To The Moon

$Verizon(VZ)$ 

Overall, Verizon has delivered a strong quarter again, but some numbers require close attention!

Consolidated numbers

Operating Revenue increased by $1.7 billion, primarily driven by growth in Wireless Equipment Revenue (up by $1.22 billion or 24.54%).

The increase in net income and EBITDA was primarily attributed to higher operating revenue.

However, this growth was partially offset by a $1.3 billion rise in operating expenses, which was mainly driven by the costs associated with a larger volume of wireless equipment sold.

This increase in expenses was due to device upgrades and a shift towards higher-priced devices.

The Total Wireless Revenue increased by $1.85 billion, driven by the $1.22 billion increase in Wireless Equipment revenue mentioned above.

In the first 6 months of 2025, Verizon paid $5.6 billion in dividends, which reflects a 55% payout ratio.

Verizon announced an update to the 2025 guidance:

• Adjusted EBITDA growth of 2.5 percent to 3.5 percent.

• Adjusted EPS growth of 1.0 percent to 3.0 percent.

• Cash flow from operations of $37.0 billion to $39.0 billion.

• Free cash flow of $19.5 billion to $20.5 billion.

Consumer Segment

Operating Revenue for the consumer segment increased by $1.7 billion, with growth across all revenue streams.

The largest growth was seen in Wireless Equipment, up by $1.2 billion (29.60%) due to a higher volume of wireless devices sold.

The increase in revenue reflected the growth of $227 million in EBITDA, up by 2.06%.

Operating Income remained relatively flat since Operating Expenses increased by $1.68 billion, driven by higher Cost of Wireless Equipment.

Net wireless additions were up by 664 thousand connections (great improvement compared to the same period for the year before).

The total wireless retail connections remained flat year over year.

If we examine the Wireless Retail Postpaid phone connections, which represent 64% of total wireless connections, we can see that they have undergone significant changes so far in 2025.

Verizon has lost a total of 407 thousand connections in the first 6 months of 2025, with 1Q25 contributing a loss of 356 thousand and 2Q25 accounting for a loss of 51 thousand.

In contrast, in 2024, Verizon reported a net gain of 82 thousand Wireless Retail Postpaid connections. Although they were only able to report positive additions for the year due to strong numbers in the 4Q24.

If we compare the first half of 2024 to 2025, the net additions were -693 thousand and -407 thousand, respectively. Therefore, we can conclude that 2025 is performing significantly better than 2024 in those terms.

Net broadband additions saw a significant decline, with Verizon adding 50,000 fewer connections compared to the same period last year.

Total broadband increased by 895 thousand, of which 715 thousand were new Fixed Wireless Access (FWA) connections.

ARPA has increased to $174.50, and management has confirmed that this increase reflects the reclassification of recurring device protections and insurance-related plan revenues, which were previously reported under Other Revenue.

Business Segment

Operating revenue remained flat, with decreases of $168 million in the Enterprise & Public Sector, and Wholesale streams.

The decrease was driven by two factors: first, market pressure caused declines in networking and data and voice communication services; second, government pressure for efficiency efforts.

This decline was partly offset by a $143 million increase in the Business Markets and Other segment, driven by pricing actions and a growth in the FWA subscriber base.

Operating income experienced significant growth, increasing by 27.6%.

This rise was largely driven by a $163 million reduction in operating expenses. Of this decrease, $148 million resulted from lower service costs, which were primarily due to decreases in personnel costs and adjustments in circuit usage and pricing.

Essentially, the company saved money by utilizing fewer rented network lines and/or negotiating lower prices for them.

The EBITDA saw a 5.76% growth due to the lower expenses mentioned above.

Net wireless retail additions decreased by a significant 75.74% with 203 thousand fewer additions than 2Q24.

Comparing the six-month periods ending in 2024 and 2025, the net wireless retail additions were 446 thousand in 2024 and dropped to 159 thousand in 2025.

Total wireless retail increased by 717 thousand compared to the same period in 2024.

Net broadband additions experienced a notable decline of 30%, resulting in 46 thousand fewer additions. Despite this, total broadband increased by 512thousand overall.

BONUS:

Interpretation of Financial Statements 

Following on from the series started in my last analysis, today we will talk about Operating Expenses.

These hard costs include selling and administrative costs, depreciation, amortization, restructuring, and impairment charges.

They all have an impact on the long-term economic nature of the company, so we will go through them one by one.

Selling, General & Administrative (SGA) Expenses

These costs include management salaries, advertising, travel expenses, legal fees, commissions, payroll costs, and any other administrative expenses incurred during the accounting period.

SGA can vary significantly between businesses and industries, and the key is to look for “consistency”. Companies that show wild variations in SGA costs as a percentage of gross profit don’t normally have a durable competitive advantage.

The lower the SGA costs are, the better it is. If they can remain consistently low, that would be even better. Generally, expenses for SGA under 30% of gross profit are considered excellent. However, some companies operate with SGA expenses ranging from 30% to 80% and still maintain a durable competitive advantage.

Depreciation and amortization expense

This expense relates to the amount assets wear out over time (machinery and buildings).

For example, if Verizon installs a $100,000 cell site upgrade with an estimated useful life of 10 years, it might record $10,000/year in depreciation expense for that asset.

The $100,000 cost will come out of the cash flow statement and be added to the balance sheet under Property, Plant and Equipment, and each year $10,000 will be subtracted from it for the next 10 years.

A clever strategy that companies often use is to treat a $10,000 yearly expense as a deduction from their asset value on the balance sheet, rather than as an outgoing cash flow. So, financial professionals on Wall Street can add that $10,000 expense back when calculating earnings.

This adjustment allows them to present a stronger cash flow, which can support more debt for profitable ventures and leveraged buyouts. This metric is known as EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.

This situation can become problematic if a company accumulates significant debt from leveraged buyouts and the 10-year lifespan of an asset expires, necessitating replacement. They may not have the financial capacity to acquire a new asset.

Companies that have a lower depreciation cost as a percentage of gross profit tend to have a more durable competitive advantage.

In the following table, we compare Verizon’s ratios with those of its peers for the 2Q25 and full year 2024.

$AT&T Inc(T)$ $T-Mobile US(TMUS)$

The following table shows Verizon’s ratios over 5 years.