Skip to content
    T
    Earnings call· Mar 2025(Q1 FY25)

    AT&T Q1 FY25 earnings call T

    Apr 23, 2025 Source

    Executive summary

    AT&T Q1 FY25 — Strong Start with Postpaid Phone and Fiber Growth, Share Buyback Commenced

    AT&T delivered a solid first quarter, marked by robust growth in postpaid phone and fiber net adds, which drove increases in service revenue and adjusted EBITDA. The company is accelerating its fiber buildout and network modernization, positioning itself as a converged connectivity leader. Despite a fluid macro environment and potential tariff impacts, management remains confident in its 2025 financial guidance and has commenced its planned share repurchase program, reflecting a strong balance sheet and strategic capital allocation.

    Highlights

    6

    • Consolidated service revenue grew 1.2% year-over-year.

    • Adjusted EBITDA increased 4.4% year-over-year.

    • Postpaid phone net adds were 324,000, contributing to service revenue growth.

    • AT&T Fiber net adds reached 261,000, with fiber revenue growing 19%.

    • Free cash flow was $3.1 billion, up over $350 million on a comparable basis.

    • Net debt reduced by approximately $1 billion in the quarter.

    Concerns

    4

    • Postpaid phone churn increased to 0.83%, up 11 basis points year-over-year, primarily due to normalization of equipment promotional financing roll-offs.

    • Business Wireline revenues declined approximately 9% year-over-year, driven by legacy service pressures.

    • Mobility EBITDA margins decreased 50 basis points year-over-year to 43% due to increased advertising and customer acquisition spend.

    • Anticipated higher costs from announced tariffs could impact device and network equipment, though manageable within 2025 guidance.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year free cash flow
    $16 billion plus
    high materiality
    High
    Q2 capital investment
    $4.5 billion to $5 billion range
    medium materiality
    High
    Q2 free cash flow
    approximately $4 billion
    medium materiality
    High
    Full-year capital investment
    $22 billion range
    high materiality
    High
    Fiber locations passed
    over 30 million total locations
    high materiality
    High
    Fiber locations passed
    50 million-plus total locations
    high materiality
    High
    Share repurchases
    at least $3 billion
    high materiality
    High
    Share repurchases
    remainder of $10 billion authorization
    high materiality
    High
    Postpaid phone churn
    remain at a similar level
    medium materiality
    Medium
    Business Wireline EBITDA trajectory
    normalization
    medium materiality
    Medium

    Segment performance

    13
    SegmentRevenueYoYQoQMargin
    Consolidated
    Total revenues were up 2%.
    		2%———
    Consolidated
    Service revenues were up 1.2%.
    		—1.2%——
    Consolidated
    Adjusted EBITDA was up 4.4%.
    		———4.4% adjusted EBITDA growth
    Mobility
    Total Mobility revenues were up 4.7% year-over-year.
    		—4.7%——
    Mobility
    Mobility service revenues were up 4.1%.
    		—4.1%——
    Mobility
    Mobility EBITDA grew 3.5% year-over-year.
    		———3.5% EBITDA growth
    Consumer Wireline
    Consumer Wireline revenue grew 5.1% versus the prior year.
    		—5.1%——
    Consumer Wireline - Fiber
    Fiber revenue growth of 19%.
    		—19%——
    Consumer Wireline
    Consumer Wireline EBITDA grew 18.6% for the quarter.
    		———18.6% EBITDA growth
    Business Wireline
    Business Wireline revenues declined approximately 9% year-over-year.
    		—-9%——
    Business Wireline - Legacy and other transitional services
    Legacy and other transitional services declined 17.4%.
    		—-17.4%——
    Business Wireline - Fiber and advanced connectivity services
    Fiber and advanced connectivity services grew 4.5%.
    		—4.5%——
    Business Wireline
    Business Wireline EBITDA declined less than 2% versus the prior year.
    		———-2% EBITDA decline

    Operational metrics

    17
    Adjusted EPS (excluding DIRECTV)
    $0.51$0.03 higher YoY
    Q1 FY25

    Adjusted EPS was $0.51 in the quarter, which was $0.03 higher than the prior year when excluding DIRECTV.

    Capital investment
    $4.5 billionslightly lower YoY
    Q1 FY25

    First quarter capital investment of $4.5 billion was slightly lower year-over-year due to lower vendor financing payments.

    Mobility EBITDA margin
    43%down 50 bps YoY
    Q1 FY25

    EBITDA margins of 43% was down 50 basis points versus last year due to increased advertising and marketing spend related to the launch of the AT&T Guarantee as well as higher spending on customer acquisition and device upgrades.

    Converged customer penetration
    more than 4 in 10climbing
    Q1 FY25

    More than 4 in 10 AT&T fiber households also now subscribing to Mobility services.

    Lifetime value of converged accounts
    more than 15% greater
    Q1 FY25

    Accounts with both fiber and wireless services have lifetime values that are more than 15% greater than customers with stand-alone services.

    Postpaid phone gross adds
    about 13%YoY increase
    Q1 FY25

    Postpaid phone gross adds increased by about 13% year-over-year, which more than offset a normalizing trend in churn.

    Postpaid phone ARPU growth
    1.8%YoY growth
    Q1 FY25

    Postpaid phone ARPU grew 1.8% year-over-year.

    Consumer locations served with fiber
    23.8 million
    end of Q1 FY25

    Consumer locations served with fiber reached 23.8 million at the end of 1Q.

    AT&T Internet Air net adds
    181,000significant improvement YoY
    Q1 FY25

    AT&T Internet Air net adds were 181,000 in the quarter, which is a significant improvement from a year ago.

    Total broadband net adds
    137,000
    Q1 FY25

    Combined success with Fiber and Internet Air helped deliver 137,000 total broadband net adds in the quarter.

    Fiber ARPU growth
    6.2%
    Q1 FY25

    Solid fiber ARPU growth of 6.2%.

    Vendor settlements impact on wireline operating expenses
    approximately $100 million
    Q1 FY25

    First quarter results benefited from vendor settlements that positively impacted total wireline operating expenses by approximately $100 million, with roughly $55 million in Consumer Wireline and the rest in Business Wireline. This was factored into the full year plan.

    Business Wireline operating and support costs reduction
    about $400 millionYoY decrease
    Q1 FY25

    Business Wireline operating and support costs were down about $400 million year-over-year due to cost-saving initiatives, lower force, contractor and access costs, vendor settlements, and prior deconsolidation of cybersecurity business.

    FirstNet connections
    more than 7 million
    early Q2 FY25

    As announced earlier this month, AT&T now has more than 7 million FirstNet connections.

    Net debt reduction
    about $1 billion
    Q1 FY25

    During the first quarter, AT&T made further progress on strengthening its balance sheet and reduced net debt by about $1 billion.

    Net debt reduction since 2020
    $32 billion
    since beginning of 2020

    Since the beginning of 2020, AT&T has reduced its net debt by $32 billion.

    Share repurchase authorization
    $10 billion
    multi-year

    AT&T expects to begin share repurchases under its $10 billion authorization this quarter.

    Industry KPIs

    6
    MetricValueDetails
    Postpaid phone churn0.83%%
    Postpaid arpa vs ARPU1.8%%
    Postpaid phone net adds324,000net adds
    Broadband fwa net adds split137,000net adds
    Share buyback capital returnedCommenced
    Net debt EBITDA deleveraging path2.63xx

    Risks & headwinds

    5
    Tariff impact on device and equipment costs2025 and beyond

    potentially increase the cost of smartphones and other devices as well as the cost of network and technical equipment

    Mitigation: Manageable within 2025 financial guidance due to strong Q1 performance, resilient demand, and accelerated cost actions; closely monitoring fluid environment.

    Diminished visibility in macro environmentongoing

    less visibility

    Mitigation: Ability to adjust operating posture to prioritize cash flow if a lower-growth environment materializes; historical resilience of demand for critical connectivity services.

    Normalization of postpaid phone churnQ1 FY25, expected similar in Q2 FY25

    0.83% churn, up 11 bps YoY

    Mitigation: Primarily driven by expected normalization of equipment promotional financing roll-offs; involuntary churn remained low and consistent with expectations.

    Competitive intensity in wireless marketQ1 FY25 and ongoing

    shifts in offers and promotions

    Mitigation: Fine-tuning offers and competing effectively, especially within fiber footprint; focus on high-value customer acquisition and retention.

    Secular pressure on Business Wireline legacy servicesongoing

    legacy and other transitional services declined 17.4%

    Mitigation: Partially offset by growth in fiber and advanced connectivity services; pricing actions on legacy services helped moderate declines, but benefit expected to diminish.

    What to watch in Q2 FY25

    5

    Q2 Free Cash Flow

    Q2 FY25
    Current$3.1 billion (Q1 FY25)
    Targetapproximately $4 billion

    Why it matters

    Free cash flow is a key indicator of financial health and ability to fund capital returns and debt reduction.

    For the second quarter, we expect capital investment in the $4.5 billion to $5 billion range and free cash flow of approximately $4 billion

    Q&A highlights

    6

    How will AT&T and the industry react to increased handset costs due to tariffs? What expense reduction opportunities exist in a slower growth environment, beyond Consumer Wireline?

    John Stankey stated that if tariffs increase handset costs, the industry will likely pass these costs to end-users, finding creative ways for customers to manage pricing increases, similar to past cycles of rising handset costs. He emphasized that AT&T has demonstrated it can navigate such cycles. For expense reduction, he highlighted ongoing efforts across the entire wireline business, call centers, software development, IT, and digital channels, expressing confidence in meeting 2025 guidance through aggressive expense management.

    “if ultimately, costs are passed to us from those that we buy handsets from, unfortunately, for the customer, we're going to have to come up with some new ways for them to figure out how to digest that increase in pricing.”

    asked by Peter Supino · answered by John Stankey

    3 min read7 chapters

    Detailed Narrative

    01

    Strategic Focus on Converged Connectivity

    AT&T's core strategy revolves around its differentiated position as the largest converged provider of 5G and fiber. This approach is driving growth in high-value customer relationships, with converged accounts exhibiting lifetime values over 15% greater than standalone services. The company emphasizes its 'AT&T Guarantee' for wireless and fiber networks, underscoring its commitment to reliable connectivity for consumers and small businesses.

    02

    Accelerated Fiber Buildout and Network Modernization

    The company is ahead of schedule on its fiber expansion, expecting to pass over 30 million total locations by midyear 2025, originally targeted for year-end. The long-term objective remains reaching 50 million-plus total locations with fiber by 2029 through organic builds and commercial agreements. Significant progress is also being made in retiring the legacy copper network, transitioning to modern 5G wireless and fiber technology, with recent FCC orders facilitating faster execution.

    03

    Wireless Market Dynamics and Performance

    The wireless industry is experiencing normalization in net adds and activity levels, leading to shifts in competitive offers. Despite a slow January, AT&T fine-tuned its offers and competed effectively, particularly within its fiber footprint where it sees significant wireless share gains. Postpaid phone gross adds increased by 13% year-over-year, offsetting a normalizing churn trend. The company is pleased with the uptake of its offers among high-quality customer cohorts, evident in ARPU growth and increased converged accounts.

    04

    Consumer Wireline Growth Driven by Fiber and Fixed Wireless

    Consumer Wireline performance was strong, led by 261,000 AT&T Fiber net adds and 181,000 AT&T Internet Air net adds. This marks the seventh consecutive quarter of overall broadband subscriber growth. Fiber revenue grew 19% with a 6.2% ARPU increase, while Consumer Wireline EBITDA grew 18.6%. The company notes the attractive return profile of fiber and its positive impact on the Mobility business.

    05

    Business Wireline Cost Rationalization and FirstNet Momentum

    Business Wireline revenues declined 9% due to legacy service pressures, partially offset by 4.5% growth in fiber and advanced connectivity services. Business Wireline EBITDA declined less than 2%, benefiting from pricing actions on legacy services and approximately $400 million in operating and support cost reductions. FirstNet continues its strong momentum, reaching over 7 million connections and remaining the communication solution of choice for public safety agencies.

    06

    Capital Allocation and Share Repurchase Commencement

    AT&T continues to prioritize fiber deployment and wireless network modernization, with full-year capital investment expected to be in the $22 billion range. The company reduced net debt by approximately $1 billion in Q1, bringing net debt to adjusted EBITDA to 2.63x. Based on balance sheet improvements and financial outlook, AT&T will commence share repurchases under its $10 billion authorization in Q2, with at least $3 billion completed by year-end 2025 and the remainder in 2026.

    07

    Macroeconomic Environment and Tariff Impacts

    Management acknowledges diminished visibility in the macro environment due to policies aimed at rebalancing global trade, particularly announced tariffs. These tariffs could increase costs for smartphones, devices, and network equipment. However, AT&T believes it can manage anticipated higher costs within its 2025 financial guidance by leveraging strong Q1 performance, resilient demand for connectivity, and accelerating planned cost actions. Elevated upgrade rates in Q2 are observed, potentially as a pull-forward📎 due to tariff concerns.

    AI-generated summary of the company’s earnings call. Not investment advice.