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Verizon's (VZ) weak connection with investors begins to strengthen as shares rebound from earlier lows of -2.7% following Q1 results today. There were not too many surprises surrounding VZ's headline results in Q1, reporting a slim earnings beat on relatively slow revenue growth. The telecom giant also reiterated its FY25 outlook despite warning of heightened macroeconomic uncertainty.

However, initially pinning the stock lower today was VZ's increasing postpaid phone losses, posting a net loss of 289,000 wireless subscribers, considerably higher than the 114,000 reported in the year-ago period. The massive uptick in losses reflects a rebuff from consumers over recent pricing actions. With many players in the telecom arena, such as Mobile Virtual Network Operators (MVNO) like Mint and Visible, who charge a fraction of the cost of major telecoms, VZ does not command significant price inelasticity, causing many users to flee its network.

Nevertheless, investors quickly shrugged off this blemish due to VZ's confidence in still achieving its financial targets for the year, including adjusted EPS growth of flat to +3%, total wireless service revenue growth of +2.0-2.8%, and free cash flow of $17.5-18.5 bln.

• As usual, VZ narrowly exceeded bottom-line estimates, delivering adjusted EPS of $1.19. Adjusted EBITDA expanded by 4% yr/yr, exceeding its FY25 forecast of +2.0-3.5%, to VZ's best figure ever. Part of VZ's success in growing adjusted EBITDA above its target for the year is its focus on growing its wireless portfolio, which commands more attractive margins than its other businesses. VZ is also making progress on its private networks business, closing over a dozen deals in Q1. Meanwhile, the company is continuing to take costs out.
• Revenue inched 1.5% higher yr/yr to $33.5 bln despite the sizeable postpaid phone net losses, illuminating the inflationary pricing gains. Revenue in wireless services climbed by 2.7% yr/yr, with wireless equipment revs ticking 0.7% higher. Weighing on this growth was Verizon Business, which saw a 1.2% drop in revenue.
• A clear highlight was within VZ's Broadband business, which boasted 339,000 net adds in Q1, with total fixed wireless access net adds of 308,000. The gains push the total base to over 4.8 mln fixed wireless access subs, placing VZ in a firm position to reach the next milestone of 8-9 mln by 2028.
• Several factors are underpinning VZ's confidence in hitting its goals this year. For one, the company expects to achieve higher volumes, a higher premium mix, and upgrade customers to myPlan (a new customized unlimited plan). Secondly, VZ is focused on better customer retention, making the necessary price adjustments which impacted churn but should begin improving through the year, especially as more customers turn to myPlan, which locks in rates for three years.

VZ's Q1 report was initially met with a cold reception as investors zeroed in on the alarming net losses number. However, as market participants digested the full report, which included many highlights, they began to warm up to VZ, helping push the stock into positive territory today.