cost transformation strategies to achieve financial growth? - Michael Rollins (Citi)

2024Q4: We have achieved $6 billion of annual benefits from this program in 2024. We expect to recognize an additional $4 billion of annual benefits in 2025. In total, we expect to have achieved roughly $10 billion in annual benefits by the end of 2025. - Tony Skiadas(CFO)