Verizon, now owner of AOL (and, thus, us!) reported its second-quarter earnings today. The company posted revenues of $32.2 billion on earnings per share of $1.04. Analysts were estimating sales of $32.45 billion on EPS of $1.01 — so the company was more profitable than expected despite falling short on revenue.
“In the second quarter, we again balanced quality Verizon Wireless connections growth with low churn and profitability, and we announced and completed our acquisition of AOL,” said CEO Lowell McAdam in the earnings release. “We’re now poised to offer customers exciting new over-the-top (OTT) mobile video services, and we look forward to a very positive second half of 2015.”
Earnings increased from Q2 of last year, with revenue up 2.4 percent and EPS up 14.3 percent.
As with many carriers today, when it comes to gauging the state of the company, much of the focus is on how it’s doing in wireless. Last quarter, Verizon reported wireless net postpaid adds of 565,000. That figure disappointed some analysts since most of that came from tablet additions, while phone subscriptions actually declined, with strong competition from smaller rivals like Sprint and T-Mobile.
Why the negative feeling about tablets? Although they have bigger screens and lend themselves to more video usage, tablets have been heavily subsidized by carriers, and actually tend to lead to lower mobile data consumption, since many of them end up getting added to existing family plans.
In Q2, on the other hand, Verizon says it added 1.1 million net postpaid connections. Tablets still made up the bulk of that, with 842,000 net additions, but this time the 588,000 net smartphone adds outweighed the decline of 266,000 in basic phones.
There’s another area where tablets are very useful, tying into a big metric for carriers like Verizon: churn, or when subscribers leave Verizon, most likely for a competitor. Last quarter the company reported a postpaid retail customer churn of 1.03 percent, one of the lower percentages among U.S. carriers. For this quarter, churn was 0.9 percent.
On the wireline, Verizon says consumer revenue grew 4.5 percent year-over-year, to $4 billion, with FiOS accounting for $3.4 billion. That’s a 10 percent increase from last year, with 72,000 FiOS Internet and 26,000 FiOS Video net adds.
As evidenced by its acquisition of AOL for $4.4 billion, one of the areas where Verizon wants to grow are in services that run over its physical networks — specifically content and the advertising that runs alongside it. As with devices, growing usage and loyalty in these areas gives Verizon the potential for extra recurring revenue streams that will complement those that it makes from charging for use of its pipes. (And for many carriers, these revenues are seen as a way to offset declines in network revenues.)
Verizon says AOL’s assets and liabilities are included in these numbers, but the report “does not reflect any results from AOL operations since these were immaterial for the last seven days of the quarter.”
As of 7:52 a.m. Eastern, Verizon’s share price was down 1.7 percent in pre-market trading.