Verizon (VZ)

Telecommunications giant Verizon (NYSE:VZ) announced better-than-expected revenue in Q4 CY2025, with sales up 2% year on year to $36.38 billion. Its non-GAAP profit of $1.09 per share was 3.3% above analysts’ consensus estimates.

Company Overview

Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE:VZ) is a telecom giant providing a range of communications and internet services.

The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.

Competitors in the telecommunications industry include AT&T (NYSE:T), T-Mobile (NASDAQ:TMUS), and Comcast (NASDAQ:CMCSA).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Verizon grew its sales at a weak 1.5% compounded annual growth rate. This fell short of our benchmarks and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Verizon’s annualized revenue growth of 1.6% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Verizon reported modest year-on-year revenue growth of 2% but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not lead to better top-line performance yet.

Verizon’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 21.2% over the last two years. This profitability was lousy for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, Verizon generated an operating margin profit margin of 13.8%, down 7 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Verizon’s flat EPS over the last five years was below its 1.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

In Q4, Verizon reported adjusted EPS of $1.09, down from $1.10 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.3%. Over the next 12 months, Wall Street expects Verizon’s full-year EPS of $4.71 to grow 1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Verizon has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 14.6%, lousy for a consumer discretionary business.

Verizon’s free cash flow clocked in at $4.37 billion in Q4, equivalent to a 12% margin. The company’s cash profitability regressed as it was 3 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts’ consensus estimates show they’re expecting Verizon’s free cash flow margin of 14.6% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Verizon historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.7%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Verizon’s ROIC decreased by 1.4 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Verizon reported $19.05 billion of cash and $181.6 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $50 billion of EBITDA over the last 12 months, we view Verizon’s 3.3× net-debt-to-EBITDA ratio as safe. We also see its $2.99 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Verizon beat analysts’ revenue and EPS expectations this quarter. Zooming out, we think this was a decent quarter. The stock traded up 3.8% to $41.32 immediately following the results.

Updated: January 30, 2026 at 6:45 AM EST

Before investing in or passing on Verizon, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Verizon doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. On top of that, Verizon’s Forecasted free cash flow margin for next year suggests the company will fail to improve its cash conversion, and its .

Verizon’s P/E ratio based on the next 12 months is 8.4x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $47.02 on the company (compared to the current share price of $41.32).