Verizon Turns the Corner: AI Infrastructure and Customer Economics Drive a Structural Inflection

Q2 shows accelerating revenue, record EBITDA margin, and a $1B+ dark fiber deal that positions VZ as a key AI infrastructure player.

VZ · Earnings Call · 2026-07-24

The Digital Inflection

Verizon's second quarter earnings marked a watershed moment. After years of flat growth and rising churn, the company delivered accelerating service revenue, record EBITDA margins, and a new multi-billion-dollar AI infrastructure opportunity. As CEO Dan Schulman put it, "we see clear and compelling evidence that our transformation is driving a structural and meaningful inflection in our results." “We are accelerating across every key metric.” — Daniel Schulman, Chief Executive Officer · 2026-07-24 Operational metrics were strong across the board. Postpaid phone net adds of 184,000 improved 193,000 year-over-year, with consumer churn down to 84 basis points—the lowest in years. Broadband net adds reached 348,000, and the company now has over 17.1 million broadband subscribers. Management raised full-year guidance for mobility and broadband service revenue to 2.5%–3% growth and adjusted EPS to 6%–7% growth. broadband service revenue grew 2.8% year-over-year, a clear acceleration from Q1.

AI Infrastructure: The New Growth Engine

The most consequential development is Verizon's pivot into AI infrastructure. Dan announced a $1 billion+ dark fiber agreement with Google and expects additional deals worth multiple billions by year-end. "We are just announcing this partnership with Google for several of our dark fiber routes for well in excess of $1 billion." “We're just announcing this partnership with Google for several of our dark fiber routes for well in excess of $1 billion.” — Daniel Schulman, Chief Executive Officer · 2026-07-24 This is the leading edge of a strategy that leverages Verizon's extensive fiber footprint and central offices for inference edge computing. AI infrastructure is a global theme, and Verizon is now directly positioned to monetize it—a meaningful step beyond its traditional telecom role. This pivot was foreshadowed in prior calls. On the Q1 call, Dan noted, "we are in quite deep discussions right now with hyperscalers with alternative cloud providers, large enterprises to integrate our fiber, both dark and lit and our 5G assets to support their AI infrastructure efforts. And that is the potential for multibillions in revenues." “We are in quite deep discussions right now with hyperscalers with alternative cloud providers.” — Daniel Schulman, Chief Executive Officer · 2026-04-27 The Google deal turns that discussion into concrete revenue, validating the strategy. Meanwhile, the company's new consumer value proposition—loyalty program, Simplicity, and Verizon One—is delivering beyond expectations. Gross adds are 16% above forecasts, and new accounts are up 31%, with early signs of ARPA accretion. new value proposition is a structural repositioning around customer value, designed to drive volume and lower churn. This is a long-term play to improve customer lifetime value, as highlighted in prior years: "My aspiration is I want us to have the lowest churn rate in the industry." “My aspiration is I want us to have the lowest churn rate in the industry.” — Daniel Schulman, Chief Executive Officer · 2025-10-29

Financial Discipline and Capital Allocation

Financially, the company delivered record adjusted EBITDA margin of 40.1% and free cash flow of $6.4 billion in Q2, up 24% year-over-year. Free cash flow (less SBC) has improved from a trough of around $10.7B in 2021 to $11.3B in the latest quarter, with management guiding to 9-10% growth for the full year. The company raised its buyback target to up to $4.5 billion and completed $3.5 billion of repurchases year-to-date. Cash generation is enabling a balanced capital return program while also paying down debt—net unsecured debt to EBITDA improved to 2.5x. However, the balance sheet remains heavily leveraged with effective net cash of -$135.6 billion. Effective net cash has been improving from -$137.9B to -$135.6B over the past two quarters. Interest coverage is 4.2x, manageable but worth watching as the company invests in AI infrastructure.

The build-out of AI infrastructure across the United States is one of the largest capital cycles of our lifetime, and Verizon is uniquely positioned to participate in it.
Daniel Schulman, Chief Executive Officer · 2026-07-24

The stock, up 7.4% in the last 90 days, trades at ~1.5x price-to-revenue, within historical range. With a clear operational inflection and a new growth vector in AI infrastructure, Verizon is executing a strategic pivot that could re-rate the stock over time. The question is whether the company can sustain this momentum while managing its leverage. For now, the evidence suggests a genuine turnaround is underway.