U.S. wireless carrier Verizon raised the lower end of its annual profit forecast, benefiting from strong demand for its premium plans and the Trump administration’s new tax law.
Shares of the company rose 3.5% on Monday as it also surpassed Wall Street estimates for June-quarter sales and profit, thanks to a 2.2% rise in wireless service revenue.
The telecom major has launched price-lock promotions and broadband-wireless bundles to retain users as competition intensifies from AT&T and T-Mobile, as well as broadband providers Comcast and Charter.
Verizon is also benefiting from favorable U.S. tax reform, which allows companies to immediately write off the full cost of certain new equipment, according to finance chief Tony Skiadas.
He estimated the legislation will boost free cash flow by $1.5 billion to $2 billion this year, prompting Verizon to raise its forecast for the metric to between $19.5 billion and $20.5 billion, up from $17.5 billion to $18.5 billion previously.
The company now expects its 2025 adjusted profit to grow between 1% and 3%, compared with the previously expected range of 0% to 3%.
Verizon pays the highest cash taxes among major U.S. telecom companies, Wells Fargo analysts said earlier this month, adding that the tax law will provide a significant financial boost to the industry.
Shares of AT&T and T-Mobile were both up 2.3%.
However, Verizon posted a surprise drop of 9,000 monthly bill-paying wireless subscribers in the second quarter, reeling from user churn after price hikes in January. Analysts polled by FactSet were expecting an increase of 13,000 subscribers.
To drive growth, Verizon and its rivals have been expanding their fiber-optic assets, which can tap into the growing demand for consumer data.
Verizon in May won approval from the U.S. telecom regulator for its $20 billion acquisition of fiber-optic internet provider Frontier, after it agreed to end its diversity programs.
The sharper focus on internet services helped it post 293,000 broadband net additions in the second quarter.
Overall, Verizon reported revenue of $34.5 billion, beating estimates of $33.74 billion, according to data compiled by LSEG. Its adjusted earnings per share of $1.22 also beat estimates.
Disclosure: Comcast is the parent company of CNBC.
Read More: Verizon (VZ) Q2 earnings