Verizon Communications Inc. (NYSE: VZ) saw its stock rise 2.4% to $44.86 in early Friday trading, following a quarterly report that showed a rebound in subscriber additions and improved profitability driven by lower handset spending. The New York-based telecom giant added 184,000 postpaid phone subscribers in the second quarter, significantly above the FactSet consensus of 103,900 and a sharp reversal from a loss of 9,000 in the same period last year.
The subscriber growth came alongside a 26.5% decline in phone upgrades to 3.3 million, reflecting longer device lifecycles and reduced subsidy spending. Equipment revenue fell nearly 20%, but the trade-off was a 24.4% increase in free cash flow to $6.4 billion. Adjusted EBITDA rose 7.2% to $13.7 billion, with margins expanding 300 basis points to 40.1%.
"We are gaining subscribers and earning long-term retention based on real value rather than subsidized promotions," said CEO Dan Schulman. The quarter supports that narrative, though revenue remains a concern. Total revenue slipped 0.7% to $34.3 billion, below the LSEG consensus of $35.16 billion, while adjusted earnings of $1.30 per share beat the $1.27 estimate.
Mobility and broadband service revenue grew just 2.8% to $23.4 billion, highlighting the challenge of top-line expansion even as cost controls boost the bottom line. The company raised its 2026 adjusted EPS guidance to $4.99-$5.04 from $4.95-$4.99 and now expects free cash flow growth of 9%-10%, up from prior guidance.
Verizon also increased its share buyback target for 2026 to as much as $4.5 billion, while net unsecured debt declined to $128.7 billion from $130.1 billion in March. The lower handset spending and improved cash flow are seen as signs of operational discipline, but risks persist. Phone churn of 0.92% improved five basis points from the previous quarter but still trailed AT&T's 0.86% churn rate.
AT&T Inc. (NYSE: T) added 432,000 postpaid phones in the same period, while T-Mobile US Inc. (NASDAQ: TMUS) reported 277,000 postpaid account additions. T-Mobile expects about 250,000 account additions in the third quarter. Verizon's guidance calls for service revenue growth near 3% in the third quarter and about 4% in the fourth, a target that will test the company's ability to hold churn while expanding margins.
The market responded positively to the operational leverage, though the revenue miss serves as a cautionary note. Analysts are watching whether the company can sustain its subscriber momentum while maintaining the cost discipline that drove the quarter's cash flow improvement. With the stock still trading below its 52-week high, the guidance raise and buyback increase signal confidence in the second half of 2026.
