Verizon's EPS Growth Supported by $5B Cost Cuts, 9.8x Multiple
VZ•Verizon trades at 9.8x trailing and 8.7x FY27 earnings despite growing EPS, driven by a $5 billion OpEx reduction program and $25 billion buyback. Year-to-date 14% rally came from Q4 2025 adding 616k postpaid subscribers and Q1 2026 adding 55k via aggressive promotions, pressuring churn.
1. Valuation and EPS Expansion
Verizon shares trade at 9.8x trailing earnings and 8.7x FY27 consensus despite sequential EPS growth. The low multiple reflects market concerns over core wireless growth but underscores the impact of cost measures and buybacks boosting profitability.
2. Subscriber Growth Fueled by Promotions
Year-to-date shares are up 14% after Q4 2025 net adds of 616,000 postpaid phones and a surprise 55,000 in Q1 2026. These gains were driven by aggressive subsidized offers, pushing wireless retail churn up to 0.97%, its highest in years.
3. Cost-Cutting Boosts Profitability
A $5 billion internal OpEx reduction initiative, including headcount cuts and network decommissioning, is lifting margins on flat revenues. Capital expenditures are falling toward $16 billion annually, enabling a $25 billion buyback and funding the Frontier acquisition without straining the balance sheet.
4. Sustainability Risks Ahead
Cost-cutting and buybacks are finite levers, with further cuts risking operational efficiency. A saturated wireless market, rising churn if incentives wane, and headwinds to broadband expansion from satellite entrants challenge long-term organic growth.
