AT&T Earnings Call: Fiber, 5G and Cash Drive Outlook

At&t Inc ((T)) has held its Q4 earnings call. Read on for the main highlights of the call.

AT&T Charts Aggressive Growth Path as Long-Term Strategy Outshines Near-Term Growing Pains

AT&T’s latest earnings call struck a decidedly optimistic tone, with management leaning hard into a multi-year growth story built on 5G, fiber, and convergence. Executives highlighted strong subscriber momentum, expanding free cash flow, and a detailed plan through 2028, even as they acknowledged short-term pressure from integration costs, higher leverage, and accounting-driven ARPU headwinds. The message to investors was clear: the company is willing to absorb some near-term noise in exchange for a larger, higher-quality connectivity franchise and stronger medium-term earnings and cash generation.

Exceeded 2025 Guidance and Strong Financial Results

AT&T reported a year of outperformance versus its 2025 guidance, underscoring that the turnaround and growth strategy is gaining traction. Fourth-quarter adjusted EPS climbed more than 20% to $0.52, while full-year adjusted EPS rose nearly 9% to $2.12. Consolidated adjusted EBITDA in Q4 increased more than 4%, with margins expanding about 20 basis points, showing the company is not only growing the top line but also improving profitability. Taken together, these results give management credibility as it lays out bolder targets for the next several years.

Robust Subscriber Growth in Wireless and Fiber

Growth on the customer front remained a key highlight. AT&T delivered more than 1.5 million postpaid phone net additions for the fifth year in a row, signaling ongoing competitiveness in a mature wireless market. On the wireline side, AT&T Fiber added over 1 million net new customers for the eighth consecutive year, reinforcing fiber’s role as the core growth engine. AT&T Internet Air – the company’s fixed wireless broadband product – also gained traction, adding 875,000 net additions and more than doubling its customer base over the year. This combination of mobile, fiber, and fixed wireless puts AT&T in a stronger position to capture share across the connectivity spectrum.

Accelerating Fiber Footprint Expansion

Fiber buildout plans are set to accelerate meaningfully, with AT&T positioning its network as a long-term competitive moat. Management plans to ramp annual fiber construction from about 3 million new locations in 2025 to a 4 million run rate by the end of 2026, with a goal of reaching more than 40 million customer locations by year-end 2026, up from 32 million at the end of 2025. Beyond 2026, the company targets roughly 5 million additional fiber locations annually through the end of the decade. This aggressive footprint expansion is aimed at driving higher-quality, recurring revenue streams and supporting the company’s convergence strategy.

Convergence Gains Support Higher Share and Lower Churn

AT&T highlighted convergence – the bundling of wireless and home internet – as a key differentiator and profit driver. The fiber convergence rate improved by 200 basis points year-over-year to 42%, showing more customers are taking multiple services from the company. In markets where AT&T has fiber, its share of postpaid phone subscribers is estimated to be 10 percentage points higher than in non-fiber areas, indicating that fiber presence materially lifts mobile performance. Converged customers tend to exhibit lower churn and higher wallet share, reinforcing management’s strategy of using fiber as the anchor product even if it requires some upfront discounting.

Advanced Connectivity Now Dominates Revenue and Earnings

On a recast basis for 2025, AT&T’s advanced connectivity businesses – domestic 5G and fiber – accounted for roughly 90% of total revenues and more than 95% of adjusted EBITDA. Importantly, advanced connectivity EBITDA has been growing at an average rate above 6% annually over the past two years, roughly double the consolidated EBITDA growth rate of about 3%. This mix shift underscores how AT&T is methodically moving away from legacy services and building a portfolio where the bulk of earnings are tied to scalable, high-demand broadband and wireless infrastructure.

Strong Free Cash Flow Fuels Capital Returns

Cash generation remains a central part of the AT&T story. Free cash flow reached $16.6 billion for the year, up more than $1 billion and near the high end of guidance. This robust cash performance allowed the company to step up capital returns, returning more than $12 billion to shareholders in 2025. Dividends accounted for over $8 billion, while share repurchases topped $4 billion, marking a more than 50% increase in capital returns versus 2024. Looking ahead, AT&T plans to return over $45 billion to shareholders between 2026 and 2028, reinforcing its pitch to income and total-return investors.

Strategic M&A Expands Addressable Market

AT&T is leaning into selective M&A to broaden its network capabilities and growth runway. The company has agreements in place to acquire spectrum from EchoStar and fiber assets from Lumen, with both transactions expected to close in early 2026. The Lumen deal alone is expected to add about $900 million of annualized fiber revenue and materially increase AT&T’s fiber addressable market, enhancing convergence opportunities in new territories. The spectrum and fiber additions are designed to deepen AT&T’s footprint in advanced connectivity, though they also temporarily increase leverage and integration complexity.

Cost Efficiency and Productivity as Key Margin Levers

Operational efficiency is a major theme supporting AT&T’s margin and earnings outlook. The company delivered more than $1 billion of cost savings in 2025 and is targeting an additional $4 billion of annualized savings by 2028. Management plans to achieve these gains through expanded use of AI, greater digital transactions, decommissioning of legacy platforms, and broader operating efficiencies. These initiatives are intended to offset pressures from higher depreciation, integration spending, and promotional activity, while providing flexibility to continue investing in growth.

Positive 2026–2028 Outlook Anchored in Advanced Connectivity

AT&T laid out an upbeat multi-year forecast anchored in its advanced connectivity strategy. The company expects advanced home internet revenue to grow organically at more than 20% annually through 2028, with reported growth above 30% in 2026 when Lumen’s fiber assets are included. Wireless service revenue is projected to grow 2–3% per year, while consolidated adjusted EBITDA is expected to rise 3–4% in 2026 and improve to at least 5% growth by 2028. Adjusted EPS is guided to $2.25–$2.35 in 2026, with a double-digit three-year compound growth rate through 2028, and free cash flow is forecast to exceed $18 billion in 2026 with further gains in 2027 and 2028. These targets imply steadily improving earnings power as new fiber builds and acquisitions mature.

Near-Term Dilution and Integration Costs Weigh on 2026

Management was upfront that the EchoStar and Lumen deals will bring short-term financial drag. AT&T expects about $0.05 of adjusted EPS dilution in 2026 tied to stand-up and integration costs as well as higher interest expense from the associated financing. The company also flagged that upfront integration and build investments will weigh on first-quarter 2026 results, with adjusted EBITDA growth running below the full-year trajectory and free cash flow in Q1 expected between $2.0 billion and $2.5 billion. Investors are being asked to look past these initial impacts to the longer-term earnings power of the expanded platform.

Leverage Bump and Balance Sheet Trajectory

The pending acquisitions will temporarily push leverage higher. Net debt to adjusted EBITDA stood at 2.53x at the end of 2025, but AT&T expects that ratio to rise to around 3.2x immediately after closing the Lumen and EchoStar deals. Management plans to reduce leverage back to roughly 3.0x by year-end 2026 and return to about 2.5x within approximately three years. While this path introduces near-term balance sheet risk, the company is signaling that deleveraging remains a priority even as it funds aggressive fiber expansion and shareholder returns.

Moderate Deployment Cost Inflation

Fiber expansion is not immune to the broader inflation backdrop. AT&T reported that the average deployment cost per fiber passing has risen approximately 2% annually over the past two years, and management expects a similar 2% annual increase over the next three years. While this inflation is manageable and relatively modest, it does modestly pressure build economics and reinforces the importance of scale, cost efficiencies, and disciplined capital allocation to preserve project returns.

ARPU Headwinds from Device Accounting and Convergence Strategy

Reported revenue metrics are being pressured by technical and strategic factors. Device amortization reduced AT&T’s reported postpaid phone ARPU by about 90 basis points in 2025, and a similar headwind is expected in 2026. Additionally, convergence discounts and strategic pricing aimed at winning and retaining bundled customers have tempered consumer wireline ARPU growth, contributing to some slowdown in consumer wireline revenue in the quarter. Management is effectively trading some near-term ARPU and revenue growth for higher lifetime value, lower churn, and deeper customer relationships.

Legacy Business Wind-Down and Transition Costs

AT&T continues to manage the decline of its legacy copper-based services, which remains a structural drag. The company aims to discontinue the majority of these services by 2029, has already stopped sales of targeted copper offerings in 85% of wire centers, and has regulatory approval to shut down copper in more than 30% of its wire centers by 2026. While this transition frees up capital and operating expense over time, it also brings near-term revenue headwinds and transition costs as customers migrate to modern fiber and wireless alternatives.

Higher Depreciation and Interest Temper Near-Term EPS

The heavy investment cycle and acquisition financing are driving up non-operational expenses. AT&T expects depreciation and amortization to run around $20 billion annually through 2028, reflecting substantial network, technology, and fiber investments. Higher interest costs associated with the Lumen and EchoStar transactions will further weigh on near-term EPS and free cash flow. Management argues that these pressures are the price of building a more durable, higher-return infrastructure base that should generate superior cash flows over the long term.

Bad Debt and Elevated Acquisition Costs Pressure Margins

Some near-term margin pressure also stems from higher bad debt and sales costs. Bad debt rose in the quarter, but management attributed this mainly to higher equipment sales and longer-term receivables, rather than broad deterioration in consumer payment behavior. In addition, 2025 featured elevated customer acquisition and advertising spending as AT&T pushed for growth in wireless and broadband, weighing on margins. Executives expect future cost savings and efficiency gains to help offset these pressures and support margin expansion over time.

Integration and Execution Risks Around Lumen Assets

The company acknowledged operational risks as it moves quickly to integrate the Lumen fiber assets on an accelerated timeline. Management expects roughly a two-quarter learning curve as teams absorb seasonality, train on new systems, harmonize IT platforms, and adjust distribution. This compressed ramp could introduce volatility in quarterly results and operational metrics. Nonetheless, AT&T views these risks as manageable and temporary in relation to the long-term strategic value of the assets.

Forward-Looking Guidance Highlights Growth and Discipline

AT&T’s guidance paints a picture of steady financial and operational improvement over the next several years, albeit with some notable first-quarter and near-term bumps. For 2026, the company expects consolidated adjusted EBITDA growth of 3–4%, EPS of $2.25–$2.35 (including roughly $0.05 of dilution from recent deals), and free cash flow above $18 billion, with further FCF increases of about $1 billion in 2027 and $2 billion in 2028. The company plans to return more than $45 billion to shareholders from 2026 to 2028, including sizable share repurchases. Operationally, AT&T targets annual organic advanced home internet revenue growth above 20%, wireless service revenue growth of 2–3% per year, a fiber build pace rising to 4 million passes annually by the end of 2026 and then 5 million per year thereafter, and net leverage trending down from about 3.2x post-deal close back toward 2.5x within roughly three years. Management also expects to hold annual D&A around $20 billion, keep cash taxes relatively low, and deliver an additional $4 billion in cost savings by 2028.

AT&T’s earnings call framed a company in the midst of a major upgrade cycle, using strong cash flows and a healthier core business to fund larger bets on fiber, spectrum, and convergence. While investors must watch near-term integration risks, increased leverage, and accounting-driven headwinds to ARPU and EPS, the overarching narrative is one of a telecom giant pivoting decisively toward higher-growth, infrastructure-heavy advanced connectivity. For shareholders willing to look beyond early integration noise, management’s multi-year plan suggests a path to stronger earnings, higher free cash flow, and sustained capital returns as the decade progresses.