AT&T (T) shares rose Wednesday after the wireless carrier delivered reassuring financial results and reaffirmed its long-term growth forecasts. The company continues to attract new subscribers, posting solid gains in what it calls “premium connectivity customers,” including 432,000 postpaid phone subscribers, 367,000 fiber accounts, and 279,000 fixed wireless customers.
AT&T remains on track to reach more than 60 million fiber passings by the end of 2030, up from 38.6 million at the end of the second quarter. That bodes well for the telecom giant’s customer growth and retention efforts, as more than 40% of households that use AT&T’s home internet service also choose to become wireless subscribers. Chief Executive Officer John Stankey said that with the company’s industry-leading position in fiber, AT&T believes its network performance and operational scale are unmatched.
Overall, AT&T’s revenue rose 2.3% year over year to $31.6 billion, while adjusted earnings increased 20% to $0.65 per share. In addition, the telecom giant’s free cash flow grew 7% to $4.7 billion, allowing AT&T to return $4.1 billion to shareholders through dividends and share buybacks.
Adding to the optimism, AT&T reaffirmed its full-year and long-term targets. Management continues to expect adjusted earnings per share of between $2.25 and $2.35 in 2026. The company remains on schedule to generate more than $18 billion in free cash flow this year and reach $21 billion by 2028. This reaffirmed guidance helped alleviate investor concerns about potential competition from satellite communications services such as SpaceX’s Starlink and the possible impact on AT&T’s profitability. Shareholders of the wireless leader breathed a sigh of relief, and the stock moved higher accordingly.
For income-oriented investors, dividend coverage is a key concern. The good news is that the dividend appears well protected. AT&T expects free cash flow of more than $18 billion this year, while dividend costs amount to approximately $8 billion. That puts the payout ratio at less than half of free cash flow, leaving ample coverage even as the company invests heavily in its network and conducts share repurchases. Beyond dividends, management plans approximately $8 billion in buybacks this year as another way to return cash to shareholders. Measured by earnings, the payout is equally comfortable: AT&T generated roughly $2.99 per share in earnings over the past twelve months, while the dividend stands at $1.11, well below half of earnings.
Admittedly, first-quarter free cash flow declined to $2.5 billion from $3.1 billion in the same period last year due to rising capital expenditures. This decline reflects investment in fiber and wireless networks that are winning those customers, rather than any sign of business distress. Management still expects full-year capital expenditures of $23 billion to $24 billion and free cash flow of more than $18 billion.
Valuation also adds to the appeal. AT&T trades at roughly 7 times earnings over the past 12 months and 9 times forward earnings, representing a substantial discount to the broader market’s price-to-earnings ratio of over 20 times. Such a multiple is normal for a telecom company with no growth, yet AT&T is still growing, which makes the discount appear excessive. For a profitable, cash-generating business, this is already cheap.
Summary: AT&T’s latest earnings report shows robust subscriber growth, with fiber and wireless businesses advancing in tandem, and free cash flow ample enough to cover both dividends and buyback plans. The company’s reaffirmed guidance eased market concerns about satellite communications competition, and combined with a valuation well below market averages, these factors collectively drove the stock’s positive reaction.
