Verizon Communications VZ · USD

Note 13. Segment InformationReportable SegmentsWe have two reportable segments that we operate and manage as strategic business units - Consumer and Business. We measure and evaluate our reportable segments based on segment operating income, consistent with the chief operating decision maker's (CODM) assessment of segment performance.The Company's CODM is the Chief Executive Officer. The CODM uses segment operating income to allocate resources (including employees, financial or capital resources) and to assess performance during the monthly and quarterly financial strategic review process. When assessing segment performance and how to allocate resources, the CODM focuses on evaluating whether revenues generated are sufficient to cover variable and fixed costs with an appropriate return on investment. Key decisions considered by the CODM using segment operating income include prioritization and timing of changes to network technologies, allocation of capital expenditures based on the Company's priorities, geographic expansion of wireline and wireless networks, establishment of key financial and operational targets, pricing decisions, branding matters and people management. Our segments and their principal activities consist of the following:SegmentDescriptionVerizon Consumer GroupOur Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. As of December 31, 2025, our wireline services are provided in nine U.S. states and Washington D.C. over our 100% fiber-optic network through our fiber product portfolio, as well as over a traditional copper-based network. We also provide fixed wireless access (FWA) broadband through our fifth-generation (5G) or fourth-generation (4G) Long-Term Evolution (LTE) networks as an alternative to traditional landline internet access.

Note 2. Revenue and Contract CostsWe earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment.Revenue by CategoryWe have two reportable segments that we operate and manage as strategic business units, Consumer and Business. Revenue is disaggregated by products and services within Consumer, and customer groups (Enterprise and Public Sector, Business Markets and Other, and Wholesale) within Business. See Note 13 for additional information on revenue by segment, including Corporate and other.We also earn revenues that are not accounted for under Topic 606 from leasing arrangements (such as those for towers and equipment), captive reinsurance arrangements primarily related to wireless device insurance and the interest recognized when equipment is sold to the customer by an authorized agent under a device payment plan agreement. We have elected the practical expedient within Topic 842, to combine the lease and non-lease components for those customer arrangements under Topic 606 that involve customer premise equipment where we are the lessor. Remaining Performance ObligationsWhen allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations which were not satisfied or are partially satisfied as of the end of the reporting period. Below we disclose information relating to these unsatisfied performance obligations. We apply the practical expedient available under Topic 606 that provides the option to exclude the expected revenues arising from unsatisfied performance obligations related to contracts that have an original expected duration of one year or less. This situation primarily arises with respect to certain month-to-month service contracts. At December 31, 2025, month-to-month service contracts represented approximately 95% of our wireless postpaid contracts and approximately 94% of our wireline Consumer and our Business Markets and Other contracts, compared to December 31, 2024, for which month-to-month service contracts represented approximately 95% of both our wireless postpaid contracts and our wireline Consumer and our Business Markets and Other contracts.Additionally, certain contracts provide customers the option to purchase additional services.

Note 16. Commitments and ContingenciesIn the ordinary course of business, Verizon is involved in various litigation and regulatory proceedings at the state and federal level. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, Verizon establishes an accrual. In none of the currently pending matters is the amount of accrual material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including: (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods will have a material effect on our financial condition, but it could have a material effect on our results of operations for a given reporting period.Verizon is currently involved in approximately 30 federal district court actions alleging that Verizon is infringing various patents. Most of these cases are brought by non-practicing entities and effectively seek only monetary damages; a small number are brought by companies that have sold products and could seek injunctive relief as well. These cases have progressed to various stages and a small number may have gone to trial or may go to trial in the coming 12 months if they are not otherwise resolved.In connection with the execution of agreements for the sales of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as indemnity from certain financial losses. From time to time, counterparties may make claims under these provisions, and Verizon will seek to defend against those claims and resolve them in the ordinary course of business.As of December 31, 2025, letters of credit totaling approximately $783 million, which were executed in the normal course of business and support several financing arrangements and payment obligations to third parties, were outstanding.

Note 7. DebtOutstanding long-term debt obligations as of December 31, 2025 and 2024 are as follows: (dollars in millions)At December 31,MaturitiesInterest Rates %20252024Verizon Communications< 5 Years0.85 - 7.75$29,192 $29,325 5-10 Years1.13 - 7.8839,769 33,851 > 10 Years1.13 - 8.9560,471 52,719 < 5 YearsFloating(1)1,373 1,171 5-10 YearsFloating(1)647 1,735 Alltel Corporation< 5 Years6.8038 38 5-10 Years7.8856 56 Operating telephone company subsidiaries – debentures< 5 Years6.00 - 8.38317 286 5-10 Years5.13 - 8.75297 328 Other subsidiaries – asset-backed debt< 5 Years1.53 - 6.0918,247 16,363 < 5 YearsFloating(1)8,857 9,805 Finance lease obligations (average rate of 5.0% and 4.8% in 2025 and 2024, respectively)(2)2,511 2,349 Vendor financing arrangements(2)16 85 Unamortized discount, net of premium(3,463)(3,604)Unamortized debt issuance costs(619)(558)Total long-term debt, including current maturities157,709 143,949 Less long-term debt maturing within one year18,177 22,568 Total long-term debt$139,532 $121,381 Long-term debt maturing within one year$18,177 $22,568 Add short-term vendor financing arrangements(2)441 65 Debt maturing within one year$18,618 $22,633 Add long-term debt139,532 121,381 Total debt$158,150 $144,014 N/A - not applicable(1) For the period ending December 2025, the debt obligations bore interest at floating rates, including floating rates associated with the Secured Overnight Financing Rate (SOFR) for the interest period plus an applicable interest margin per annum. Floating rates associated with SOFR for the interest payments made in December 2025 ranged from 3.943% to 4.869%.(2) Finance lease and vendor financing obligations are part of alternative financing arrangements. Maturities of long-term debt (secured and unsecured) outstanding, including current maturities, excluding finance lease obligations and unamortized debt issuance costs, at December 31, 2025 are as follows:Years(dollars in millions)2026$17,267 20279,569 202813,032 20298,115 203011,081 Thereafter96,753 During 2025, we received $27.6 billion of proceeds from long-term borrowings including current maturities, which included $9.3 billion of proceeds from asset-backed debt transactions. The net proceeds were primarily used for general corporate purposes including the repayment of debt. We used $19.8 billion of cash to repay and repurchase long-term borrowings including current maturities and finance lease obligations, including $8.

Note 10. Stock-Based CompensationVerizon Long-Term Incentive PlanIn May 2017, our shareholders approved the 2017 Long-Term Incentive Plan (the 2017 Plan) and terminated the Company's authority to grant new awards under the Verizon 2009 Long-Term Incentive Plan (the 2009 Plan). The 2017 Plan provides for broad-based equity grants to employees, including executive officers, and permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other awards. Upon approval of the 2017 Plan, we reserved for issuance under the 2017 Plan the number of shares that were remaining but not issued under the 2009 Plan. Shares subject to outstanding awards under the 2009 Plan that expire, are canceled or otherwise terminated will also be available for awards under the 2017 Plan. As of December 31, 2025, 37 million shares are reserved for future issuance under the 2017 Plan.Restricted Stock UnitsRestricted Stock Units (RSUs) granted under the 2017 Plan generally vest in three equal installments on each anniversary of the grant date. The RSUs that are paid in stock upon vesting and are thus classified as equity awards are measured using the grant date fair value of Verizon common stock and are not remeasured at the end of each reporting period. In 2020, Verizon announced a broad-based program that provides for the annual award of cash-settled RSUs under the 2017 Plan to all full-time and part-time employees who meet eligibility requirements. The RSUs that are settled in cash are classified as liability awards and the liability is measured at its fair value at the end of each reporting period. All RSUs granted under the 2017 Plan have dividend equivalent units (DEUs), which will be paid to participants if, and only to the extent the applicable RSU award vests, and is paid at the time the RSU award is paid, and in the same proportion as the RSU award. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate forfeitures and recognize that estimated compensation cost of restricted stock units, net of estimated forfeitures, on a straight-line basis over the vesting period.Performance Stock UnitsThe 2017 Plan also provides for grants of Performance Stock Units (PSUs) that generally vest at the end of the third year after the grant.

Note 3. Acquisitions and DivestituresSpectrum License TransactionsIn February 2021, the FCC concluded Auction 107 for C-Band wireless spectrum. In accordance with the rules applicable to the auction, Verizon was required to make payments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which were approximately $7.5 billion. During 2024 and 2023, we made payments of $269 million and $4.3 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives. The carrying value of the wireless spectrum won in Auction 107 consists of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we were obligated to pay in order to acquire the licenses, as well as capitalized interest to the extent qualifying activities have occurred. On October 17, 2024, Verizon entered into a license purchase agreement to acquire select spectrum licenses of United States Cellular Corporation (currently known as Array Digital Infrastructure, Inc.) and certain of its subsidiaries (collectively, UScellular) for total consideration of $1.0 billion, subject to certain potential adjustments. The closing of this transaction is subject to the receipt of regulatory approvals and other closing conditions, including the sale of UScellular's wireless operations and select spectrum assets to T-Mobile US, Inc., which concluded in August 2025, and the termination of certain post-closing arrangements with respect to that sale.Business Acquisitions and DivestituresTracFone Wireless, Inc.On November 23, 2021, we completed the acquisition of TracFone Wireless, Inc. (TracFone). The acquisition agreement provided for up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and other commercial arrangements. The estimated fair value of the contingent consideration as of the acquisition date was approximately $560 million and represented a Level 3 measurement as defined in ASC 820, Fair Value Measurements and Disclosures. The contingent consideration payable was based on the achievement of certain revenue and operational targets, measured over a two-year earn out period.

Integrated Cybersecurity Risk Management Verizon’s Senior Vice President and Chief Information Security Officer (CISO) has responsibility for the management of cybersecurity risks at Verizon. The CISO and her team are responsible for Verizon’s information security strategy, policy, standards, architecture and processes.The CISO brings nearly two decades of cybersecurity experience to her work at Verizon. Prior to joining Verizon, she held executive-level cybersecurity roles at other large public companies, where she was responsible for cybersecurity strategy and operations, including incident response, threat intelligence, security services, architecture, commercial operational technology security, and regulatory and compliance matters.Verizon effectuates cybersecurity management by providing for close cooperation among the CISO’s team and other teams within the company, as well as by integrating cybersecurity risk into Verizon’s overall enterprise risk management structures and processes. Our business units and certain functional groups have a Business Information Security Officer, who is an integral member of that unit or group, but reports to the CISO. This structure provides the CISO with line of sight across the enterprise. The CISO and members of her leadership team also meet regularly with business unit senior leaders, including the CEO and the Chief Financial Officer (CFO), to discuss business priorities, emerging threats and trends, and the performance of the cybersecurity program.The Verizon Executive Security Council (VESC) is the governing body for Verizon's cybersecurity program. The VESC is chaired by the CISO. The principal members are the key business, technology, network, legal, finance, audit, and compliance leaders from the business units and corporate functions. The VESC provides oversight of all aspects of Verizon’s cybersecurity program and, at regular intervals throughout the year, evaluates key cybersecurity metrics as well as planned and ongoing initiatives to reduce cybersecurity risks.Verizon’s Risk Committee, which includes our CFO, Senior Vice President of Internal Audit and other senior executives, is responsible for overseeing components of our overall risk management strategy. The Risk Committee receives periodic updates from the CISO on Verizon’s cybersecurity program.Verizon also operates a robust internal audit program.

Note 12. TaxesThe components of income before provision for income taxes are as follows:(dollars in millions)Years Ended December 31,202520242023Domestic$20,150 $21,253 $15,668 Foreign2,522 1,726 1,319 Total$22,672 $22,979 $16,987 The components of the provision for income taxes are as follows:(dollars in millions)Years Ended December 31,202520242023CurrentFederal$1,735 $3,367 $2,070 Foreign323 240 219 State and local666 608 215 Total2,724 4,215 2,504 DeferredFederal2,115 807 1,799 Foreign19 (4)28 State and local206 12 561 Total2,340 815 2,388 Total income tax provision$5,064 $5,030 $4,892 The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal income tax rate:(dollars in millions)202520242023Years Ended December 31,AmountPercentAmountPercentAmountPercentU.S. federal statutory tax rate$4,761 21.0 %$4,825 21.0 %$3,567 21.0 %State and local income taxes, net of federal income tax effect(1)739 3.3 566 2.5 664 3.9 Foreign tax effects(131)(0.6)(68)(0.3)(16)(0.1)Effect of cross-border tax laws41 0.2 — — 18 0.1 Tax credits(25)(0.1)(27)(0.1)(27)(0.2)Changes in valuation allowances(34)(0.2)15 0.1 — — Nontaxable or nondeductible itemsGoodwill impairment— — — — 1,149 6.8 Other(69)(0.3)(116)(0.5)(133)(0.8)Changes in unrecognized tax benefits19 0.1 40 0.2 (27)(0.2)Other adjustmentsFederal refund claims— — (17)(0.1)(245)(1.4)Other(237)(1.1)(188)(0.9)(58)(0.3)Effective income tax rate$5,064 22.3 %$5,030 21.9 %$4,892 28.8 %(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Maryland, Pennsylvania and Virginia for 2025, California, Maryland and Pennsylvania for 2024, California, Georgia, Illinois, Maryland and Virginia for 2023.The effective income tax rate for 2025 was 22.3% compared to 21.9% for 2024. The increase in the effective income tax rate and provision for income taxes was primarily due to higher tax benefits resulting from the favorable resolution of various income tax matters and a reduction in deferred income taxes due to changes in state apportionment during the prior period.The effective income tax rate for 2024 was 21.9% compared to 28.8% for 2023. The decrease in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion in 2023 that substantially decreased income before income taxes and was not deductible.