Verizon Communications Was The Bargain A Year Ago. Now It Carries The Premium Over AT&T

In the battle of telecom giants, the market is suddenly charging more for Verizon’s turnaround story than for its faster-growing rival.

In the telecommunications sector, investors have two primary ways to own the network: AT&T (T) or Verizon (VZ) (VZ). Right now, the market values these direct rivals very differently. AT&T is growing revenue faster, at a 2.6% clip over the last year, and trades at 6.3 times its operating profit. Verizon, growing at a slower 1.4% pace, costs more at 6.9 times operating profit. This presents a sharp question for investors: what exactly does Verizon’s premium buy you that its cheaper, faster-growing peer does not?

This valuation gap is a recent development. The positions have reversed over the past year. A year ago, Verizon was the cheaper of the two, but its multiple now carries a premium, largely because AT&T’s valuation has compressed. The core of the decision is whether AT&T’s de-rating is a bargain or a warning sign about its future.

Verizon’s premium rests on a turnaround gaining speed.

The case for paying more for Verizon is a bet on accelerating operational momentum and a new, high-potential revenue stream. Management points to what it calls a “structural and meaningful inflection” in results. The evidence is in the customer metrics: consumer postpaid phone churn improved to 84 basis points, and the company posted its best second-quarter consumer postpaid phone net additions in five years. This suggests Verizon is improving the health of its core business.

More importantly, Verizon is building a new story on top of its existing wireless and broadband segments. The company recently signed an agreement with Google valued at over $1 billion to connect data centers using its fiber network. Management expects to announce more deals worth “multiple billions of dollars” in the coming years, positioning Verizon to capture a piece of the large spending on AI infrastructure. This initiative, which it calls AI Connect, is expected to contribute to revenue growth starting next year.

This operational progress is reflected in the company’s outlook. Management raised its full-year guidance for adjusted EPS growth to a range of 6.0% to 7.0% and for free cash flow growth to between 9.0% and 10.0%. The premium on the stock is effectively a down payment on the belief that this new trajectory is sustainable and that the AI opportunity is real.

The key numbers side by side, today:

OpInc = Operating Income, P/OpInc = Price To Operating Income Ratio

And the same comparison exactly a year ago, so you can see which way the mismatch has been moving:

OpInc = Operating Income

The cheaper peer is not standing still.

By paying Verizon’s premium, an investor gives up the chance to own a peer that is currently growing faster for a lower multiple. While Verizon projects future acceleration, AT&T is delivering slightly stronger top-line growth today. The risk is that an investor is overpaying for a turnaround story that has not yet fully translated into superior financial results, while a discounted alternative sits next to it.

AT&T is also actively investing in its own network. The company recently selected a telecommunications equipment provider to provide advanced radios to help deploy newly acquired spectrum, a move aimed at improving capacity and performance for its customers. This is a reminder that AT&T is a dynamic competitor, not a static asset. Some analysis even suggests the market may be overly pessimistic about AT&T’s prospects. For investors who prefer to avoid picking a single winner in this competitive space, a broad communication services ETF like the XLC offers exposure to the entire sector.

The discount on AT&T forces a difficult question: is Verizon’s operational story and nascent AI business worth forgoing the immediate value and faster growth offered by its primary rival? The market’s recent punishment of AT&T’s stock could represent a genuine opportunity if its business proves more resilient than its multiple suggests.

The choice hinges on a new, unproven revenue stream.

Ultimately, the decision between these two telecom giants comes down to one forward-looking dimension: belief in Verizon’s ability to build a meaningful business serving the AI industry. The core wireless businesses are mature, and while operational improvements matter, they are unlikely to create dramatic new value on their own. Verizon’s premium is a bet on a second act.

The trade-off is clear: you can pay a lower price for AT&T’s demonstrated, albeit modest, growth, or you can pay a premium for Verizon’s improving core business plus the option on a new, potentially significant AI-related revenue stream. The key watchable for Verizon investors will be the company’s ability to announce the additional multi-billion dollar fiber deals it has signaled are in the pipeline by year-end. Their arrival would validate the premium; their absence would challenge it.

Rather Compare Them On Your Own Terms?

You can line Verizon Communications and AT&T up directly on the Verizon Communications peer comparison, weigh them on valuation, growth, margins, and returns, and swap in any other Integrated Telecommunication Services names you hold.

The Better Bet Is Still One Bet

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