Verizon Communications Inc. (NYSE:VZ) had a pretty good quarter. The telecom giant reported its strongest third-quarter wireless subscriber growth in five years, beat earnings expectations, and raised its full-year outlook. So naturally, the stock traded lower on Monday. Because that's just how markets work sometimes.

The company reported third-quarter adjusted earnings of $1.31 per share, comfortably beating the analyst consensus estimate of $1.27. Revenue came in at $34.31 billion, slightly missing Wall Street's estimate of $34.74 billion, as fewer customers upgraded their devices after Verizon reduced handset subsidies. GAAP diluted earnings per share rose 6.8% year over year to $1.25, while net income increased 5.2% to $5.3 billion.

Profitability and Cash Flow Improve

Total operating revenue increased 1.5% year over year to $34.3 billion, supported by growth in mobility and broadband service revenue, which offset a decline in wireless equipment sales. Adjusted EBITDA rose 8% to a record quarterly $13.8 billion, while adjusted earnings per share increased 8.3%.

Operating cash flow climbed 2.2% to $11.5 billion, and free cash flow increased 12.1% to $7.8 billion. Capital expenditures totaled $3.72 billion during the quarter. Verizon ended the period with $136.1 billion in total unsecured debt and $123.7 billion in net unsecured debt.

Wireless Subscriber Growth Tops Expectations

Mobility and broadband service revenue increased 2.9% year over year to $23.5 billion, while wireless equipment revenue declined 9% to $5.12 billion. Verizon recorded 406,000 postpaid phone net additions, more than double Bloomberg's cited analyst estimate of 202,000. The company also added 314,000 broadband connections, below analyst expectations of 379,100, and reported 52,000 core prepaid phone net losses, excluding SafeLink.

Consumer revenue totaled $26.43 billion, with an operating margin of 30.6%. Business revenue reached $7.02 billion, with an operating margin of 12.2%.

CEO Dan Schulman Advances Turnaround Strategy

CEO Dan Schulman continued reshaping Verizon's operations through cost reductions, simplified pricing and efforts to improve customer retention. Since taking over, Schulman has cut thousands of jobs, introduced the Simplicity wireless plan and launched a new loyalty program, Reuters reported Monday.

Schulman said Verizon's customer proposition is gaining traction, with postpaid net additions increasing ninefold year over year. Customer acquisition costs fell 41%, while retention costs declined 30%. He expects net account growth to continue in the fourth quarter.

Schulman also identified broadband and convergence as substantial growth opportunities. Verizon plans to expand its gigabit fixed wireless service using millimeter-wave spectrum, targeting 50 million to 65 million premises with speeds of at least 1 gigabit per second over the medium term.

Verizon Focuses on Value-Based Pricing

Schulman said Verizon would consider raising prices only when customers receive additional value. He acknowledged that previous price increases without corresponding benefits damaged customer trust and contributed to higher churn. Schulman said Verizon's improved customer value proposition provides greater flexibility to adjust prices.

He also emphasized that Verizon does not intend to compete primarily through free phones, free lines or aggressive subsidies, instead focusing on network quality, customer experience and bundled services.

AWS and Google Partnerships Support AI Growth

Schulman identified Verizon's AI Connect initiative as a significant growth opportunity, citing approximately $4 billion in signed contracts covering fiber and edge computing services. He said demand from hyperscalers and other artificial intelligence customers remains strong, with revenue from those agreements expected to begin contributing in 2027.

Verizon highlighted partnerships with Amazon.com Inc. (NASDAQ:AMZN) unit Amazon Web Services and Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) unit Google. Chief Financial Officer Tony Sciati said the agreements offer attractive margins and provide additional growth opportunities beyond Verizon's core operations.

Verizon Addresses Starlink Competition

Schulman said Space Exploration Technologies Corp. (NASDAQ:SPCX) could take at least four to six years to build a competitive terrestrial wireless network, potentially making it America's "sixth—not the fourth" wireless competitor. He estimated the buildout could cost between $300 billion and $500 billion over seven to eight years, arguing that SpaceX would ultimately face a similar network infrastructure and cost structure to established carriers.

Schulman said Verizon takes Starlink wireless ambitions seriously but believes building a competitive terrestrial wireless network would require years and substantial investment. He said Verizon plans to strengthen its existing wireless network, broadband services and AI-enabled offerings while ruling out a mobile virtual network operator agreement with satellite providers.

Verizon Raises 2026 Guidance

Verizon raised key elements of its full-year 2026 outlook for the third consecutive quarter, citing stronger subscriber growth, profitability and cash generation. The company increased its adjusted earnings guidance to $5.04 to $5.06 per share from its previous range of $4.99 to $5.04. The updated outlook is slightly above the analyst consensus estimate of $5.04 at the midpoint.

Verizon now expects 1.1 million to 1.2 million postpaid phone net additions, up from the upper half of its previous forecast of 750,000 to 1 million. The company expects full-year mobility and broadband service revenue growth in the upper half of its previous 2.5% to 3% guidance range, with approximately 4% growth anticipated in the fourth quarter.

Verizon also raised its operating cash flow growth forecast to 3.5% to 5% from 2% to 4%. The company raised its full-year free cash flow growth outlook, expecting growth to approach 12%, compared with its previous forecast of 9% to 10%. Verizon maintained its capital expenditure guidance of $16 billion to $16.5 billion, including investments tied to AI Connect.

VZ Price Action

VZ Price Action: Verizon Communications shares were down 2.70% at $43.45 at the time of publication on Monday, according to market data.