Verizon Revenue Misses Estimates on Slow Phone Upgrade Cycle
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(Bloomberg) -- Verizon Communications Inc. reported third-quarter revenue that missed analysts’ expectations, weighed down by lackluster sales of hardware such as mobile phones.
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The company reported a net gain of 239,000 monthly phone subscribers, beating analysts’ projections of 222,000. But total revenue was essentially flat from a year earlier at $33.3 billion, slightly under analysts’ expectations of $33.4 billion, as service revenue and other growth was offset by declines in wireless equipment revenue.
It was the second consecutive quarter that lower equipment revenue overshadowed other gains. The stock slid 4.1% Tuesday late-morning in New York.
“The downturn in equipment sales is tied to a lack of compelling new hardware features from the smartphone makers, leading to a marked reduction in switching and lower churn,” Bloomberg Intelligence analysts wrote in a recent note.
Telecom executives, including Verizon Chief Executive Officer Hans Vestberg, have said they didn’t expect Apple Inc.’s latest iPhone, which came out in September, to spur a significant upgrade cycle. Apple’s iPhone 16 offers only modest hardware upgrades, and its advanced artificial intelligence technology will only be gradually added to the device via incremental software updates.
Vestberg said it’s still unclear whether the promises of AI capabilities in new iPhone models will convince people to upgrade. Historically, consumers have been persuaded to trade in their devices by hardware redesigns or a significant network evolution such as 5G.
“Is the software side going to do that?” Vestberg asked on a video presentation to analysts on Tuesday. “It’s too early for us to say. So far we haven’t seen that it is creating the cycle.”
Customers used to upgrade every 12 months but now they are keeping their phones for more than 40 months, Vestberg had said previously.
As the pool of potential new wireless customers tightens, New York-based Verizon has been offering customizable mobile and broadband plans and throwing in perks such as savings on streaming services like Netflix and Max. The company is also pushing its fixed wireless product, which delivers high-speed internet over the airwaves rather than through lines into the home. Vestberg said this “convergence” of plans and products has been attractive to customers and leads to lower churn, or customers leaving for rivals.