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Verizon Shares Rise 23.3% YTD: How Should You Play the Stock?
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Key Takeaways
Verizon's consumer strategy is driving user growth while reducing acquisition and retention costs.
Verizon targets $9 billion in savings as adjusted EBITDA rose 7.2% to $13.7 billion in Q2.
Verizon sees AI infrastructure potential, while high capex, debt and competition remain concerns.
Verizon Communications Inc. (VZ - Free Report) has gained 23.3% year to date compared with the Wireless National industry’s growth of 118.2%. The stock has outperformed the Zacks Computer & Technology sector during this period.
Image Source: Zacks Investment Research
The company has outperformed its peers like AT&T Inc. (T - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) . Shares of AT&T have gained 4.4%, while T-Mobile has declined 7.8% during this period.
VZ Gains on Customer-Oriented Strategy, Cost Efficiency and AI Focus
Verizon's new consumer strategy is driving user growth. The company introduced a broad loyalty program alongside its simplified Simplicity wireless plan. The strategy is designed to reduce customer friction, improve retention and attract new customer segments. The company has reported a 15% year-over-year decline in consumer promotional acquisition costs and a 17% reduction in promotional retention costs in the second quarter. Such an approach is expected to boost operating margin over time.
Verizon's transformation program is also improving profit. The company is targeting at least $9 billion in combined operating and capital expense savings. For that, VZ has taken several initiatives focused on lowering the cost to serve customers, improving productivity and streamlining customer interactions. The overall cost structure is already improving, backed by these initiatives. Second-quarter adjusted EBITDA increased 7.2% year over year to $13.7 billion, while the adjusted EBITDA margin reached 40.1%.
The company is increasing investment in improving its network to deliver reliable services. VZ is integrating AI to identify and resolve network issues. It recently acquired AWS-3 spectrum to enhance network capacity and customer experience.
Verizon's entry into the rapidly expanding AI infrastructure market will likely bring long-term benefits. The company is leveraging its extensive long-haul and metro fiber networks to serve hyperscalers, cloud providers and enterprises. VZ has already signed a dark-fiber agreement with Google worth more than $1 billion. The company expects to sign additional agreements in upcoming quarters.
Stiff Competition, Elevated Debt Burden are Concerns
Verizon operates in highly competitive wireless and broadband markets. Here, pricing, promotions, network quality and customer experience can significantly influence subscriber trends. The company faces competition from other major players, such as AT&T and T-Mobile.
Verizon's new Simplicity plans, Verizon One offering and expanded loyalty program are intended to improve customer retention without materially increasing promotional spending. However, aggressive responses from competitors could slow subscriber growth, pressure margins and reduce the benefits of Verizon's improving customer economics.
Verizon remains a capital-intensive business. The company expects 2026 capital expenditures of approximately $16-$16.5 billion, while continuing to invest in fiber, wireless infrastructure and spectrum. It also spent about $3.2 billion to acquire 82 AWS-3 spectrum licenses. High capex can impact free cash flow in the near term.
Its net unsecured debt-to-adjusted EBITDA ratio stood at 2.5 times at the end of the second quarter. At the end of second-quarter 2026, total unsecured debt stood at $136.5 billion, while net unsecured debt totaled $128.7 billion. Verizon is working to reduce leverage, but a substantial debt burden can limit financial flexibility.
Estimate Revision Trend of VZ
VZ’s earnings estimates for 2026 and 2027 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of VZ
From a valuation standpoint, VZ appears to be trading relatively cheaper compared to the industry but trading above its mean. Going by the price/earnings ratio, the company’s shares currently trade at 9.65, lower than 37.6 for the industry.
Image Source: Zacks Investment Research
End Note
Verizon's growth outlook is increasingly supported by a combination of improving wireless and broadband subscriber trends. Beyond its traditional telecom operations, the company's extensive fiber assets provide an opportunity to capitalize on the rapid buildout of AI infrastructure. Focus on cost optimization is a positive. However, despite an improving outlook, intense competition continues to impact margins. High debt burden remains a concern. With a Zacks Rank #3 (Hold), VZ appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
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Verizon Shares Rise 23.3% YTD: How Should You Play the Stock?
Key Takeaways
Verizon Communications Inc. (VZ - Free Report) has gained 23.3% year to date compared with the Wireless National industry’s growth of 118.2%. The stock has outperformed the Zacks Computer & Technology sector during this period.
Image Source: Zacks Investment Research
The company has outperformed its peers like AT&T Inc. (T - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) . Shares of AT&T have gained 4.4%, while T-Mobile has declined 7.8% during this period.
VZ Gains on Customer-Oriented Strategy, Cost Efficiency and AI Focus
Verizon's new consumer strategy is driving user growth. The company introduced a broad loyalty program alongside its simplified Simplicity wireless plan. The strategy is designed to reduce customer friction, improve retention and attract new customer segments. The company has reported a 15% year-over-year decline in consumer promotional acquisition costs and a 17% reduction in promotional retention costs in the second quarter. Such an approach is expected to boost operating margin over time.
Verizon's transformation program is also improving profit. The company is targeting at least $9 billion in combined operating and capital expense savings. For that, VZ has taken several initiatives focused on lowering the cost to serve customers, improving productivity and streamlining customer interactions. The overall cost structure is already improving, backed by these initiatives. Second-quarter adjusted EBITDA increased 7.2% year over year to $13.7 billion, while the adjusted EBITDA margin reached 40.1%.
The company is increasing investment in improving its network to deliver reliable services. VZ is integrating AI to identify and resolve network issues. It recently acquired AWS-3 spectrum to enhance network capacity and customer experience.
Verizon's entry into the rapidly expanding AI infrastructure market will likely bring long-term benefits. The company is leveraging its extensive long-haul and metro fiber networks to serve hyperscalers, cloud providers and enterprises. VZ has already signed a dark-fiber agreement with Google worth more than $1 billion. The company expects to sign additional agreements in upcoming quarters.
Stiff Competition, Elevated Debt Burden are Concerns
Verizon operates in highly competitive wireless and broadband markets. Here, pricing, promotions, network quality and customer experience can significantly influence subscriber trends. The company faces competition from other major players, such as AT&T and T-Mobile.
Verizon's new Simplicity plans, Verizon One offering and expanded loyalty program are intended to improve customer retention without materially increasing promotional spending. However, aggressive responses from competitors could slow subscriber growth, pressure margins and reduce the benefits of Verizon's improving customer economics.
Verizon remains a capital-intensive business. The company expects 2026 capital expenditures of approximately $16-$16.5 billion, while continuing to invest in fiber, wireless infrastructure and spectrum. It also spent about $3.2 billion to acquire 82 AWS-3 spectrum licenses. High capex can impact free cash flow in the near term.
Its net unsecured debt-to-adjusted EBITDA ratio stood at 2.5 times at the end of the second quarter. At the end of second-quarter 2026, total unsecured debt stood at $136.5 billion, while net unsecured debt totaled $128.7 billion. Verizon is working to reduce leverage, but a substantial debt burden can limit financial flexibility.
Estimate Revision Trend of VZ
VZ’s earnings estimates for 2026 and 2027 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of VZ
From a valuation standpoint, VZ appears to be trading relatively cheaper compared to the industry but trading above its mean. Going by the price/earnings ratio, the company’s shares currently trade at 9.65, lower than 37.6 for the industry.
Image Source: Zacks Investment Research
End Note
Verizon's growth outlook is increasingly supported by a combination of improving wireless and broadband subscriber trends. Beyond its traditional telecom operations, the company's extensive fiber assets provide an opportunity to capitalize on the rapid buildout of AI infrastructure. Focus on cost optimization is a positive. However, despite an improving outlook, intense competition continues to impact margins. High debt burden remains a concern. With a Zacks Rank #3 (Hold), VZ appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.