# Verizon (VZ) Financial Model

Free Excel 3-statement financial model and company analysis for Verizon.

- Canonical: https://finamodel.com/companies/verizon
- Industry: Telecom
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/VZ.xlsx

## Model Purpose

This model evaluates Verizon's equity valuation and credit profile to determine if its robust free cash flow generation can simultaneously support its high dividend yield, fund the integration of the Frontier Communications acquisition, and maintain its target leverage ratios.

## Company Overview

Verizon Communications Inc. is one of the world's leading providers of technology and communications services, operating primarily in the United States. The company offers voice, data, and video services and solutions on its award-winning wireless and wireline networks.

Business segments include:
- Verizon Consumer Group (approximately 77% of total revenue): Provides wireless and wireline services to retail customers, including Fios internet and Fixed Wireless Access.
- Verizon Business Group (approximately 21% of total revenue): Provides wireless and wireline services to businesses, public sector customers, and wholesale partners.
- Corporate and Other (approximately 2% of total revenue): Includes corporate operations and unallocated items.

The company operates almost exclusively in the United States, making geographic revenue splits immaterial. Verizon operates an asset-heavy business model requiring massive ongoing capital expenditures to maintain network quality and deploy new technologies like 5G and fibre. Its competitive position is strong, operating as one of the "Big Three" US wireless carriers alongside AT&T and T-Mobile, competing on network reliability and premium service bundles. A major recent event is the acquisition of Frontier Communications, which closed in January 2026, significantly expanding Verizon's fibre footprint to over 30 million homes and businesses.

## Revenue Deep Dive



### Verizon Consumer Group (VCG)

- **Segment name:** Verizon Consumer Group
- **Revenue driver formula:** (Average Retail Postpaid Accounts x Average Revenue Per Account) + Wireless Equipment Sales + Fios/FWA Broadband Connections x ARPU
- **Historical growth rate:** 1.0% to 3.0% CAGR
- **Key growth levers and headwinds:** Growth is driven by Fixed Wireless Access (FWA) adoption, premium unlimited plan step-ups (myPlan), and price increases. Headwinds include intense promotional competition from T-Mobile and AT&T, and lengthening handset upgrade cycles.
- **Pricing dynamics:** Highly competitive but rational oligopoly pricing. Verizon relies on premium pricing justified by network quality, often bundling streaming perks to reduce churn.
- **Revenue recognition notes:** Service revenue is recognised over time as services are provided. Equipment revenue is recognised upfront when the device is transferred to the customer, often bundled with device payment plans that create contract assets.
- **Seasonality:** Q4 is historically the strongest quarter for equipment revenue due to holiday sales and new iPhone launches, which also drives higher gross additions.

### Verizon Business Group (VBG)

- **Segment name:** Verizon Business Group
- **Revenue driver formula:** Wireless Connections x ARPU + Enterprise Wireline Contract Value
- **Historical growth rate:** -2.0% to 0.0% CAGR
- **Key growth levers and headwinds:** Wireless service growth and business FWA adoption are positive levers. These are offset by secular declines in legacy wireline voice and data services.
- **Pricing dynamics:** Contractual and highly competitive, often involving multi-year enterprise agreements and government contracts.
- **Revenue recognition notes:** Similar to Consumer, but with more complex multi-year enterprise contracts that may include upfront installation fees deferred over the contract life.
- **Seasonality:** Less seasonal than the Consumer segment, though enterprise IT budget flushes can slightly elevate Q4 hardware sales.

## Cost Structure



### Variable Costs / COGS

- **Cost of Services:** Includes network operations, interconnect fees paid to other carriers, roaming charges, and content costs for Fios video.
- **Cost of Wireless Equipment:** The direct cost of handsets and accessories sold to customers. This often exceeds equipment revenue due to heavy promotional subsidies.
- **Gross margin range:** Verizon does not report a traditional gross margin, but the implied margin (Revenue less Cost of Services and Cost of Equipment) typically ranges from 58% to 61%.
- **Key input costs and commodity exposures:** Energy costs for running the network, fibre leasing costs, and handset wholesale prices from Apple and Samsung.
- **How COGS scales with revenue:** Cost of services is largely fixed in the short term, providing high operating leverage on service revenue. Cost of equipment is purely variable and scales directly with handset sales volumes.

### Operating Expenses

- **Selling, General & Administrative (SG&A):** Typically 20% to 23% of revenue. This includes retail store operations, marketing, advertising, customer service, and commissions. It is largely headcount and marketing-driven.
- **Depreciation & Amortisation (D&A):** Typically 12% to 14% of revenue. This is massive due to the capital-intensive nature of the network. It is heavily weighted towards tangible network assets, though amortisation of customer lists and certain software is included.
- **Stock-Based Compensation:** Relatively small for a telecom, typically under 1% of revenue.
- **Restructuring / one-time charges:** Frequent but variable, often related to voluntary separation programmes, real estate rationalisation, or asset impairments (such as the wireline goodwill impairments seen in recent years).

### Margin Profile

- **EBITDA margin:** Consolidated Adjusted EBITDA margin ranges from 35% to 37%.
- **Operating margin:** 22% to 24%.
- **Net margin:** 12% to 14%.
- **Margin trend:** Stable to slightly expanding. Service revenue growth drops down to the bottom line efficiently, while equipment margins remain structurally negative due to subsidies.
- **Segment-level margins:** Consumer EBITDA margins typically run at 41% to 43%, while Business EBITDA margins are lower, typically 21% to 23%.

## Balance Sheet Structure

- **Total assets:** Approximately $380 billion to $400 billion.
- **Key asset categories:** Property, Plant and Equipment (PP&E) and Wireless Licences (spectrum) make up the vast majority of assets.
- **Goodwill & intangibles as % of total assets:** Wireless licences alone represent over 35% of total assets. Goodwill represents another 6% to 8%.
- **Working capital profile:**
  - **Days Sales Outstanding (DSO):** 30 to 35 days.
  - **Days Inventory Outstanding (DIO):** 15 to 20 days (primarily handsets).
  - **Days Payable Outstanding (DPO):** 45 to 55 days.
  - **Net working capital as % of revenue:** Typically negative 8% to negative 12%.
  - **Is working capital positive or negative?** Negative. Verizon uses its scale to stretch payables while collecting service revenue quickly, providing a structural cash flow advantage.
- **PP&E:** Consists of cell towers, fibre optic cables, switching equipment, and real estate. Useful lives range from 3 to 15 years for network equipment and up to 50 years for buildings.
- **Right-of-use assets / operating leases:** Material, typically $25 billion to $30 billion, representing leased cell tower space (e.g., from American Tower or Crown Castle) and retail stores.

## Capital Expenditure & Investment

- **Capex as % of revenue:** 12.0% to 13.5% (historically higher during the C-Band buildout, now normalising).
- **Maintenance capex vs. growth capex:** Approximately 60% maintenance (network upkeep, capacity upgrades) and 40% growth (5G expansion, fibre footprint expansion).
- **Major capex programmes underway or planned:** The C-Band 5G deployment is largely complete. Current focus is on expanding the fibre network and integrating the Frontier assets.
- **Capitalised software / development costs:** Material, often exceeding $1 billion annually, included within total capital expenditures.
- **M&A pattern:** Historically a mix of transformational (Vodafone stake buyout, TracFone) and bolt-on. The 2026 Frontier acquisition is a major strategic move to converge mobility and broadband.
- **Typical acquisition multiple paid:** Telecom infrastructure typically commands 7x to 9x EV/EBITDA.

## Debt & Capital Structure

- **Total debt:** Approximately $150 billion to $160 billion, with net unsecured debt around $110 billion.
- **Debt/EBITDA ratio:** Net unsecured debt to Adjusted EBITDA target is 1.75x to 2.0x. Current levels are around 2.2x.
- **Credit rating:** BBB+ / Baa1 (investment grade).
- **Key debt instruments:** Predominantly long-term unsecured bonds, supplemented by term loans and commercial paper for working capital.
- **Maturity profile:** Highly laddered. Verizon typically faces $10 billion to $15 billion in maturities annually, which it routinely refinances.
- **Interest rate profile:** Mostly fixed-rate debt, with a weighted average interest rate of approximately 4.8% to 5.2%.
- **Covenants:** Standard investment-grade covenants; no restrictive financial maintenance covenants that pose near-term risk.
- **Share repurchase programme:** The Board authorised a $25 billion repurchase programme, though aggressive buybacks are paused until the leverage target is met.
- **Dividend policy:** Highly stable. Verizon has increased its dividend for 19 consecutive years. The payout ratio is typically 55% to 65% of Free Cash Flow, yielding around 6.0% to 6.5%.

## Cash Flow Characteristics

- **Operating cash flow conversion:** OCF is typically 2.0x to 2.2x Net Income, driven by massive non-cash D&A.
- **Free cash flow margin:** 13% to 15% of revenue (generating around $20 billion annually).
- **Major non-cash items that bridge net income to OCF:** Depreciation and amortisation, deferred income taxes, and stock-based compensation.
- **Working capital cash flow impact:** Device payment plan receivables are a major use of cash when equipment sales spike, while accounts payable and deferred revenue provide cash sources.
- **Capex intensity:** Very high. Capex consumes nearly half of operating cash flow.
- **Cash tax rate vs. GAAP effective tax rate:** Cash taxes are often lower than the GAAP effective rate due to accelerated depreciation on network assets for tax purposes.

## Sheet Structure

1. **Assumptions:** Hardcoded inputs for macroeconomic drivers, segment growth, ARPA, margins, capex intensity, and debt terms.
2. **Scenarios:** Scenario manager for Base, Bull, and Bear cases (toggling ARPA growth, FWA net adds, and Frontier integration synergies).
3. **Income Statement:** Consolidated P&L mirroring the 10-K, down to Net Income and EPS.
4. **Revenue Build:** Detailed build for Consumer (Service, Equipment, Other) and Business (Service, Equipment, Other), driven by connections and ARPA.
5. **Operating Costs:** Breakdown of Cost of Services, Cost of Equipment, SG&A, and D&A.
6. **Balance Sheet:** Standard assets, liabilities, and equity. Must include specific lines for Wireless Licences and Device Payment Plan Receivables.
7. **Working Capital:** Schedules for receivables, inventory, payables, and contract assets/liabilities.
8. **PP&E and Intangibles:** Waterfall schedules for network capex, spectrum amortisation (if applicable), and goodwill.
9. **Debt Schedule:** Tranche-by-tranche debt build, tracking maturities, interest expense, and the net unsecured debt to EBITDA metric.
10. **Cash Flow Statement:** Direct link from Net Income, adjusting for D&A, working capital changes, and capex to arrive at Free Cash Flow.
11. **Valuation (DCF):** Unlevered free cash flow build, WACC calculation, terminal value, and implied share price.
12. **Frontier Pro-Forma:** A dedicated sheet to model the consolidated impact of the Frontier acquisition from FY2026 onwards.

## Key Financial Relationships

1. **Consumer Wireless Service Revenue** = Average Consumer Postpaid Connections x Consumer Postpaid ARPA x 12
2. **Consumer Equipment Revenue** = Consumer Gross Additions x Average Handset Price
3. **Business Wireless Service Revenue** = Average Business Connections x Business ARPU x 12
4. **Total Operating Revenue** = Consumer Revenue + Business Revenue + Corporate/Other Revenue
5. **Cost of Equipment** = Consumer Equipment Revenue + Business Equipment Revenue + Equipment Subsidy Loss
6. **Consolidated Adjusted EBITDA** = Total Operating Revenue - Cost of Services - Cost of Equipment - SG&A (excluding one-time items)
7. **D&A Expense** = (Beginning PP&E x Blended Depreciation Rate) + Amortisation of Definite-Lived Intangibles
8. **Interest Expense** = Average Total Debt Balance x Weighted Average Interest Rate
9. **Effective Tax Rate** = Provision for Income Taxes / Earnings Before Taxes
10. **Free Cash Flow** = Cash Flow from Operating Activities - Capital Expenditures (including capitalised software)
11. **Net Unsecured Debt** = Total Unsecured Debt - Cash and Cash Equivalents
12. **Leverage Ratio** = Net Unsecured Debt / Consolidated Adjusted EBITDA

## Cross-Sheet Dependencies

- The **Revenue Build** feeds the top line of the **Income Statement** and drives the accounts receivable calculations on the **Working Capital** sheet.
- The **Operating Costs** sheet feeds the **Income Statement** and drives accounts payable and inventory on the **Working Capital** sheet.
- The **PP&E and Intangibles** sheet calculates D&A, which feeds both the **Income Statement** (as an expense) and the **Cash Flow Statement** (as a non-cash add-back).
- The **Cash Flow Statement** determines the ending cash balance and borrowing needs, which feeds the **Debt Schedule**.
- The **Debt Schedule** calculates interest expense, which feeds back into the **Income Statement** and reduces net income, creating a circular reference that must be managed with a circuit breaker switch.
- The **Frontier Pro-Forma** sheet must feed into the consolidated **Revenue Build** and **Operating Costs** starting in FY2026.

## Sign Convention

- Revenues, assets, and cash inflows are represented as positive numbers.
- Expenses, liabilities, and cash outflows (including Capex and dividends) are represented as negative numbers in the cash flow and build schedules.
- On the Income Statement, expenses should be displayed as positive numbers but subtracted in the subtotal formulas (e.g., Gross Profit = Revenue - COGS).
- The Balance Sheet must follow the fundamental equation: Total Assets - (Total Liabilities + Total Equity) = 0.

## Things Most Likely to Go Wrong

- **Frontier Acquisition Stub Period:** The acquisition closed on January 20, 2026. The model must account for the partial first quarter of integration rather than a full year, adjusting revenue and EBITDA run-rates accordingly.
- **Spectrum Licence Treatment:** Wireless licences are indefinite-lived intangible assets. They are not amortised. Applying a standard amortisation schedule to total intangibles will artificially depress net income.
- **Equipment Revenue vs. Cost:** Equipment margins are structurally negative. Modellers often mistakenly project equipment revenue growing faster than equipment costs, which artificially inflates EBITDA.
- **Device Payment Plans:** The cash flow impact of device payment plans is significant. Revenue is recognised upfront, but cash is collected over 36 months. The model must accurately build the contract asset/receivable balance.
- **Reclassification of Revenue:** Starting in January 2025, Verizon reclassified device protection revenue from "Other" to "Wireless Service Revenue". Historical data prior to 2024 must be adjusted to ensure comparable growth rates.
- **Net Unsecured Debt Metric:** Verizon's primary leverage target uses *Net Unsecured Debt*, not Total Debt. Including secured debt or capital leases in the covenant check will trigger false warnings.
- **Capitalised Software:** Verizon capitalises significant software development costs. These must be included in the Capex line for Free Cash Flow calculations, not just PP&E additions.
- **Pension Remeasurements:** Verizon frequently records large, non-cash mark-to-market pension adjustments in Q4. These must be excluded from Adjusted EBITDA and Adjusted EPS projections.

## Validation Checks

- "Consolidated Adjusted EBITDA margin should be in the 35% to 37% range; flag if outside this band."
- "Capex as a % of revenue should run between 12.0% and 13.5%; flag if it drops below 11% or exceeds 15%."
- "Free Cash Flow must exceed dividend payments by at least $6 billion annually to allow for debt reduction."
- "Net Unsecured Debt / Adjusted EBITDA should trend towards the 2.0x target; flag if it exceeds 2.5x."
- "Cost of Wireless Equipment must exceed Wireless Equipment Revenue (negative equipment margin)."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Effective tax rate should be between 22% and 24%."
- "Consumer postpaid phone churn should remain between 0.85% and 0.95%; flag if it exceeds 1.0%."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Consumer Revenue Growth | 2.5 | % | Based on FY2025 actuals and management guidance for mobility/broadband growth |
| Business Revenue Growth | -1.0 | % | Reflects ongoing legacy wireline declines offsetting wireless gains |
| Consumer EBITDA Margin | 42.0 | % | Historical average reflecting strong service revenue drop-through |
| Business EBITDA Margin | 22.0 | % | Historical average reflecting lower-margin enterprise contracts |
| Cost of Services % of Revenue | 24.5 | % | Based on FY2024/FY2025 actuals |
| SG&A % of Revenue | 21.5 | % | Based on recent historical run-rates |
| D&A % of Revenue | 12.5 | % | Reflects steady-state network depreciation |
| Capex / Revenue | 12.3 | % | Aligns with management guidance of $16.0B to $16.5B on ~$138B base |
| Effective Tax Rate | 23.0 | % | Standard US corporate rate plus state taxes |
| Weighted Average Interest Rate | 5.1 | % | Based on FY2024/FY2025 reported effective interest rates |
| Target Leverage Ratio | 2.0 | x | Management's stated Net Unsecured Debt to Adj. EBITDA target |
| Annual Dividend per Share | 2.71 | $ | Based on Q4 2025 run-rate ($0.6775 quarterly) |
| Share Count | 4,210 | Millions | Outstanding shares as of late 2025 |
| WACC | 7.5 | % | Standard telecom discount rate reflecting stable cash flows and high debt |
| Terminal Growth Rate | 1.0 | % | Mature telecom industry growth rate |

## Data Sources & Benchmarks

- **SEC Filings:** Verizon Investor Relations website and SEC EDGAR for 10-K, 10-Q, and 8-K filings.
- **Key Peers:** AT&T (T), T-Mobile US (TMUS), Comcast (CMCSA), Charter Communications (CHTR).
- **Industry Data:** CTIA (The Wireless Association) for US mobile penetration and ARPU trends; FCC reports on broadband deployment.
- **Consensus Estimates:** Bloomberg, FactSet, or Yahoo Finance for forward-looking revenue and EPS consensus.
- **Proprietary Data:** TeleGeography for global network infrastructure data; Ookla Speedtest Intelligence for network performance benchmarking against peers.

## Sources

- Verizon Communications Inc. Form 10-K for the fiscal year ended December 31, 2024 (Filed February 2025).
- Verizon Communications Inc. Q4 2025 Earnings Release and 8-K (Filed January 30, 2026).
- Verizon Investor Relations Presentations and Financial and Operating Information schedules (2024-2026).
- TradingView, Quiver Quantitative, and StockTitan news summaries regarding Verizon's FY2025 performance and Frontier acquisition closure.

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## Frequently asked questions

### What services does Verizon Communications Inc. provide?

Verizon is a leading provider of technology and communications services in the United States, offering voice, data, and video services. These are delivered over its award-winning wireless and wireline networks to both retail consumers and businesses.

### What are Verizon's primary revenue sources and business segments?

Verizon's revenue is primarily driven by its Consumer Group, which accounts for approximately 77% of total revenue through wireless and wireline services like Fios internet and Fixed Wireless Access. The Verizon Business Group contributes about 21% by providing services to businesses, public sector customers, and wholesale partners.

### What is a key capital expenditure assumption in Verizon's financial model?

A key assumption in Verizon's financial model is Capex_Pct_Revenue, set at approximately 3.49%. This reflects the ongoing capital expenditures required for network maintenance, capacity upgrades, and strategic growth initiatives like fiber expansion and Frontier asset integration.

### What are the key considerations for valuing Verizon's equity and credit profile?

The financial model evaluates Verizon's equity valuation and credit profile by assessing its robust free cash flow generation. Key considerations include its ability to support a high dividend yield, fund the integration of the Frontier Communications acquisition, and maintain target leverage ratios.

### Can I download an Excel financial model for Verizon (VZ)?

Yes, an Excel financial model for Verizon (VZ) is available for download. This general corporate model provides forecasts from FY2026 to FY2030 to help evaluate the company's financial performance.

### What is Verizon's typical working capital profile?

Verizon typically maintains a negative net working capital profile, ranging from negative 8% to negative 12% of revenue. This structural cash flow advantage is achieved by leveraging its scale to extend payables while efficiently collecting service revenue.

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