Categories Analysis, Technology
Verizon’s subscriber growth fuels strong fiscal 2025 outlook
For FY25, the management expects an increase in earnings, adjusted EBITDA and wireless service revenue
Verizon Communications Inc. (VZ) last week posted better-than-expected fourth-quarter results and issued positive guidance, encouraged by the steady increase in subscriptions. The company’s network is expected to become stronger and bigger this year as the management executes its growth initiatives including completion of the pending Frontier acquisition and execution of AI strategy.
After experiencing high volatility last year, Verizon’s stock is now trading at a price that matches its value 12 months ago. The shares have recovered and gained some momentum after slipping to a one-year low early this month. VZ has been a favorite of income investors, thanks to regular dividend hikes and strong yield that places it among the highest-yielding dividend stocks in the S&P 500. The company has hiked its dividend for the 18th consecutive year while continuing to pay down debt.
Results Beat
In the fourth quarter, Verizon’s adjusted earnings rose modestly to $1.10 per share from $1.08 per share in the comparable period of fiscal 2023 and came in above the market’s expectations. Unadjusted profit was $5.0 billion or $1.18 per share in Q4, compared to a loss of $2.71 billion or $0.64 per share in the prior-year quarter.
The bottom line benefitted from a 1.6% year-over-year increase in operating revenues to $35.68 billion in Q4, beating expectations. Both Services and Wireless Equipment revenues increased. The company added about 1 million postpaid subscribers to the mobile and broadband platforms during the quarter as it continues to increase market share, despite stiff competition. According to Verizon’s CEO Hans Erik Vestbeg, Q4 FY24 was the best quarter in about one decade.
Outlook
For fiscal 2025, the Verizon leadership expects total wireless service revenue to grow between 2% and 2.8%, aided by improving postpaid consumer phone net additions and healthy business-phone volumes. Pricing actions taken in 2024, and being carried over into 2025, are also expected to drive revenue growth. Full-year free cash flow is expected to be in the range of $17.5 billion to $18.5 billion, assuming no change to current tax legislation and a mid-single-digit growth in upgrading of devices and services by customers.
“Looking ahead, our 2025 priorities are clear: a continued focus on wider service revenue growth, adjusted EBITDA expansion, and strong free cash flow; accelerate the mobility momentum and broadband growth while scaling private networks as we expand 5G Ultra-Wideband and fiber reach; laser focus on operational excellence, financial discipline, and customer experience to drive customer and financial growth; execution of our capital allocation model, investing in the business, supporting and growing our dividend, paying down debt and, eventually, share repurchases; and we will leverage our fiber and edge compute assets to open new revenue streams from the AI ecosystem,” Vestberg said at the Q4 earnings call.
Expansion
As part its efforts to meet the spiraling demand for network capacity and computational power, the tech firm has developed an AI strategy targeting hyperscalers, cloud providers, and global enterprises — Verizon AI Connect is a suite of products/solutions designed to manage AI resource-intensive workloads at scale. Last year, Verizon launched satellite-based messaging services by partnering with non-terrestrial network service providers like AST SpaceMobile and Skylo. More recently, the company entered into a collaboration with NVIDIA to develop a solution that enables a wide range of AI applications to run over its 5G private network with private Mobile Edge Compute technology.
Extending the upswing seen in recent weeks, Verizon’s shares traded higher on Monday but stayed below their 52-week average price of $41.11.
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