Why Verizon Stock Climbed Today

The Motley Fool · 1d ago

Key Points

Customer gains and lower costs are driving Verizon's cash flow sharply higher.
AI data centers could light up the wireless leader's dark fiber.
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Shares of Verizon Communications (NYSE: VZ) rose on Friday after the telecom giant highlighted its new AI-fueled expansion plans.

Image source: Verizon Communications.

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Robust subscriber growth and surging free cash flow

Verizon added 184,000 postpaid phone customers in the second quarter, including its biggest Q2 gains in lucrative postpaid consumer accounts in half a decade.

The wireless carrier also added 348,000 broadband accounts, including 193,000 fixed wireless customers and 155,000 fiber clients.

CEO Dan Schulman said Verizon's new flat-rate unlimited mobile plans and bundled offerings are helping it attract and retain subscribers "based on real value rather than subsidized promotions."

Lower customer acquisition costs and churn rates are also boosting Verizon's profit margins and cash flow generation.

The telecom titan's adjusted earnings rose 6.6% to $1.30 per share. Its operating and free cash flow surged 16.3% and 24.4%, respectively, to $10.4 billion and $6.4 billion.

Artificial intelligence could boost Verizon's profits

These solid results prompted Verizon to lift its full-year financial forecast. Management now sees adjusted earnings per share growing by 6% to 7% to between $4.99 and $5.04 in 2026.

During a conference call with analysts, Schulman disclosed that Verizon recently signed a deal with Alphabet's Google valued at more than $1 billion. The search giant will use Verizon's dark fiber -- unused optical infrastructure that's available for lease or purchase -- to connect its AI data centers.

Schulman said that the deal with Google was "just the beginning" of its new AI-focused growth strategy.

"We have other deals that we expect to announce by year-end that, taken together, are expected to be worth multiple billions of dollars in revenue over the next several years," Schulman said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.