Verizon Communications (NYSE:VZ) reported first-quarter financial results on Monday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Verizon Communications reported a 2.9% increase in total revenues to $34.4 billion for Q1 2026, with adjusted EPS growing 7.6% year-over-year to $1.28.
The company added 55,000 postpaid phone net adds, marking the first positive Q1 in 13 years, and achieved significant improvements in customer churn and acquisition costs.
Verizon Communications raised its 2026 guidance for adjusted EPS growth to 5-6% and expects postpaid phone net adds to reach the upper half of their 750,000 to 1 million range.
A comprehensive transformation program is underway, focusing on healthier growth, improved customer economics, and stronger cash generation, with specific initiatives in AI and operational efficiency.
Free cash flow for Q1 was approximately $3.8 billion, up 4% year-over-year, supporting continued investment in network excellence and shareholder returns.
Full Transcript
OPERATOR
Good morning and welcome to Verizon’s first quarter 2023 earnings conference call. At this time, all participants have been placed in listen-only mode and the call will be open for questions following the presentation. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Investor Relations.
Colleen Ostrowski (Senior Vice President, Investor Relations)
Thanks Brad. Good morning and welcome to our first quarter 2026 earnings call. I’m Colleen Ostrowski and on the call with me this morning are our Chief Executive Officer Dan Schulman and Tony Sciatis, our CFO. Before we begin, I like to point you to our Safe harbor statement which can be found in the earnings presentation and on our Investor relations website. Our comments this morning may include forward looking statements which are subject to risks and uncertainties. Factors that may affect future results are discussed in our Securities and Exchange Commission filings. This presentation also contains non-GAAP financial measures and you can find reconciliations of these measures in the materials on our website. Finally, as a reminder, the results of Frontier Communications are included in our financial and operating Results Beginning on January 20, 2026, the date we closed the Frontier acquisition. With that, I’ll turn it over to Dan.
Dan Schulman (Chief Executive Officer)
Thank you, Colleen and good morning everyone. When I joined Verizon, I had a simple but ambitious goal. I wanted Verizon to reclaim its market leadership. Obviously, there are a lot of things we need to do right to make that happen. We need to delight our customers and put them at the center of everything we do. We need to drive consistent and fiscally responsible subscriber and revenue growth. We need to keep more of our customers as measured by our churn rate and convert that into stronger, more predictable cash generation for our shareholders. With all that in mind, we ended last year with our strongest quarter of mobility and broadband net adds in six years. And we entered 2026 with a clear set of priorities, a step, functional improvement and guidance and a realistic plan. Today, our first quarter results show that our turnaround is not only progressing, it is gaining momentum, powered by a comprehensive transformation program that is reshaping how we operate and serve our customers. I’m also very pleased that our unions in the East recently ratified a new four year contract that we believe will enable us to better serve our customers. Let me start by saying we delivered a strong quarter across our core operating metrics and we translated that performance into solid operational and financial outcomes, some of which we haven’t seen in over a decade. I’ll briefly review the key highlights of the quarter, including the impact of the network outage we experienced earlier in January. Then I’ll walk through three key themes how we will continue to drive healthier growth, second, how we will accomplish that with meaningfully better customer economics, and finally, how that leads to improved cash generation. I’ll close with how these results and the transformation work underway Support an increase in our 2026 guidance for both our adjusted EPS growth and our postpaid phone Net adds. In the first quarter, total revenues grew 2.9% to $34.4 billion, while our reported mobility and broadband service revenue grew below our annual guided range. Our reported growth includes one time pressure of 80 basis points on our wireless service revenues from customer credits and other impacts related to our network outage. We ended the quarter with momentum with March mobility and broadband service revenue growing in the middle of our guidance range, with consumer wireless service revenue approximately flat year over year. We anticipate Q1 mobility and broadband service revenues will be the low point of 2026 and we are highly confident that our forecast for mobility and broadband service revenue growth is in line with our 2 to 3% guidance for the year. Importantly, the quality of our revenue is improving. We are purposely shifting our mix towards durable recurring service revenues and away from low margin highly promotional activity. We are prioritizing customer lifetime value over short term revenue maximization. The benefits of that approach are obvious when looking at the combination of positive postpaid phone net adds and better churn, lower acquisition and retention costs and higher free cash flow and adjusted EPS. We added 55,000 postpaid phone net ads in the quarter. That represents an improvement of over 340,000 postpaid phone net ads versus the same period a year ago. And it’s the first time in 13 years that Verizon has had positive postpaid phone net ads. In Q1, both consumer and business had significant improvements in postpaid phone net adds. Overall, we delivered almost half a million net adds across our mobility and broadband platforms. This is a strong continuation of the momentum we established in Q4 of last year and it is happening while we are also improving the overall quality and economics of our customer relationships. I’m particularly pleased to see the early results of our transformation efforts on our customer retention. Consumer postpaid phone churn in the quarter was 90 basis points, a sequential improvement of 5 basis points from Q4. Importantly, churn improved throughout the quarter and in March, consumer postpaid phone churn improved further to below 85 basis points. That is a significant improvement both sequentially from Q4 and within the quarter, and it reversed the upward pressure we had seen in churn over the past several years. As expected, when we stop imposing blunt price increases without corresponding value on our customers and begin to remove friction from the end to end customer experience, they reward us with their loyalty. At the same time, we are acquiring and retaining customers far more efficiently. Our cost of acquisition and retention in March was down approximately 35% relative to the end of Q4, and we expect to maintain a lower cost of acquisition and retention as we look forward. I would point out that we accomplished these meaningful cost reductions while still delivering increasingly positive postpaid phone net ads versus a year ago. In other words, we are no longer predominantly reliant on expensive promotions to drive our growth. We are growing and we are doing so in a much more disciplined, repeatable and fiscally responsible manner. We of course retain the flexibility and conviction to defend our base and have a large war chest if necessary to react to competitive moves in the market. These trends in churn and unit economics are lifting our consumer lifetime value and are already flowing through to the bottom line and into our free cash flow. I’d also point out that a lower cost of acquisition will benefit our future revenue growth as the headwinds of promotion amortization finally begin to subside. Adjusted earnings per share for the quarter were $1.28, up 7.6% year over year. Our highest adjusted EPS growth rate in over four years free cash flow was approximately $3.8 billion, up 4% year over year and represents a strong start to the year. Our performance is consistent with and in a few key areas ahead of the guidance we laid out for 2026, driven by a better customer experience and operating efficiency. It is also the foundation for the capital allocation priorities we have outlined. Investing to maintain our network excellence and our overall value proposition, maintaining our ironclad commitment to our dividend, steadily reducing our leverage and returning capital to our shareholders. Now let me come back to the three themes I mentioned earlier. Healthier growth, better economics and stronger cash generation first Healthier growth the story in mobility and broadband is that we are now consistently adding more of the right customers at the right economics. The dramatic year over year improvement in postpaid phone net ads over the past two quarters with continued momentum into Q2 all reinforce that our offers and our go to market strategies are working. We are leaning into converged value mobility plus broadband, a simplified customer experience and features that matter to customers rather than chasing every promotion in the market. We are also beginning to see the benefits of our transformation efforts we which make it easier for customers to do business with us and reduce friction in their interactions with us. In fact, I’m very pleased to say that our consumer customer service team delivered its best quarter on record for customer satisfaction. Driven by improved resolution, fewer handoffs and faster response times in broadband, we continue to aggressively expand our footprint, increase penetration and and position those assets as a core part of our long term growth story. We are solidly on track to have more than 32 million fiber passings by the end of this year. We are early in the journey of fully monetizing the combination of best in class mobility and a growing fiber and fixed wireless access footprint. But we already see in our net adds and in our improved churn that customers value having more of their connectivity needs metrics a single trusted provider. Our frontier integration is on track and I am extremely pleased with the level of teamwork and focus from go to market execution to network integration and all with a keen focus on driving convergence and delivering on our more than $1 billion of run rate operating cost synergies by 2028. Now let me turn towards our second theme which revolves around driving better economics. The improvements in churn acquisition costs and retention costs are not one off events. They are the result of specific choices we have made over the past 200 days and the early benefits of a broader transformation we have launched across the company. We have put in place an ambitious company wide transformation built around 10 major work streams. These work streams span everything from becoming an AI first company to to reducing friction in every step of the customer journey, to reexamining outdated internal policies and procedures that slow us down and add to bureaucracy. We aim to simplify our products and services, apply micro segmentation to better match offers to customer needs and drive towards our goal of being the most efficient telco in the world. Each work stream has a dedicated cross functional tiger team with clear monthly and annual targets and a disciplined governance process that reviews progress, unblocks issues and reallocates resources where needed. This program is changing how we run the company day to day. As I’ve mentioned before, we will not rely on empty across the board price increases that create short term financial gains but erode the long term trust of our customers. Instead, we aim to delight customers. A central pillar of our upcoming new value proposition is the end to end redesign of our customer experiences to ensure we delight each customer in every interaction. Our commitment to customer value and trust is becoming part of our corporate DNA embedded in how we design offers, how we communicate with our customers and How We Measure Success Internally we are in the final stages of extensive market research that will inform a new generation of offers built around the principles of transparency, simplicity and genuine value delivery. We have begun to embed AI and automation into our operations and customer interactions, which is already significantly improving customer experiences and lowering costs. We will encourage more volume into digital sales and service channels which lowers costs, increases engagement and leads to higher customer satisfaction. And we have begun to see meaningful cost benefits from our transformation efforts as we take out legacy structural costs from the business. Consequently, we are well on our way towards our OPEX savings target of $5 billion in 2026. Churn is the clearest measure of whether our efforts are resonating with our customers. When we achieve the kind of churn benefits we did during the first quarter, it has profoundly positive implications for our business model. Every cohort now contributes more revenue, more margin and more cash that effect compounds over time. Lower churn also makes our marketing dollars work harder because we are not simply replacing customers who leave, we are adding to a more stable base. Our advertising is also evolving as exemplified by our Connor Story brand advertisement which resonated powerfully across social media and focused on our service and our network, not promotions or handsets. The same is true for acquisition and retention economics. We were able to meaningfully drive year over year improvement in our postpaid phone net adds while driving the cost of acquisition and retention lower by approximately 35%. Obviously, this fundamentally changes the return on investment we make to attract and keep our customers and as I mentioned, the less we spend on promotions, the lower our amortization headwinds, enabling a step function change in our future revenue growth. These improvements come from the work our teams are doing in our transformation streams smarter channel mix, less friction, better tools and modeling, the beginning of AI enabled processes and a tighter focus on fiscally responsible offers that drive profitable growth. We expect these more efficient levels to be sustainable under our current strategy and we see additional opportunities to further improve our trends as our transformation matures. Finally, our third theme revolves around stronger cash generation. The combination of healthier subscriber growth and better economics is evident in our first quarter free cash flow results and we are confident in our annual guidance of approximately 7% or more growth. We are seeing the benefits of a more disciplined capital program where we continue to invest in capacity, coverage and reliability, but do so with sharper prioritization and better utilization of the assets we already have. We are also continuing to execute on our operating expense initiatives which are delivering a substantial warjust to continue our investments in driving our end to end value proposition while driving continued shareholder returns. We see room for further meaningful efficiencies in the years ahead while simultaneously advancing our primary goal of delighting our customers and by doing so driving long term sustainable revenue growth. We have also discussed in our previous earning calls that we aim to drive incremental margin by eliminating sunsetting or creating structures to dramatically reduce our exposure to non core assets. We are well underway in this journey and we look forward to sharing more details shortly. All that brings me to our updated outlook on the back of our first quarter performance, the leading indicators we see in our business and the traction we are seeing in our transformation work streams. We are raising our guidance for adjusted eps growth to 5 to 6% versus the prior range of 4 to 5%. We also now anticipate our postpaid phone net adds to be in the upper half of our 750,000 to 1 million range. We are reaffirming the balance of our guidance mobility and broadband service revenue growth up 2% to 3% with Q1 being the low point of 2026 and free cash flow growth of approximately 7% or more versus last year. We are making these changes early in the year because the data supports a higher level of confidence. We are ahead of pace on postpaid phone net adds. In doing so with lower churn, better unit economics and record customer satisfaction scores, we have clear line of sight to the remaining cost and capital efficiency actions that underpin our free cash flow target and the transformation program gives us additional levers as the year progresses. At the same time, we are far from assuming a perfect environment. We operate in a dynamic and rapidly changing landscape. Our revised guidance continues to reflect a prudent view of competitive dynamics and the macro, …
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