Verizon Lifts Forecast and Signs More Than 2 Billion Dollar AI Deal With AWS

Verizon raised its full year forecast on Monday and signed an AI infrastructure deal worth more than 2 billion dollars with Amazon Web Services. The company now expects to add between 1.1 million and 1.2 million postpaid phone subscribers this year, up from an earlier projection of 750,000 to 1 million.

The raised outlook followed a third quarter in which Verizon added 406,000 monthly bill paying wireless subscribers. That result was well ahead of the 209,439 additions expected by analysts tracked by Visible Alpha. Verizon also raised its full year adjusted earnings per share forecast to 5.04 to 5.06 dollars, from 4.99 to 5.04 dollars earlier.

Subscriber growth leads the quarter

Verizon said it added 137,000 postpaid net accounts in the quarter, which it described as its best performance in more than a decade. It also added 314,000 net broadband connections in the same period. Those gains helped explain the higher full year guidance.

Third quarter profit came in at 5.3 billion dollars, or 1.25 dollars a share, compared with 5.06 billion dollars, or 1.17 dollars a share, a year earlier. Adjusted earnings per share were 1.31 dollars, compared with analyst estimates of 1.27 dollars. Shares of Verizon rose 2.4 percent in premarket trading after the results.

Revenue falls short of estimates

Revenue for the quarter was 34.3 billion dollars, up 1.5 percent from a year earlier but short of analyst estimates of 34.74 billion dollars, according to LSEG data. Mobility and broadband service revenue rose 2.9 percent to 23.5 billion dollars, while equipment revenue declined 9 percent.

Reuters reported that revenue was pressured by lower device upgrade volumes, as customers held on to their phones longer after Verizon began cutting device subsidies. The pattern left service revenue growing while the equipment side of the business shrank.

Verizon also raised its outlook for cash flow. The company now expects cash flow from operations to grow 3.5 to 5.0 percent year over year, up from 2.0 to 4.0 percent, and said free cash flow is expected to approach 12.0 percent growth, up from 9.0 to 10.0 percent.

Fiber deal for AWS data centers

Under the deal with Amazon's cloud unit, Verizon will provide high capacity fiber optic connectivity for AWS data centers. The work is meant to enable faster and more reliable data transfers to support growing AI computing workloads.

The AWS agreement follows a similar move earlier this year. In July, Verizon announced a more than 1 billion dollar agreement with Google to connect data centers using dark fiber. Together, the two deals place Verizon's fiber network inside the build out of data centers run by two of the largest cloud providers.

A year of overhaul under Schulman

The results come a year into chief executive Dan Schulman's tenure. In that time Verizon has pursued a broad overhaul, restructuring operations and simplifying its wireless offerings. In June the company launched its Simplicity plan, with transparent pricing and unlimited data.

Verizon added more postpaid phone subscribers than forecast, lifted its full year guidance for subscribers, earnings and cash flow, and added a large fiber contract tied to AI demand, even as total revenue came in below estimates and equipment revenue fell.