8-K: AT&T Reports Strong Q3 2026 with Record Connectivity Growth

AT&T announced robust third-quarter 2026 results, showcasing significant growth in advanced connectivity services and exceeding expectations for customer additions.

Summary

• AT&T reported third-quarter 2026 revenues of $32.3 billion, a 5.3% increase year-over-year.
• Diluted EPS from continuing operations was $0.13, impacted by non-cash impairment charges and separation costs.
• Adjusted EPS was $0.65, up from $0.54 in the prior year's quarter.
• Adjusted EBITDA reached $12.5 billion, a 5.4% increase year-over-year.
• Free cash flow was $5.0 billion, compared to $4.9 billion in the prior year.
• The company added over 1 million Advanced Connectivity customers for the second consecutive quarter.
• AT&T is increasing its 2026 adjusted EPS outlook and lowering its long-term capital investment forecast.
• The company is on track to reach over 60 million locations with fiber by the end of 2030.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with strong revenue growth and improved operational efficiency, though some one-time charges impacted reported EPS.

Positives

• Consolidated service revenue grew 5.3% year-over-year to $32.3 billion.
• Advanced Connectivity service revenue increased by 6.1% to $23.9 billion.
• Advanced Connectivity operating income grew by 18.9% to $7.6 billion.
• Advanced Connectivity EBITDA increased by 7.3% to $12.3 billion.
• Achieved a record 769,000 consumer and business Advanced Connectivity internet net adds, including 442,000 fiber and 327,000 fixed wireless.
• Added 379,000 postpaid phone net adds with a low churn rate of 0.92%.
• Increased 2026 adjusted EPS outlook and lowered long-term capital investment forecast.
• Returned approximately $4.8 billion to shareholders in the quarter, including $2.8 billion in common share repurchases.

Negatives

• Diluted EPS from continuing operations was $0.13, significantly down from $1.29 in the prior year, due to a $2.6 billion non-cash impairment charge for the held-for-sale Mexico wireless business and employee separation charges.
• Operating income was $4.1 billion, down from $6.1 billion in the prior year, impacted by the impairment charge and increased operating expenses.
• Legacy segment revenues declined 24.5% year-over-year as the company continues to decommission its copper-based network.
• Latin America segment operating income was $45 million, down from $22 million in the prior year, despite revenue growth.

Risks

• Potential delays in decommissioning the copper-based network beyond 2029 could impact cost reductions.
• The sale of the Mexico wireless business is subject to closing conditions and regulatory approvals.
• Increased wireless equipment costs and higher bad debt expenses driven by subscriber growth were noted.

Future Outlook

AT&T is increasing its 2026 adjusted EPS outlook and lowering its long-term capital investment forecast. The company maintains its long-term outlook for improved growth in adjusted EBITDA and adjusted EPS, and higher free cash flow through 2028. It expects to return $45 billion+ to shareholders during 2026-2028 and anticipates its net debt-to-adjusted EBITDA ratio will return to the 2.5x range by 2029. Service revenue is projected to grow in the low-single-digit range annually, with Advanced Connectivity service revenue growing in the mid-single-digit range. Legacy service revenue is expected to decline by over 20% in 2026 and be immaterial by the end of 2029. Adjusted EBITDA growth is projected in the upper portion of the 3% to 4% range in 2026, improving to 5% or better in 2028. Adjusted EPS is expected to be in the $2.40 range in 2026 with a double-digit 3-year CAGR through 2028. Capital investment is projected between $23 billion and $24 billion in 2026, and $22 billion to $23 billion annually in 2027 and 2028. Free cash flow is expected to be $18 billion+ in 2026, $19 billion+ in 2027, and $21 billion+ in 2028.

Management Comments

• "We are growing valuable customer relationships as more homes and businesses choose AT&T for all their advanced connectivity needs across both internet and on-the-go wireless," said John Stankey, AT&T Chairman and CEO.
• "Our asset base positions us well for the AI era, with a leading position in fiber the best technology available."
• "We're building the nation's strongest network, backed by Americas Best Guarantee, to deliver faster, more reliable and more accessible connectivity."

Industry Context

StockSavvy.ai notes that AT&T's performance aligns with broader industry trends of increasing demand for high-speed internet and advanced wireless services. The company's focus on fiber deployment and 5G expansion positions it to capitalize on the growing need for robust connectivity, especially with the anticipated rise of AI-driven applications.

Comparison to Industry Standards

• AT&T's reported consolidated service revenue growth of 5.3% in Q3 2026 is a strong indicator, especially when compared to the more mature legacy segments of the telecommunications industry.
• The addition of 769,000 Advanced Connectivity internet net adds, with a significant portion from fiber (442,000), demonstrates AT&T's success in a competitive broadband market where companies like Verizon and T-Mobile are also investing heavily in network upgrades.
• The company's fiber deployment target of over 60 million locations by 2030 is ambitious and places it among the leaders in fiber infrastructure build-out, aiming to compete with or surpass the reach of other major providers.
• The postpaid phone churn rate of 0.92% is a positive metric, indicating strong customer retention, which is a key performance indicator across the wireless industry, often benchmarked against competitors like Verizon and T-Mobile.

Legal Proceedings

• A non-cash impairment charge of $2.6 billion was recorded for the held-for-sale Mexico wireless business.

Stakeholder Impact

• Shareholders are expected to benefit from increased adjusted EPS outlook, continued capital returns ($45 billion+ planned for 2026-2028), and potential share price appreciation driven by growth in advanced connectivity services.
• Customers will benefit from continued investment in and expansion of AT&T's fiber and 5G networks, offering faster and more reliable connectivity.
• Creditors may see a positive impact from the company's strategy to return its net debt-to-adjusted EBITDA ratio to its target range of 2.5x by 2029.

Next Steps

• Continue execution of the investment-led strategy to deliver advanced connectivity.
• Accelerate growth in consolidated service revenue and improve operating efficiency.
• Continue fiber network expansion, aiming for over 60 million locations by end of 2030.
• Complete the sale of the Mexico wireless business.
• Return $45 billion+ to shareholders through dividends and share repurchases during 2026-2028.

Key Dates

Recommendation

The company is demonstrating strong execution in its core growth areas (Advanced Connectivity) and is improving its financial outlook. However, the significant impact of one-time charges on reported EPS, the ongoing decommissioning of legacy assets, and the substantial debt levels warrant a cautious 'hold' rating until sustained profitability and debt reduction are more clearly demonstrated.

Keywords

telecommunications, connectivity, fiber internet, 5G wireless, subscriber growth, revenue growth, EBITDA, capital investment