Verizon Q3 2026: 406,000 phone adds and EPS up 6.8%, but revenue per account fell 1.9%

Verizon's third quarter of 2026 had the strongest customer growth it has reported in years. It added 406,000 postpaid phone customers, against 44,000 a year earlier. Revenue rose 1.5% to $34,313 million. Diluted earnings per share (EPS, profit divided by the number of shares) rose 6.8% to $1.25, and adjusted EPS rose 8.3% to $1.31. Management raised its full-year targets for the third quarter running. Under those headlines, the trade-off our Q2 report described is still there. Revenue per postpaid account fell 1.9%, so Verizon is still winning customers on price. Its home-built broadband engine, fixed wireless, grew at its slowest pace in years. And much of the 12.1% jump in free cash flow came from spending $594 million less on the network than a year ago.

This report is written from the earnings release (Exhibit 99.1 to the 8-K filed October 26, 2026). The full 10-Q isn't filed yet, so the line-by-line explanations of segment revenue, including how much came from Frontier, aren't available.

Key figures

A few of these terms need explaining:

• Operating margin is the share of revenue left after the costs of running the business, before interest and tax.
• Adjusted EBITDA is earnings before interest, tax, depreciation and amortization, with one-off items removed. It is a rough measure of the cash profit the operations generate.
• Churn is the share of postpaid phone customers who cancel in a given month.
• ARPA is average monthly service revenue per postpaid account. One account usually covers several lines.

Why profit grew faster than revenue

Total revenue rose only $492 million. Service and other revenue grew $995 million, and equipment revenue fell $503 million. The release says the equipment decline came "primarily from significantly lower upgrade volumes, as the average time customers keep their mobile devices continues to increase, and the company's strategic decision to reduce spending on device subsidies." The upgrade rate, meaning the share of postpaid lines that traded in for a new phone, fell to 2.6% from 3.3%.

Verizon sells phones below cost, so fewer upgrades mean smaller losses. The cost of wireless equipment fell $660 million, more than equipment revenue fell. The loss on equipment (equipment revenue minus equipment cost) narrowed to -$707 million from -$864 million. In Q2 that loss had widened, so this is the first quarter in which the subsidy cuts show up directly in this line. The release says the promotional cost of acquiring a customer fell 41% and the promotional cost of keeping one fell 30%.

Selling, general and administrative expense fell $272 million (-3.5%) to $7,480 million, despite the added Frontier operations. Two cost lines grew. Cost of services rose $402 million (+5.9%). Depreciation and amortization rose $477 million (+10.3%), including $100 million more amortization of intangible assets from acquisitions ($289 million vs $189 million). Both increases are consistent with Frontier's fiber network joining the cost base. Frontier was bought in January 2026, so the year-ago quarter doesn't include it. The net result was operating income up $545 million to $8,650 million, and a margin up 1.2 points to 25.2%.

By segment, Consumer did most of the work. Its operating income rose 5.6% to $8,093 million, with a margin of 30.6% against 29.4%. Business operating income rose 19.4% to $855 million, mainly because its costs fell. Business mobility and broadband service revenue actually slipped 0.8% to $3,713 million. Its "other" revenue (legacy wireline products and fees) rose 10.0% to $2,471 million. The release doesn't explain that increase.

Customer growth: phones up, prepaid and fixed wireless down

The postpaid phone result is strong by Verizon's recent standards. It added 406,000 phones and 137,000 accounts, which the company calls its best account growth in over a decade, and churn improved to 0.94%. Management credits plans like "Simplicity" and a loyalty program used "over heavy subsidies."

Three other numbers point the other way:

• Revenue per account kept falling. ARPA was $168.08, down 1.9% from a year ago and slightly below Q2's $168.35. Accounts are growing, but each one is paying less. The release doesn't split postpaid service revenue, so whether that line is still shrinking (it fell $365 million in Q2) has to wait for the 10-Q.
• Prepaid lost customers. Core prepaid connections fell by 12,000 (+47,000 a year ago), prepaid phones by 52,000, and prepaid churn rose to 3.80% from 3.73%. Some of these customers may have moved to postpaid plans, but the release doesn't say.
• Fixed wireless slowed again. Fixed wireless access (FWA) is home internet delivered over the mobile network. Its net additions fell 39.1% to 159,000, from 261,000 a year ago and 193,000 in Q2. Fiber additions of 155,000 (61,000 a year ago) offset most of that, so total broadband additions were 314,000 against 322,000. The 33.5% rise in total broadband connections to 17.4 million mostly reflects Frontier's existing customers joining the count.

Mobility and broadband service revenue grew 2.9% to about $23.5 billion, up from 2.8% in Q2 and 1.6% in Q1. Consumer's part of that line rose $681 million (+3.6%). In Q2, Frontier's fiber revenue added $712 million to the Consumer segment, more than that quarter's entire increase. If its contribution was similar in Q3, the acquisition again accounts for all of the growth, and Verizon's existing wireless business would have shrunk slightly. This is an inference from the Q2 breakdown. The Q3 figure will be in the 10-Q.

What the headline numbers hide

EPS growth is about two-thirds operations. Pre-tax income rose 4.4% to $6,817 million, less than operating income, because interest expense rose $286 million (+17.2%) to $1,950 million on the debt taken on for Frontier. That costs about $0.05 a share after tax. Two smaller factors lifted EPS. Diluted shares fell 1.7% to 4,161 million from 4,233 million because of buybacks. The effective tax rate fell to 22.0% from 22.5%. Together they explain most of the gap between 4.4% pre-tax growth and 6.8% EPS growth.

The adjusted-vs-reported gap is small and consistent. Adjusted EPS excludes two items, worth $0.06 a share this quarter against $0.04 a year ago. The first is $289 million of amortization on intangible assets from acquisitions ($217 million after tax). The second is $57 million of acquisition and integration costs. There were no severance, write-down or disposal charges this quarter, unlike Q2's $1.81 billion. The amortization recurs every quarter and is growing because of Frontier, so adjusted EPS will keep running a few cents above reported EPS.

Cash conversion is healthy, but part of the free cash flow increase is timing. Q3 operating cash flow of $11,517 million was 2.2 times consolidated net income of $5,320 million. That is normal for a company with $5.1 billion of quarterly depreciation. Operating cash flow grew only 2.2%, though. Most of the free cash flow increase came from capital spending falling to $3,716 million from $4,310 million. Capital spending for the first nine months was $11,926 million. The unchanged full-year range of $16.0 to $16.5 billion therefore implies $4.1 to $4.6 billion in Q4, the heaviest quarter of the year.

Free cash flow excludes spectrum. Spending on wireless licenses was $4,384 million for the nine months against $1,155 million in the first half, so about $3.2 billion went out in Q3. That is the AWS-3 auction payment our Q2 report flagged. It doesn't count against the $7.8 billion of free cash flow. The quarter's dividends ($2,940 million) and buybacks ($500 million), worked out by subtracting first-half figures from nine-month figures, used a smaller share of free cash flow than the headline suggests. Verizon still expects up to $4.5 billion of buybacks for the year, so at most another $500 million in Q4.

Debt fell less than the "net debt" figure suggests. Net unsecured debt fell $5.0 billion during the quarter to $123.7 billion. Unsecured debt itself fell only $376 million, and total debt rose to $166.2 billion from $165.2 billion. The rest came from a $2.7 billion rise in cash to $4.5 billion and a $1.8 billion larger "equity credit" for junior subordinated notes. That credit is a method of counting half of certain hybrid bonds as equity, and Verizon issued more of them. Leverage on Verizon's own measure improved to 2.3 times adjusted EBITDA from 2.5 times in Q2.

One working-capital item to watch. Inventory was $2,775 million, up 13.7% since December, while equipment revenue fell 9%. Net receivables fell 2.7% over the same period. The release gives no reason, and it may be seasonal stocking ahead of the holiday quarter.

On balance the quarter is clean. Operating income (+6.7%) and adjusted EBITDA (+8.0%) grew in line with reported EPS, there were no material one-off items in either quarter, and buybacks plus the lower tax rate added roughly two points to EPS growth rather than creating it.

Takeaway: Verizon's profit growth this quarter came from spending less, not from charging more. Smaller phone subsidies, lower selling costs and $594 million less capital spending drove the gains in margin and cash flow, while revenue per account fell 1.9%. That works as long as customers keep their phones longer and keep joining on cheaper deals. The full-year targets now need Q4 phone additions above Q3's record and a step-up in capital spending at the same time.

Did last time's read hold up?

Our Q2 report named four things to watch in Q3:

• Service revenue growth "approaching 3.0 percent". It held, at 2.9%.
• Price per account under pressure while customers were added. It held. ARPA fell 1.9%, a bigger decline than Q2's 1.4%.
• Whether fixed wireless additions would stop falling. They didn't. They fell to 159,000 from 193,000 in Q2.
• The cash cost of the July spectrum payment. It showed up as roughly $3.2 billion of license spending in Q3, outside free cash flow, as expected.

The adjusted EPS target we called "reachable" was raised again.

Outlook

Verizon raised four of its full-year 2026 targets, compared with what it guided in Q2:

• Postpaid phone net additions: 1.1 to 1.2 million, up from the upper half of 750,000 to 1.0 million.
• Adjusted EPS: $5.04 to $5.06 (7.0% to 7.5% growth), up from $4.99 to $5.04.
• Operating cash flow growth: 3.5% to 5.0%, up from 2.0% to 4.0%.
• Free cash flow: growth approaching 12%, about $22.44 to $22.54 billion, up from 9% to 10%.

Two targets were narrowed or kept. Mobility and broadband service revenue growth is now in the upper half of 2.5% to 3.0%, with about 4.0% in Q4. Capital spending is unchanged at $16.0 to $16.5 billion. The Q2 guidance for wireless service revenue to be "approximately flat" doesn't appear in this release.

The implied fourth quarter is demanding in two ways. With 645,000 postpaid phone additions through September, the new range requires 455,000 to 555,000 in Q4, above the Q3 record. The free cash flow range implies about $4.4 to $4.5 billion of Q4 free cash flow while capital spending rises to $4.1 to $4.6 billion. The adjusted EPS range is narrow ($0.02 wide), which suggests management is confident about the cost side. The question for 2027 is the one Q2 raised. Frontier stops boosting year-over-year growth after January, and ARPA is still falling. Once both happen, Verizon's service revenue growth will depend on its wireless prices stabilizing. The 10-Q, expected around October 30, should show whether postpaid service revenue was still shrinking in Q3.