버라이즌(VZ) 2026년 3분기 실적 발표 콜: 가입자 성장 가속화로 가이던스 상향

핵심 요약

• 버라이즌은 2026년 3분기에 406,000명의 후불폰 가입자를 순증시켜 전년 동기 대비 820% 증가했으며, 이는 5년 만에 가장 강력한 3분기 실적이다. 후불 계정 순증은 137,000건에 달해 10년 만에 최고의 분기 실적을 기록했다.
• 총매출은 전년 동기 대비 1.5% 증가한 343억 달러를 기록했다. 모빌리티 및 브로드밴드 서비스 매출은 2.9% 성장한 반면, 기기 교체 수요가 20% 이상 감소함에 따라 단말기 매출은 9% 하락했다.
• 조정 EBITDA는 8% 증가한 138억 달러를 기록했다. 조정 EBITDA 마진율은 240bp 확대된 40.2%로 회사 역대 최고치를 기록했다.
• 조정 EPS(주당순이익)는 8.3% 증가한 1.31달러를 기록했다. 3분기 잉여현금흐름은 78억 달러로 전년 동기 대비 12% 이상 증가하며 2020년 이후 최고 분기 수준을 기록했다.
• 버라이즌은 후불폰 가입자 순증, 조정 EPS 성장률, 잉여현금흐름 성장률에 대한 2026년 전망치를 상향 조정했다. 경영진은 또한 4분기 모빌리티 및 브로드밴드 서비스 매출 성장률이 약 4%에 달할 것으로 예상한다.
• AI 커넥트(AI Connect) 수주 계약 금액은 아마존웹서비스(AWS)와의 20억 달러 이상 규모 다크 파이버 계약을 포함해 약 40억 달러에 달했다. 경영진은 2027년부터 매출 기여가 시작될 것으로 예상하고 있다.

주요 재무 데이터

사업 및 영업 성과

모빌리티

후불폰 가입자 순증은 소비자 부문 266,000명과 기업 부문 140,000명을 포함해 406,000명을 기록했다. 신규 고객 유입과 보조금이 없는 심플리시티(Simplicity) 요금제 수요에 힘입어 총 가입자 추가는 11% 증가했다.

전체 후불폰 해지율은 0.94%로 4bp 개선되었으며, 소비자 후불폰 해지율은 0.87%로 4bp 하락했다. 고객 유치 비용은 전년 동기 대비 41% 감소했고, 유지 비용은 30% 감소했다. 경영진은 이러한 추세가 고객 가치 제안, 세분화, 절제된 기기 교체 관리, 고객 충성도 이니셔티브 덕분이라고 설명했다.

기기 교체 수량이 20% 이상 감소하면서 단말기 매출은 줄었으나 보조금 절감, 마진율 개선 및 현금흐름 향상에 기여했다. 경영진은 기기 교체 감소 추세가 4분기에도 지속될 것으로 예상하고 있다.

브로드밴드 및 컨버전스

버라이즌은 3분기에 314,000명의 브로드밴드 순증을 기록하며 올해 누적 100만 명을 돌파했다. 광통신(Fiber)이 분기 브로드밴드 순증의 절반 가까이를 차지했으며, 전체 브로드밴드 가입자는 1,740만 명에 달했다.

신규 광통신 브로드밴드 가입자의 55% 이상이 1기가비트 이상의 다운로드 속도를 선택했다. 경영진은 모빌리티와 브로드밴드 서비스를 모두 이용하는 고객이 단일 상품 이용 고객에 비해 해지율이 실질적으로 현저히 낮다고 밝혔다.

버라이즌은 1,700메가헤르츠(MHz)의 밀리미터파 주파수를 활용해 대도시 지역에서 1기가비트 고정무선접속(FWA) 서비스를 제공할 계획이다. 회사는 중기 목표인 4,000만~5,000만 가구의 광통신 망 구축 외에도, 고속 FWA로 1,000만~1,500만 가구를 추가 커버하는 것을 목표로 하고 있다.

비용 구조 혁신 및 자본 환원

회사는 50억 달러 규모의 영업비용 효율화 프로그램을 포함한 90억 달러의 영업비용(OpEx) 및 설비투자(CapEx) 감축 계획이 차질 없이 진행 중이라고 밝혔다. 프론티어(Frontier) 인수는 2028년까지 연간 연율화 기준 10억 달러 이상의 영업비용 시너지 효과를 창출할 것으로 예상된다.

버라이즌은 올해 첫 9개월 동안 배당금 88억 달러와 자사주 매입 40억 달러를 포함해 총 128억 달러를 주주에게 환원했다. 경영진은 2026년 전체로 최대 45억 달러 규모의 자사주 매입 전망을 유지하고 있다.

AI 커넥트

버라이즌은 지난 분기 공개한 구글과의 계약에 이어 아마존웹서비스(AWS)와 20억 달러 이상 규모의 다크 파이버 계약을 체결했다고 발표했다. 현재까지 체결된 AI 커넥트 수주 계약 총액은 약 40억 달러에 달하며, 이에는 초기 엣지 컴퓨팅 계약 기간 동안 기대되는 수억 달러의 매출이 포함된다.

경영진은 해당 계약들이 매력적인 마진율을 제공하며, 성과 연동형으로 소폭의 추가 자본만 요구되는 장기 계약이라고 설명했다. 매출 기여는 2027년부터 시작될 예정이다.

경영진 가이던스

경영진은 또한 4분기에 플러스의 후불 계정 성장을 예상하며, 2027년 중 목표 레버리지 범위를 달성하기 위한 궤도를 유지하고 있다고 밝혔다.

리스크 및 주요 점검 사항

• 낮은 기기 교체 수량이 단말기 매출에 부담을 주고 있으며, 경영진은 이 추세가 4분기에도 이어질 것으로 예상하고 있다.
• 버라이즌은 FWA 판매에 더 선별적으로 접근하고 있다. 경영진은 이용 가능한 속도가 특정 고객층의 요구 사항을 충족하지 못하는 지역에서는 해당 서비스를 제공하지 않을 것이라고 밝혔다.
• AI 커넥트 계약은 고객별 맞춤형으로 체결되며, 재무적 기여는 2027년까지 시작되지 않을 것으로 예상된다. 관련 자본 지출은 수주된 수요에 연동될 예정이다.
• 경영진은 스페이스X(SpaceX)의 지상 이동통신망 구축 가능성을 장기적인 경쟁 이슈로 보고 있다. 완전한 구축까지 최소 4~6년이 걸릴 것으로 추정했으며, 위성 사업자에 대한 MVNO(알뜰폰) 계약 제공 가능성은 일축했다.
• 경영진에 따르면 상위 C-밴드 주파수 정리에는 4~5년이 걸릴 수 있으며, 별도의 장비가 필요할 것이라고 한다.

애널리스트 Q&A 주요 내용

후불 가입자 성장 및 가격 책정: 경영진은 심플리시티(Simplicity), 버라이즌 원(Verizon One) 및 로열티 프로그램이 공짜 회선이나 과도한 보조금 없이도 계정 및 회선 성장을 뒷받침하고 있다고 밝혔다. 버라이즌은 타깃 가격 인상 가능성을 보고 있으나, 대니얼 슐만(Daniel Schulman) CEO는 추가적인 고객 가치가 수반될 때만 요금을 인상해야 한다고 전했다.

AI 커넥트 수익성: 경영진은 다크 파이버, 릿 파이버(Lit Fiber) 및 엣지 컴퓨팅 전반에 걸쳐 예상을 뛰어넘는 강력한 수요가 발생하고 있다고 보고했다. 회사는 매력적인 마진율을 기대하고 있으며, 2026년 설비투자 예산 범위에 변동이 없고 2027년에도 성과 연동형 AI 커넥트 자본 지출만 소폭 발생할 것으로 예상하고 있다.

고정무선접속(FWA) 전략: 버라이즌은 2028년까지 800만~900만 명의 FWA 가입자를 확보하겠다는 목표에 대해 자신감을 유지하고 있으며, 새로운 고속 밀리미터파 상품이 이 수준을 넘어서는 성장을 지원할 수 있다고 밝혔다. 도입은 2026년 4분기에 시작되어 2027년 이후 본격적으로 확대될 예정이다.

에이전틱 AI: 경영진은 AI 에이전트가 데이터 트래픽을 증가시키고 새로운 요금제, 고객 서비스, 로열티 애플리케이션 및 네트워크 기반 상품 개발의 기회를 창출할 것으로 기대하고 있다. 또한 승인되지 않거나 사기성 있는 에이전트 활동으로부터 고객을 보호할 필요성이 있다고 강조했다.

실적발표 콘퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, and welcome to Verizon's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded.

I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Treasurer and Head of Investor Relations.

Colleen Ostrowski

Thanks, Brad. Good morning, and welcome to our third quarter 2026 earnings call. I'm Colleen Ostrowski, and on the call with me this morning are our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO. .

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings.

This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

With that, I'll turn it over to Dan.

Daniel Schulman

Thank you, Colleen, and good morning, everyone. Thanks for joining us. It's been just over a year since I had the privilege to become the CEO of Verizon. As I reflect on the past 12 months, I'm incredibly proud of the Verizon team. We made bold decisions, we dramatically turned up our collective intensity, we put our customers front and center, and we vowed to reclaim our market leadership and play to win. We have accomplished a lot, and today's Verizon is in a fundamentally better position operationally, financially and competitively.

Q3 was another proof point that this is a structurally different Verizon. Our transformation has taken root and our results show it. In the third quarter, we delivered significantly improved performance across almost all of our key metrics. Our postpaid phone net additions were up 820% year-over-year to 406,000, our strongest Q3 in 5 years. Importantly, we also delivered 137,000 postpaid net account additions, our best quarterly net account performance in over a decade.

This is growth that pays. Every new line we added delivered revenue. There were no free lines. We now expect our postpaid phone net adds for 2026 to be 1.1 million to 1.2 million, more than 3x last year's result.

Overall, postpaid phone churn was 94 basis points, an improvement of 4 basis points year-over-year, while consumer postpaid phone churn was 87 basis points, also down 4 basis points from last year.

Year-over-year, our Q3 promotional cost of acquisition and retention once again declined, acquisition by 41% and retention by 30%.

In broadband, we delivered 314,000 net adds, and our mix is continuing to shift towards fiber, which now makes up nearly half of our broadband net adds. That is a deliberate choice we have made. Putting customers at the center of every decision we make has changed how we go to market and what we are willing to sell. Our operating philosophy is to deliver the connectivity experience that each customer segment demands, not simply the network and technologies we happen to have available.

Between fiber and FWA, we have the assets to deliver great value in broadband. But it also demands a more sophisticated, segmented approach to FWA. Where we can't deliver the speed a particular segment of customers expect from Verizon, we won't sell it. We began to implement that philosophy earlier this quarter. And as I told the team, we should never drive for a net add metric that runs counter to our customer-first philosophy.

I'm very proud that our product and network teams have responded to our customers' need for greater FWA speed. Using our millimeter wave spectrum, we have developed an innovative solution that will enable us to deliver a 1 gig FWA product in metro areas across the country, complementing our fiber belts. Over the medium term, it is our goal to substantially increase the number of premises we can serve with 1 gig of speed by an incremental 10 million to 15 million through FWA, and that is over and above our 40 million to 50 million fiber build. We will begin to scale our new high-speed FWA service beginning this quarter and throughout 2027 and beyond in order to deploy the enhanced capabilities and performance our customers expect from us.

Our 1,700 megahertz of millimeter wave spectrum has suddenly become a differentiated and competitive advantage. And it also has a dual benefit in that it will create substantial incremental efficiencies and capacity in our existing C-band spectrum. This is a technological breakthrough for us, with significant positive implications.

In addition to strong operational metrics, we also had a strong quarter from a financial perspective. Mobility and broadband service revenue grew 2.9%, a further improvement from the 2.8% we delivered in Q2 and the 1.6% we delivered in Q1. More importantly, we expect that Q4 mobility and broadband service revenue growth will accelerate to approximately 4%. Wireless service revenue once again improved sequentially, and we expect to see year-over-year growth in Q4.

Our Q3 adjusted EPS of $1.31 grew 8% year-over-year, and we now expect our 2026 full year adjusted EPS growth to be 7% to 7.5%, up from our previous range of 6% to 7%.

Free cash flow of $7.8 billion was our highest quarterly free cash flow since 2020, growing more than 12% year-over-year in Q3. Consequently, we are raising our full year guidance for free cash flow growth to approach 12%, up from our previous guidance of 9% to 10%. We anticipate our full year free cash flow will also be our highest total since 2020.

To summarize, this quarter, we delivered our strongest third quarter line and account growth in years at our lowest cost to acquire and retain in more than 3 years. Our mobility and broadband service revenue growth continues to accelerate, and our free cash flow and adjusted EPS continue to grow. This is high-quality growth delivered in a fiscally responsible manner. We are not buying customers. We are winning them on revenue-positive terms and keeping them longer.

When you compound stronger net adds with net account growth, sequential [ ARPA ] growth, structurally lower churn and healthier unit economics, you get exactly the kind of operating leverage you're seeing in our adjusted EBITDA, adjusted EPS and free cash flow this quarter and in our raised full year guidance.

Let me spend a moment on a few key strategic initiatives. First, the customer value proposition we launched in mid-June continues to deliver beyond our expectations. Simplicity, Verizon One and our loyalty program are resonating with our customers. Our loyalty program enrollment is scaling quickly across our base, and the customer feedback data, whether it be Net Promoter Score, overall customer satisfaction, or first call resolution is moving in the right direction on every dimension we track. All of our extensive efforts to focus on the end-to-end customer experience are paying off and showing up in our year-over-year improvements in our churn rate, our increasing postpaid phone net adds and accounts, and the simultaneous reduction in our cost to acquire and retain customers. This is a fundamentally different financial and operational model than in years past.

Second, convergence continues to compound. Our Frontier integration remains ahead of plan. Postpaid phone customers are attaching our broadband solutions, and our broadband customers are attaching postpaid phone service, with both cohorts churning materially less than single product customers. And we are seeing over 55% of our new fiber broadband customers take 1 gig or more download speeds, driving significant incremental ARPA and customer satisfaction.

In Q3, our overall broadband ARPU increased year-over-year. We continue to anticipate our fiber passings will exceed 32 million by year-end. And over the medium term, we remain on track to deliver 40 million to 50 million fiber passings, with an incremental 10 million to 15 million premises covered by our new high-speed FWA technology. Our goal is to have the largest footprint in the country of premises covered with at least 1 gig of download speeds.

Third, our transformation program is on track, and it is delivering results earlier than we initially expected. The 10 transformation work streams we launched earlier in the year are producing tangible improvements for customers and meaningful cost reductions across the business. Our $9 billion cost reduction plan across our OpEx and CapEx remains fully on track, and the operating leverage in this quarter results reflects the pace at which those savings are showing up. We are increasingly running our transformation through our newly completed AI tech stack for applications that help us better serve customers, increase our network performance and drive cost reductions and productivity increases.

Fourth, our network performance continues to improve. Customers notice and they are voting with their wallets by staying. The spectrum we won in the AWS 3 auction is already enhancing our network, and it will enable us to further improve our capabilities and performance in key metro areas as we continue to deploy it.

Finally, AI infrastructure is becoming a real growth driver for Verizon. Today, we announced that we have signed a dark fiber agreement with Amazon Web Services valued at over $2 billion, building on the Google agreement we announced last quarter. These 2 contracts are a clear signal that the largest builders of AI infrastructure in the world are choosing Verizon as a strategic connectivity partner. We now have an active pipeline of additional hyperscalers, neocloud providers and large enterprise clients we are in negotiations to have us supply them with either dark or lit fiber connectivity.

I'm also pleased to report that we are seeing momentum with numerous partners to use our network hubs for AI inference edge computing. And that momentum is already turning into signed deals. Our first long-term contracts are expected to generate hundreds of millions of dollars in revenue over their term. We now have signed contracts for approximately $4 billion. And based on the demand we are seeing, we expect both our fiber and edge computing to add meaningfully to our future growth.

All of these revenues come with attractive margins, and we will begin to see their impact in 2027. These are long-duration contracts with high-quality counterparties that leverage our fiber capabilities and existing real estate assets. The incremental capital required to deliver against these agreements is modest and success-based and tied to defined contracts.

And we've locked in the fiber to deliver. Last month, we announced a multiyear, multibillion dollar agreement with Corning for more than 80 million miles of fiber through 2032, supporting both our fiber broadband expansion and the long-haul backbone that AI hyperscalers need. Taken together, this opportunity significantly extends our addressable market, our revenues and our profits. And we will talk about how it helps to drive our 2027 growth on our next earnings call.

In the past year, we have delivered on our promises and raised the bar every single quarter. Given the strength of the third quarter and our visibility into the fourth, we are raising our annual guidance for postpaid phone net adds, adjusted EPS and free cash flow. And we now expect mobility and broadband service revenue growth to be in the upper half of our 2.5% to 3% range.

We are growing the right way through healthier customer relationships, stronger network performance, disciplined execution, lower costs with revenue-positive net adds and now account growth. In many ways, we have redefined how we compete with a new business model for the mobile industry. When we put our customers front and center, the aperture for growth at Verizon opens substantially.

We believe that the momentum we are seeing in Q3 will continue. Our leading indicators: churn, net adds, customer satisfaction, network performance, broadband cross-sell, cost-out execution and our hyperscaler pipeline all point in the same positive direction.

This is a multiyear story, and we are just getting started. We have not yet captured the full multiyear benefit of the $9 billion cost transformation. We have not yet fully scaled our new consumer value proposition. We have not yet begun to recognize significant revenue from our AI Connect business. And we have meaningful additional capacity to return capital to shareholders through both our growing dividend and incremental buybacks. Each of those is a tailwind into 2027, and we look forward to sharing our 2027 outlook with you at our next earnings call.

I'd like to thank all of our employees. Your efforts to satisfy our customers are inspiring. The customer-first mindset, the operational rigor and the urgency you are bringing every day, that is what is showing up in our results.

And to our shareholders, we are hyper-focused on earning your confidence with continued execution. Over the past year, we have delivered a step-function improvement in our competitive positioning and our financial profile. And we believe the trajectory from here is even more compelling.

And with that, let me turn the call over to Tony.

Anthony Skiadas

Thanks, Dan, and good morning. Our third quarter represents another key milestone in our transformation as we continue to see the benefits from our efforts reflected in our operational and financial results. This starts with our significantly improved performance in both postpaid phone and postpaid account net adds. Growing both lines and accounts is important to us, and we delivered our best account growth in over a decade.

Postpaid phone net adds are almost 900,000 better than in the same period last year, with broad-based improvement across our Consumer and Business segments. This gives us significant flexibility to deliver on our increased guidance of 1.1 million to 1.2 million postpaid phone net adds for the full year, and do it in a fiscally responsible manner. Continuing our momentum from the third quarter, we also expect to have positive account growth in the fourth quarter.

Our investments in the customer experience and innovation are working. Customers love our Simplicity plan. We are writing high-quality business, and we're pleased with how it's driving both account and [ phone gross ] adds. This successful launch delivered 266,000 consumer postpaid phone net adds in the period. This represents our best third quarter performance in 5 years.

The strong uptake of Simplicity enable us to accelerate our plan for volume growth in a meaningfully more cost-effective way compared to the more seasonally aggressive offers that we've historically relied on. In fact, our cost of acquisition in the third quarter declined 41% year-over-year. The subsidy-free, flexible and transparent nature of Simplicity has allowed us to win customers in a financially disciplined manner.

We are also winning across customer groups where we have historically under-indexed. We also had solid performance in mobility for Business with 140,000 net adds in the period. Enterprise and small Business customers continue to have strong demand in the period, and we returned to growth in the public sector. Together with our lower cost of acquisition, we are reducing churn while spending less to win and keep customers.

For the second quarter in a row, we drove year-over-year improvements in retention with the overall cost of retention declining by 30%. Our continued focus on micro segmentation our disciplined approach to upgrades and our customer-first focus all contributed to this result. This approach contributed to lower third quarter upgrade volumes year-over-year and, consequently, lower equipment revenue. Notably, upgrade volumes were down over 20% from the prior year. Additionally, with the success of Simplicity and our focus on giving more choice to customers, we expect the trend of lower upgrades to continue in the fourth quarter.

In broadband, we continue to take share and we've now added over 1 million customers year-to-date. Similar to mobility, we're taking steps to improve the overall customer experience, including simplifying our fiber pricing. We are looking to compete more on our value proposition and less on promotions.

Our third quarter fiber net adds reflect sustained demand for our products while also driving towards better customer lifetime values and margin performance. Our fiber build is on track and we continue to expect to end the year with over 32 million fiber passings. We continue to see a shift in the net add mix between fiber and fixed wireless access. We are focused on growing our FWA base and further segmenting the market. We see opportunity to meet the rise of AI-based applications and are bringing gigabit speeds to more and more consumers and businesses. We are scaling our MDU program, which will enable us to deliver fiber-like speeds over an FWA connection.

Overall, our operational results continue to outpace our expectations. We are very pleased to have added nearly 1.7 million mobility plus broadband subscribers in the first 9 months of the year and are confident that we will finish 2026 strong.

The improvements in our volumes in the third quarter are reflected in our financial results. The benefits of providing better business and cost savings efforts continue to drive adjusted EPS growth and strong free cash flow generation. Additionally, in the quarter, we saw our mobility and broadband service revenue growth improve as volumes continue to scale and promo amortization headwinds moderate.

Total revenue for the third quarter was $34.3 billion, up 1.5% year-over-year. Similar to last quarter, mobility and broadband service revenue growth of 2.9% was offset by lower equipment revenue, which was down 9% from the prior year as we drove significantly lower upgrade volumes. Additionally, wireless service revenue was just over $20.9 billion. We continue to expect to return to wireless service revenue growth in the fourth quarter.

Our improving revenue profile and cost efficiency work continues to drive strong profitability. Our third quarter adjusted EBITDA was $13.8 billion, up 8% year-over-year. Our adjusted EBITDA margin of 40.2%, up 240 basis points year-over-year, is our highest reported and demonstrates the power of our business transformation. We saw improvements in both Consumer and Business as we continued to write profitable growth.

We are also continuing to make great progress on our $5 billion operating cost efficiency program and expect to meet our goal for this year. Our efforts on cost of acquisition and retention drove our lowest net equipment subsidy in 2 years. We are also making meaningful strides on network modernization, copper decommissioning and advertising and marketing spend to optimize our expense profile. As we look ahead to 2027, we expect to drive further efficiency gains in our cost structure. The Frontier integration is also on track to deliver over $1 billion in run rate operating cost synergies by 2028.

Our third quarter adjusted EPS of $1.31 was up 8.3% year-over-year and reflects our continued progress on profitable growth. We now expect adjusted EPS to grow 7% to 7.5% for the full year.

As mentioned, our cash flow generation remained very strong in the period. Cash flow from operations was $29.9 billion for the first 9 months of the year, up over $1.9 billion or nearly 7% year-over-year. We continue to benefit from working capital improvements due to our ongoing cost efficiency work as well as lower upgrades.

Capital expenditures were $11.9 billion through the end of the third quarter. We are on track to meet our full year guide of $16 billion to $16.5 billion inclusive of success-based capital related to AI Connect.

The net of these resulted in free cash flow of $18 billion, up 14.3% for the first 9 months of the year. We expect this to be an industry-leading result, and it represents both the strength of our year-to-date results and the operational momentum of the business. With this strong result and the underlying performance of the business, we are now raising our free cash flow guidance to approach 12% growth for the full year. The strength of our cash flow allows us to execute on all aspects of our capital allocation framework, which remains unchanged. Our first priority continues to be investing in the business, and we remain on track with our mobility and fiber builds. Further, customers are already realizing the network performance enhancements being delivered by the AWS 3 spectrum licenses we won during FCC Auction 113.

We've also continued to execute on our deleveraging plan in the period. Our net unsecured debt to consolidated adjusted EBITDA ratio at the end of the quarter was 2.3x, which represents a 0.2x improvement from the prior quarter. We remain on track to reach our target leverage range during the 2027 time frame.

Lastly, year-to-date, we've returned $12.8 billion of capital to shareholders, up 49% year-over-year. This includes $8.8 billion of dividends and $4 billion of share repurchases. We remain committed to growing the dividend and delivering enhanced returns to our shareholders through share repurchases. We continue to expect to repurchase up to $4.5 billion for the full year.

To summarize, our third quarter results demonstrate our continued progress in delivering for our customers and our shareholders. Our transformation continues to progress, and we have good momentum heading into the fourth quarter and beyond. We've added nearly 1.7 million mobility and broadband subscribers this year, a major improvement year-over-year. We're driving improved retention. We're drastically reducing our cost of acquisition and cost of retention. We're driving some of the best account growth we've seen in years, and we're doing all of this while producing record-high margins and strong free cash flow.

We continue to execute on all 4 pillars of our capital allocation framework, delivering improved shareholder returns, while investing in the business to ensure our network excellence. And we are well positioned to capture future growth opportunities, including within our AI Connect business.

Our plan is working, customers are responding positively, and we're driving meaningful returns for our shareholders. We're pleased with the progress we've made, and there's more to call. We are playing to win.

With that, I will now hand the call over to Colleen to take your questions.

Colleen Ostrowski

Thank you, Tony. Brad, we are now ready to take questions. As a reminder, we would ask you to please limit yourself to one question. .

Operator

[Operator Instructions] And the first question will come from John Hodulik of UBS.

질의응답

John Hodulik

Can we talk about pricing and volumes in the postpaid market and continue with that commentary? It looks like you've got some nice momentum on the volume side, both from accounts and gross adds. Can that continue as we look out into '27? And can you talk about what's resonating with customers that you're seeing such strong demand?

And then on the pricing side, I think you guys have talked about some potential room for targeted price increases as churn came down. Can you just talk about your overall view on sort of pricing power in the industry?

Daniel Schulman

John, it's Dan. We obviously had a good strong quarter on both lines and accounts. That's the first time we've had that kind of account growth in over a decade. But the thing that I'm most proud about in the quarter is kind of the way that we did it. I always tell the team that our business model is a multivariable equation, that solving for just one variable is insufficient and it's not acceptable. And net adds are easy if your cost of acquisition goes way up and you give away free lines.

I don't consider free lines to even be net adds. I think they're churn waiting to happen. And this quarter, if we operated in the same way that we did a year ago, we could do multiple hundreds of thousands more net adds, if you give away free lines and free phones. That's why I'm so proud of the Q3 results, because not only were our postpaid net adds up 9-fold from last year -- in fact, when we presented that to the Board, they questioned whether that was a typo or not. And our postpaid net accounts, best in a decade.

But the quality of all those were exactly what we wanted. No free lines. Every single line and account came with revenue. And the cost to acquire those net accounts and net lines were down 41%. Postpaid churn continues to come down, it's down 4 points. I think we can continue to do year-over-year declines as I look ahead and I think we can even do better than where we are. But cost of retention was also down 30%. And if you remember, last year, churn rose every single quarter.

And I said a year ago that we were no longer going to be prey, that we were going to stop losing market share, and that was true this quarter. And we did all of that in what I think was a very fiscally responsible manner. I mean we're competing the right way to win in the market. We aren't competing on promotions or free phones or subsidies, which, by the way, to me, gives no one in the market any competitive advantage. Anybody launches something against us, we can respond in 2 hours. And if somebody tries to hit us, we hit back harder. There's no competitive advantage gained.

The way to gain competitive advantage is to make sure that you look at your overall end-to-end customer experience, your value proposition, the strength of your network. Because there, you can create sustainable and lasting competitive advantage. And clearly, our value proposition is resonating with our customers. Simplicity, Verizon One, our loyalty plan, as Tony said in his remarks, our customers love it, and we're seeing it in all of our results.

What I really like about it is for that segment of the market, it's ARPA accretive. And as we look ahead, we expect to see net account growth in Q4 as well.

In terms of pricing, I've always said like, I'm not against taking up pricing as long as we add value to that. In the past, we took up pricing without adding any value to customers. And eventually, that comes back to haunt you. Your churn starts to go up, you lose the trust of your customers. We've added a tremendous amount of value in the last year, and there's potentially room for us to adjust that price-to-value equation by increasing pricing as well. I think we're in a place where we can start to think about that.

Anthony Skiadas

John, just to add a couple of things. Our gross adds were up 11% in the quarter, and that's driven by new to Verizon. And Simplicity being subsidy-free and transparent for customers, as Dan mentioned, allowed us to win a fiscally responsible way. And across segments where we've under-indexed, for example, in single-line and 2-line accounts, we performed extremely well.

And we also delivered very strong margins in the quarter as well. Our EBITDA margin was over 40%, 40.2%, and our reported EBITDA was the highest that we've reported. So we're really proud of that and doing it in a responsible way.

Operator

The next question comes from Frank Louthan of Raymond James.

And we've had no response from Frank. We'll move on to Michael Ng of Goldman Sachs.

Michael Ng

I just had 2 on Verizon AI Connect. First, great to see the momentum in that business. Could you talk a little bit more about the pipeline and the opportunity for the future hyperscale and neocloud deals that you talked about in prepared remarks for both distributed compute, but also edge?

And then second, anything you could share as it relates to the details of these deals? For instance, how long are the typical deal wins? And anything you could share as it relates to the expected cash margins?

Daniel Schulman

Yes, Mike. I'll start off and then maybe Tony can add. I guess the way I would put it is AI Connect is a real business for us and a tremendous opportunity, and we're seeing that momentum. Customer demand across dark fiber, lit fiber or edge compute locations is exceptionally strong. I mean, obviously, it represents a significant growth opportunity for us and a large new and it's a rapidly growing TAM for us, addressable market.

As I mentioned, we already have approximately $4 billion of signed deals, and we're just getting started on that. And that includes hundreds of millions of dollars of revenues from our edge computing locations, and we're just scratching the surface there. Obviously, with the explosion of agents right now, the need for distributed inference computing, move from GPUs to CPUs, like the assets we have for that edge computing are exactly in the right place, and we're seeing a ton of demand for what are scarce assets.

From a financial point of view, these revenues come with attractive margins because of the demand and the scarcity of that, and we will begin to see their impact in 2027. There's no change to our 2026 CapEx envelope. And as I said in my remarks, we'll see some modest success-based CapEx associated with AI Connect in 2027.

We are clearly an attractive option and partner for the most demanding of customers. We know how to build networks. We have assets in place. We are amongst, if not the best-in-class, in terms of service and performance. We have a solid balance sheet. And we now have plenty of supply because fiber itself is a scarce commodity as well. We're obviously really pleased to be partnering with Google and Amazon and others. And this is going to be an exciting new growth vector for us over the years to come.

Anthony Skiadas

Yes. And just to add to that, on your question on the deals themselves, the deals are very customer specific. So no 2 deals are alike. So it's very much to customer specifications. As Dan mentioned, we're very happy with the Amazon deal that we announced this morning.

And on the Google deal, we've already -- we're already processing orders for fiber, so we're moving along there. And as Dan mentioned, these are very good margin deals for us, and they'll start layering into the results in 2027. And it's growth on top of our core business as well, which is really important for us, and we're really excited about the potential.

Operator

The next question will come from Michael Rollins of Citi.

Michael Rollins

So I'm curious if you could discuss your latest thoughts on the potential impacts from a possible LEO and Starlink entry into the core mobile business. And if there's any developments on how you're looking at strategic alliances with LEO constellations in the category and whether or not you would offer an MVNO to LEO constellations, including Starlink.

Daniel Schulman

Mike, I'll take that. First of all, I appreciate the question and the concern. I'll just start off by saying my operating philosophy in general is to be very thoughtful, the analytic and to never take anything for granted. I always have my eyes wide open. Clearly, the tech and the wireless landscape is rapidly evolving, and we need to rapidly evolve along with that.

That's why I've been so demanding from everyone at Verizon. I mean I just don't want us to get incrementally better. I want us to leapfrog, I want us to think about not improving by 10%, which is great, but that we improve by 10x. How do we do that in months, not years? And I'm pushing hard on everyone. So that we can shape the market and not react to it. And I want to be sure that we're always in a position to play to win.

I also operate under the assumption that everything SpaceX says they will do, they will do, and that they will execute flawlessly. That's my operating assumption on it. I think assume anything else makes no sense from my perspective. And everything that we've seen so far, all of their announcements, everything we're hearing in the market, and I'll talk about that in just a second, is, so far, the path that we've basically predicted that they would do. We always knew that they needed a terrestrial network to have any chance at providing a competitive service. I don't really need to rereview the satellite beam physics, but just suffice it to say that without a terrestrial network, their addressable market for broadband services is relatively small. It's in very rural areas. And their service just can't compete with the terrestrial network. In suburban and urban areas where like 98% of our revenues are, we're somewhere between 100 to 1,000 times more efficient than they are. And when you think about wireless, it's even more difficult with them to compete on a satellite basis.

So I think that SpaceX realizes this, and they're exploring a potential path to creating a terrestrial network. It's not surprising. They said it on their call. So I think we should take it quite seriously. And from what we see and what we hear in the market, because there are no secrets in the market, we know exactly what they're going to do. We know what their RFIs are. We know who they're talking to on towers. We know who they're talking to put terrestrial equipment in place. Like inside the industry, we know exactly what they're thinking about doing it.

And if they build a terrestrial network, it will basically look and feel like every other network, right? There's no magic wand. There's no secret sauce. There's no shortcut. There's no radically lower structural cost advantage. If they build one, they're going to look at 65,000 to 80,000 macro sites. They're going to need backhaul, some combination of fiber and maybe some satellite. They're going to need RAN. They're going to need a tremendous amount of spectrum. And assuming that's the case and assuming they try to go do that, it's going to take a minimum of 4 to 6 years to fully build that out. It's going to cost hundreds and hundreds of billions of dollars, I assume somewhere between $300 billion and $0.5 trillion over the next, like, 7 or 8 years. And then they need to build retail, customer service, back-office systems, et cetera. And all of that gets them basically the same network and saving capabilities and same cost structure as what we have today.

And then sometime over the next 4 to 6 years, they have the possibility of becoming the sixth, not the fourth, the sixth competitor in the market. And frankly, at that point, welcome the opportunity to compete against them. It's very hard to throw a punch against something that doesn't exist. But once they come into the market, we will be ferociously competitive.

We already have America's best network in terms of coverage, performance and reliability. We already compete against 3. I mean 2 of our competitors out there offer free wireless service, and we are not only competing extremely well, but we're now holding share and beginning to gain share. And you can sure, over these next 3 to 5 years or 6 years, we're not going to be standing still.

I mean 4 to 5 years from now, we will be 2 to 3 generations better than where we are today. We'll have high-speed broadband, gig-plus coverage across the country with our millimeter wave, which has now become this tremendous advantage for us with 1,700 megahertz of millimeter wave, 2x that of any of our competitors. We'll put that and deploy that we are ahead of most people and already experimenting with what 6G applications will look like. We are going to have a host of AI-enabled new value propositions using our data, our information, our AI tech stack to create new products, new services to be able to play into edge computing and all of the applications around that, whether it be robotics or agents.

In 3 to 5 years, most of our base will be fully bundled and we will be massively more efficient and massively more optimized in terms of our cost structure. And of course, AI Connect is going to be a major business for us.

So we are more than ready to compete on our network, on our value prop on our service and much more. And there's no reason to think that with the same network, same cost structure, that we won't be very successful by continuing to grow our business and compete strongly.

I do think there is a role for satellite, for sure. In remote areas, it's a great service for those customers. And I do think there are ways that we can work together, either directly or through our JV, with satellite providers, to provide a complementary service and a differentiated value proposition.

I will say, and I'll repeat it again, that there are no back doors to any of our MVNO agreements. And I see absolutely no benefit whatsoever to extending an MVNO deal to any satellite provider. I don't buy into the idea of this prisoner's dilemma. That's ridiculous. There is no benefit to Verizon extending an MVNO deal. And we look forward to being able in 4 to 6 years to finally punch back, and we'll punch back hard when that happens.

Operator

The next question will come from Sean Diffley of Morgan Stanley.

Sean Diffley

That was very clear, Dan. I wanted to hear your thoughts on where you see fixed wireless fitting into the broader equation in the next 3 to 5 years. You mentioned hit some speed standard issues, I guess, intra quarter. Maybe just double-click on that. Walk us through what those are. You mentioned a kind of 1 gig fixed wireless product in metros, if you could elaborate? And do you guys have enough spectrum to scale where you want to be in this business?

Daniel Schulman

Yes. Okay. Those are a lot of questions. Let me try and get as many of them as I can. First of all, on broadband, fixed wireless access and conversion. So we continue to take share. We did 314,000 FWA and fiber net adds. We've done over 1 million year-to-date. We have 17.4 million broadband subs in our base. We have strong ARPUs. We actually have growing ARPUs in our broadband service, were up year-over-year in Q3. And we're seeing no discernible impact from any alternative providers.

So broadband and conversions are going to be key priorities for us. There will be substantial growth drivers in both the short and the medium term. The strong consumer demand, really pleased with the uptake of Verizon One. And increasing demand for higher download speeds. I think that will just continue to increase with what's happening with AI.

And I would just point out, when I was talking about satellite, their physics get even worse as you have higher and higher broadband speeds to serve. The congestion happens much quicker at that -- at those levels. So there are 2 implications that became very clear to me. One is we need to be way more sophisticated and segmented in our go-to-market approach. Like I want to assure we sell consumers the right service to meet their needs versus selling what we have available in our network. If a customer needs 1 gig of speed and we can only offer them 300 meg, we shouldn't sell the service. It's just going to be something that disappoints the customer. And a customer need is always going to supersede any internal metric, from my perspective.

And then the second implication was like we need a much wider footprint in which we can provide 1 gig or more of speed. And that really was the genesis of our millimeter wave solution. How can we take this massive spectrum holding that we have, 1,700 megahertz of spectrum, that was largely underutilized, and turn it into a competitive and differentiated advantage for us? Not just against competitors, but in serving our customers as well.

And our goal now with this new service, and we trialed it and now we're having operational success with it, we'll start to roll it out this quarter and into '27 and beyond, is to have the nation's largest high-speed footprint with a medium-term target of 50 million to 65 million prems passed with 1 gig or more of download speed. People ask me like, are you still comfortable with the 8 million to 9 million of FWA by 2028? The answer would be absolutely, we are. But the truth of the matter is now that we have high-speed FWA offer, we'll go well beyond that now, because we have a lot more capabilities, we have a lot more capacity to do that.

And clearly, another obvious ancillary benefit is it makes our entire network more efficient. It offloads C-band capacity. It gives our network more capacity and runway. And it significantly alters our spectrum positioning. And by the way, that rollout, which will start in Q4 and, again, do it market by market in '27 and beyond, is much more cost efficient than rolling out fiber, significantly so. There's no right of way, no digging, no permitting.

And so we would expect to see our broadband pickup throughout 2027 and beyond on both fiber and a revamped high-speed FWA service. I think you'll see broadband convergence be a substantial growth driver for us. And these new solutions provide technological competitive advantage that others don't have.

And when it comes to like spectrum in general, I think there's a lot of thought around spectrum, obviously, a lot of speculation. You got upper C-band coming in the first half of next year. That's 160 megahertz speculation. Will SpaceX be a part of that or not? Remember on that, that that will take 4 to 5 years to clear. And you need different equipment associated with that. So even if SpaceX, and I'm assuming they bid in it. I'm not sure one way or another what we will do, given our new spectrum position, but say they get some spectrum, they can't deploy that for 4 or 5 years. I mean it's just -- it is spectrum that is, I think, reasonable spectrum, but it takes quite some time to clear.

And we'll evaluate our spectrum needs. We always look at build versus buy. We look at densification alternatives. I'm really pleased with the network efficiencies that our guys have done in terms of improving our network capacity. And now we have the ability to put our millimeter wave spectrum to use. I mean it's early days, but it is a technological breakthrough, and it's very exciting. We have basically 2x that of our competitors. I like the way our millimeter wave spectrum is laid out. It's a real competitive advantage. It will offload C-band. And it reframes the way that we're thinking about our spectrum needs.

The good news is, as Tony has pointed out, is we have plenty of flexibility. We have very strong free cash flow. Our balance sheet is in really good shape. We'll hit our leverage targets early next year. And our priority is to invest in our business, then keep growth in our dividend per share, pay down debt, return to our leverage ratios and return capital to shareholders.

I think at the end of the day, as I think about all the things the team has done, all the work they've done around creating some innovative solutions and capabilities, is all of a sudden our spectrum position is suddenly in a much better place than we expected and there is a robust pipeline of upcoming spectrum auctions beyond '27 that give us additional flexibility.

So all in all, the picture has changed quite a bit for us. We have a lot of flexibility. And we'll be thoughtful about how we approach the market.

Colleen Ostrowski

Brad, I believe we have time to take one more question.

Operator

Your final question will come from Greg Williams of TD Cowen.

Gregory Williams

Just had one on the rise of agentic AI and the talk about use and potential impacts on ARPU?

Daniel Schulman

I'll take that one. I guess. Look, clearly, we are entering into the age of AI, of agents, I think AGI, depends on who you talk to, is 1 to 3 years away. I mean it's clearly upon us. Quantum hitting shortly thereafter, robotics through that. All of these things are going to fundamentally change the face and nature of every single business.

And I'm pretty excited about the opportunity that that affords us. We have an opportunity to dramatically improve our productivity and our cost structure. We are already utilizing AI to increase customer satisfaction, whether that be fixing issues before they even pop up to customers, and our network through our customer service. It's going to open tremendous new TAMs for us. AI Connect, talking in 6 months, we've already signed up almost $4 billion of signed contracts. There are going to be all sorts of new value props that we develop using our data, our network infrastructure, our quite extensive customer relationships and our trusted brand. And so you're going to see a very different Verizon going forward with all sorts of new adjacencies opening up for us.

Look, I think as I look out over the next couple of years, there'll be something like 8.5 billion people in the world, but I think there could be at least 100 billion agents. There is going to be an explosion in data traffic, and our network will become a scarce and crucial asset. And we will price it as such. You'll see different pricing plans. You'll see us take advantage of our national fiber network backbone to be competitively differentiated.

Consumers and agents will need a trusted and safe and secure environment to protect against fraud and to protect their privacy. And we'll be sure that we won't allow agents to access our platforms unless we're 100% certain that it's truly a customer and not a rogue agent, and that the purchase decisions that that agent is doing are aligned with what a customer is giving them permission to go do so. I do think purchase decisions in wireless are complex. They have to do a lot with coverage and quality, speeds, family plans, perks, loyalties, converged bundles. It's not a straight to straight price comparison.

And I do think that's possibly a huge opportunity for us to deliver agents to our consumers to sell more. You think about our bundles. Our bundles are always better than any stand-alone offer out there. And you can imagine how much more bundles, of how much more subscriptions we could get utilizing agents who can go and find the right password, which is typically a lot people don't change because they don't remember their passwords.

And so I think there's a huge opportunity for us to drive incremental revenues, for us to be able to utilize Verizon dollars, our new loyalty structure with agents so they can go out and purchase things with that. And so overall, I see a tremendous opportunity, and it is something that we are doubling down on to take full advantage of everything going on with agentic commerce, but with AI in general.

I'd say just to wrap up, I think there are really like 3 big takeaways for the quarter. I mean, obviously, our results were really strong for the quarter. And what I'm most pleased about is the momentum that we see as we're going into the fourth quarter. As Tony mentioned, we're off to a strong start. And we have strong momentum going into 2027.

Second thing is that AI Connect is now real. In 6 months, we have $4 billion of signed contracts. It's a large and growing TAM, and we have strong momentum in that.

And finally, this technological breakthrough with millimeter wave is now a real substantial strategic asset and competitive advantage for us, [ and all our ] relative spectrum position has flipped, and our goal there now is to be the largest high-speed provider in the country at the lowest cost. And when I say lowest cost, it's to deploy.

So thank you, everybody, for your time. We appreciate it, and look forward to conversations in the future. Colleen?

Colleen Ostrowski

That's all the time we have. Thank you all for your time today.

Operator

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.