AT&T Inc. (T) Earnings & Analysis

Latest quarter

AT&T reported Q3 FY2026 revenue of $32.3 billion, above the $31.7 billion consensus and up from $30.7 billion a year earlier. Adjusted earnings per share were $0.65, also above the $0.61 consensus.

CFO Pascal Desroches said consolidated service revenue grew 3.8% year over year, with advanced connectivity service revenue up 6.1% and legacy service revenue down approximately 25%. He attributed wireless service revenue growth to a larger subscriber base and higher revenue per postpaid phone customer.

AT&T reported diluted earnings per share of $0.12, compared with $1.29 a year earlier. Desroches said the quarter included a $2.6 billion non-cash impairment related to the agreement to sell AT&T Mexico and a roughly $800 million employee separation charge.

AT&T’s operating margin was 12.7%, compared with 19.9% a year earlier, while gross margin remained at 61.5%. The company reported free cash flow of $5.5 billion, up from $5.3 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO John Stankey said AT&T added over 1 million advanced connectivity subscribers across fiber, fixed wireless and postpaid phone in the quarter. He said nearly 43% of advanced home internet customers also had an AT&T postpaid wireless account, and the company added approximately 350,000 converged customer relationships.

CFO Pascal Desroches said AT&T added 696,000 advanced home internet customers, including 416,000 fiber and 280,000 Internet Air customers. He attributed the additions to expanded fiber reach, spectrum, seasonal demand and introductory pricing. AT&T also added 379,000 postpaid phone customers in what Desroches called a competitive quarter.

Desroches said fiber average revenue per user fell 4% year over year, reflecting introductory offers, discounts for customers taking multiple services and the mix of customers in territories acquired from Lumen. Asked about pricing, Stankey said AT&T wants customers across price points and expects customers’ needs to lead some to higher-speed tiers over time. Desroches said customer additions, rather than pricing, would drive the vast majority of growth over the three-year guidance period.

On margins, Desroches said consolidated adjusted EBITDA grew 5.4% year over year, helped by a growing converged customer base and efficiencies. He expects fourth-quarter adjusted EBITDA growth to be affected by higher marketing and acquisition costs and approximately $100 million of unfavorable vendor dispute settlements, primarily in the legacy segment.

Asked about fiber penetration, Stankey said AT&T evaluates investments assuming a terminal penetration rate of 40 and believes it can exceed that level. He said the company could eventually consider allowing other providers to sell over its network in markets where its own brand reaches its penetration limit.

Desroches said device payments are made upfront and recovered over the customer relationship, creating a working-capital drain. He said net debt to adjusted EBITDA rose to 3.13 times after the $23 billion spectrum purchase from EchoStar and expects the ratio to return to the two and a half times target range during 2029.

Guidance

Desroches said AT&T now expects full-year adjusted EPS in the $2.40 range, versus its prior $2.25 to $2.35 outlook, primarily because of lower depreciation expense related to held-for-sale accounting for AT&T Mexico. AT&T also now expects consolidated adjusted EBITDA growth in the upper portion of the 3-4% range.

Desroches lowered the cash-tax outlook to the $750 million range from $1 billion to $1.5 billion. For 2027 and 2028, he said annual capital investment is expected in the $22 to $23 billion range, roughly $1 billion lower than previously planned.