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Understanding Verizon’s Soft Revenue Growth in Q4

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Jan. 30 2019, Updated 11:20 a.m. ET

Verizon misses on fourth-quarter revenue

Verizon Communications (VZ) saw lower-than-expected revenue in the fourth quarter, which it reported on January 29. Its total consolidated revenue was $34.3 billion in the quarter, which lagged analysts’ estimate by 0.4% and rose only ~1% YoY (year-over-year) from the previous year’s level.

Excluding the impact of its revenue recognition standard, the company’s consolidated fourth-quarter revenue rose just 0.5% YoY to $34.1 billion. Its 2018 revenue rose 3.8% YoY to $130.9 billion. Verizon expects its revenue to rise in the low-single-digit percentage range in 2019.

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Factors that affect revenue

The company has been posting softer revenue growth on a YoY basis for the last three consecutive quarters. Though its revenue continued to rise on the back of a consistently improving performance in the Wireless segment, particularly in terms of service revenue, its Wireline segment remains a headwind for its top line.

In the fourth quarter, revenue in Verizon’s Wireless segment rose 2.7% YoY to $24.4 billion. Its wireless service revenue rose 0.1% YoY, marking its third quarter of YoY growth driven by consistent customer growth and upgraded unlimited and mix-and-match plans.

Verizon’s Wireline segment’s revenue fell 3.2% YoY to $7.4 billion in the fourth quarter. It lost 46,000 Fios video connections in the quarter due to the ongoing shift from linear video offerings to OTT (over-the-top) offerings. Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) are some of the more established players in the OTT video streaming market.

In the fourth quarter, Verizon Media, formerly known as Oath, saw its revenue fall 5.8% YoY to $2.1 billion, but it improved sequentially due to seasonal advertising spending. Verizon Media is the parent company of Yahoo Finance, TechCrunch, HuffPost, and other popular media properties.

The company’s Internet of Things revenue, including revenue from Verizon Connect, rose ~9.5% YoY in the fourth quarter, excluding the impact of its revenue recognition standard.

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