Verizon Communications (NYSE: VZ) turned the narrative from defense to offense. Adjusted EPS of $1.30 beat the $1.28 consensus by a penny and rose 6.6% year-over-year. The real story is in the operating metrics: record adjusted EBITDA of $13.7 billion, a 40.1% margin that expanded 300 basis points from a year ago. It was the second consecutive full-year guidance raise across service revenue, earnings, and cash flow.
The headline revenue figure of $34.3 billion fell 0.7% year-over-year and missed the $35.2 billion estimate. That miss is almost entirely structural, not demand-driven. Equipment revenue dropped nearly 20% as customers held devices longer and Verizon deliberately reduced subsidies. Strip out that $1.2 billion decline, and mobility and broadband service revenue rose 2.8% to $23.4 billion. The company is trading top-line volume for unit economics. The math is working.
Adjusted EBITDA margin hit 40.1%, the highest the company has ever reported, up from 37.1% a year ago. That 300bp expansion came from lower customer acquisition and retention costs, a direct result of the customer-first strategy CEO Dan Schulman has been driving. Churn on postpaid phone fell to 0.92% from 0.97%. The upgrade rate dropped to 2.6% from 3.6%. Fewer upgrades mean less subsidy spend and lower equipment costs, which fell 16.4% year-over-year. The cost of wireless equipment declined faster than equipment revenue, a dynamic that compresses reported revenue but expands margin.
Postpaid phone net additions hit 184,000. This is the best Consumer second-quarter result in five years, a sharp reversal from the 9,000 net losses in the year-ago period. Total mobility and broadband net additions exceeded 550,000, more than double the prior-year quarter. The company added 348,000 broadband connections, including 193,000 fixed wireless access and 155,000 fiber net adds. Fiber broadband connections grew 43.3% year-over-year to 10.9 million, a reminder that Verizon's wireline assets remain a competitive moat even as FWA grabs headlines.
The guidance raise is the most telling signal. Verizon now expects mobility and broadband service revenue growth of 2.5% to 3.0% for the full year, with growth accelerating to approximately 4.0% in the fourth quarter. Adjusted EPS guidance was lifted to $4.99-$5.04, implying 6-7% year-over-year growth. Free cash flow growth was raised to 9-10%, with the midpoint of the forecast at $22.0 billion. That cash generation is funding a stepped-up buyback: $3.5 billion in repurchases through the first half, with the full-year target expanded to up to $4.5 billion.
What the release doesn't say explicitly the numbers support: this margin compression in equipment revenue is a feature, not a bug. Verizon is structurally evolving its business model away from subsidized device sales toward service revenue retention. The 300bp adjusted EBITDA margin expansion is the payoff. Whether that trajectory can sustain as upgrade cycles eventually normalize is the open question. For now, the company is compounding lower churn with healthier unit economics, and the cash flow math is compelling.
Free cash flow surged 24.4% in the quarter to $6.4 billion and 16% in the first half to $10.2 billion. Net unsecured debt fell to $128.7 billion from $130.1 billion sequentially. The leverage ratio of 2.5x net unsecured debt to adjusted EBITDA remains within investment-grade comfort. The company returned $9.4 billion to shareholders in the first half through dividends and buybacks, a pace that the raised free cash flow guide supports.
The second-half trajectory matters most. Verizon guided mobility and broadband service revenue growth to approach 3% in Q3 and approximately 4% in Q4, implying acceleration from the 2.8% reported in Q2. If that cadence holds, the structural inflection point Schulman describes will have the numbers to back it up. The operating momentum is real. The margin story is intact. The balance sheet is getting cleaner.