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    T
    Earnings call· Mar 2026(Q1 FY26)

    AT&T Q1 FY26 earnings call T

    Apr 22, 2026 Source

    Executive summary

    AT&T Q1 FY26 — Strong Fiber and 5G Customer Growth Drives Convergence

    AT&T delivered a strong first quarter, driven by robust customer growth in fiber and 5G, and accelerated convergence of fixed and mobile services. The early close of the Lumin acquisition significantly expanded the fiber footprint, while the company continues its strategic shift towards network value over device subsidies. Despite increased capital investments and the ongoing decline in legacy services, AT&T remains focused on its cost transformation and network modernization to support future AI-enabled connectivity.

    Highlights

    5

    • Achieved 584,000 total fiber and fixed wireless advanced Internet customer net additions, marking the best ever first quarter result and sixth consecutive quarter with over 0.5 million net adds.

    • Increased convergence rate to 42% of advanced home Internet customers also choosing AT&T Wireless, a more than 3 percentage point organic increase year-over-year.

    • Closed the Lumin transaction ahead of schedule, adding 1.1 million fiber customers and over 4 million fiber locations.

    • Advanced Connectivity business service revenues stabilized year-over-year for the first time ever.

    • Reported adjusted EPS of $0.57, up nearly 12% year-over-year.

    Concerns

    5

    • Adjusted EBITDA margin decreased 30 basis points to 37.4%, partly due to a $100 million benefit in Q1 2025 not recurring.

    • Free cash flow declined by roughly $600 million year-over-year to $2.5 billion, primarily driven by higher capital investment of $5.1 billion.

    • Net debt to adjusted EBITDA increased to 2.71x from 2.53x at the end of Q4 FY25, mainly due to the Lumin transaction.

    • Legacy service revenues declined about 25% year-over-year, consistent with outlook for 20% plus decline in 2026.

    • Legacy EBITDA declined about 40%, a greater decline than revenue due to the lag in discontinuing operations and infrastructure.

    Guidance & targets

    18
    CategoryTargetConfidence
    Consolidated service revenues growth
    low single-digit range
    high materiality
    High
    Consolidated adjusted EBITDA growth
    3% to 4% range
    high materiality
    High
    Free cash flow
    $4 billion to $4.5 billion
    high materiality
    High
    Free cash flow
    $18 billion plus
    high materiality
    High
    Adjusted EPS
    $2.25 to $2.35 range
    high materiality
    High
    Wireless service revenue growth
    2% to 3% range
    medium materiality
    High
    Fiber reach growth
    about 8 million locations
    high materiality
    High
    Total business service revenues (Advanced Connectivity segment)
    remain stable in the near term and continue to grow at a low single-digit CAGR
    medium materiality
    Medium
    Advanced Connectivity service revenues growth
    5% plus
    high materiality
    High
    Advanced Connectivity EBITDA growth
    6% plus
    high materiality
    High
    Legacy service revenues decline
    20% plus
    medium materiality
    High
    Net leverage ratio
    approximately 3.2x
    high materiality
    High
    Net leverage ratio
    approximately 3x
    high materiality
    High
    Net leverage ratio
    2.5x range
    high materiality
    High
    Share repurchases
    approximately of stock this year
    high materiality
    High
    Total capital returned to shareholders
    $45 billion plus
    high materiality
    High
    Annual cost savings
    $4 billion
    high materiality
    High
    Fiber locations reached
    60 million plus locations
    high materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    Consolidated
    Total revenues increased year-over-year.
    		Up 2.9%2.9%——
    Consolidated Service Revenues
    Service revenues increased year-over-year, driven by fiber and fixed wireless customer growth.
    		Up 1.4%1.4%——
    Advanced Connectivity Service Revenues
    Service revenues for the Advanced Connectivity segment grew year-over-year.
    		—3.6%——
    Wireless Service Revenues
    Wireless service revenues grew, consistent with guidance for below full-year run rate.
    		—1.7%——
    Advanced Home Internet Service Revenues
    Includes 2 months of revenues from Lumin acquired fiber customers, contributing about 650 basis points to growth.
    		—27.3%——
    Business Fiber and Advanced Connectivity Service Revenues
    Consistent with last quarter's trend and improved from mid-single-digit growth a year ago.
    		—7.2%——
    Total Advanced Connectivity Business Service Revenues
    Stabilized year-over-year for the first time ever, reflecting improved growth in fiber and 5G offsetting transitional services.
    		—Essentially flat——
    Advanced Connectivity EBITDA
    EBITDA grew year-over-year despite headwinds from high single-digit equipment revenue growth and Lumin acquisition costs.
    		—5.6%——
    Legacy Service Revenues
    Consistent with outlook for 20% plus decline in 2026.
    		—Declined about 25%——
    Legacy EBITDA
    Decline was greater than revenue decline due to lag between customer migration and discontinuing infrastructure operations.
    		—Declined about 40%——

    Operational metrics

    10
    Adjusted EBITDA margin
    37.4%Decreased 30 bps YoY
    Q1 FY26

    Compared to Q1 2025, which included a $100 million benefit from vendor settlements.

    Annual cost savings target
    $4 billion
    Annual

    Target for ongoing transformation initiatives including force optimization, federal rationalization, AI enablement, digitalization, and legacy operations reductions.

    Capital investment
    $5.1 billion
    Q1 FY26

    Higher capital investment primarily due to accelerated fiber deployment, contributing to a decline in free cash flow.

    Cash and marketable securities
    $12 billion
    End of Q1 FY26

    Strong liquidity position.

    Available term loans
    $19 billion
    End of Q1 FY26

    Available to draw, contributing to strong liquidity.

    Capital returned to shareholders
    $4.3 billion
    Q1 FY26

    Through dividends and share repurchases.

    Total capital returned to shareholders target
    $45 billion plus
    Through 2028

    Plan to maintain consistent pace of buybacks and dividends.

    Advanced Internet services locations reached
    90 million plus
    Current

    Represents scalable reach and converged connectivity.

    Copper wire centers on definitive shutdown schedule
    30%
    Current

    Part of the legacy copper wind-down program.

    Wireless network investment for interior buildings
    $1.5 billion
    Annual

    Investment to ensure service levels in hospitals, stadiums, hotels, and universities.

    Industry KPIs

    9
    MetricValueDetails
    Postpaid phone churn—
    Postpaid arpa vs ARPUFlatYoY
    Postpaid phone net adds294,000net adds
    M a and spectrum transactions—
    Fiber passings locations reached37 million pluslocations
    Fixed mobile convergence cross sell attach42%%
    Legacy copper wind down cost transformation2.5 millionsubscribers
    Net debt adjusted EBITDA and deleveraging path2.71xratio
    Broadband fiber fwa net adds with fiber vs fwa s512,000net adds

    Product announcements

    4
    ProductTypeDetails
    AT&T Guaranteeexpansion
    Flagship Applaunch
    AT&T OneConnectlaunch
    Unlimited Your Way plansupdate

    Deals & partnerships

    4
    Luminacquisition

    Closed the transaction ahead of schedule in early February. Integration is progressing well with sales activity above pre-transaction trends.

    EchoStaracquisition

    Acquisition of spectrum from EchoStar. Expected to close shortly after Q1.

    Equity investorpartnership

    Partnership for the acquired Lumin fiber assets.

    AST SpaceMobilepartnership

    Working closely on R&D and bringing direct-to-cell product out to market.

    Risks & headwinds

    6
    Higher capital investmentQ1 FY26

    $5.1 billion in Q1 FY26

    Mitigation: Management expects free cash flow to improve in Q2 and remain strong for the full year, with $18 billion plus expected for FY26.

    Lumin integration costsQ1 FY26

    Immaterial EBITDA contribution in Q1 FY26

    Mitigation: Increased spending in acquired geographies to stand up the business for faster growth; performance expected to improve monthly, with immaterial EBITDA contribution for the full year 2026.

    Legacy business declineQ1 FY26 and next several quarters

    Legacy service revenues declined about 25% YoY; Legacy EBITDA declined about 40% YoY

    Mitigation: Actively working with customers to upgrade to advanced services like Internet Air and Phone Advance; discontinuing legacy services in over 30% of wire centers; aiming for full copper infrastructure shutdown by 2030 to remove costs and distraction.

    Net leverage ratio increaseFollowing EchoStar transaction

    Expected to increase to approximately 3.2x

    Mitigation: Expected to decline to approximately 3x by the end of 2026 and return to the 2.5x range within approximately 3 years following the transaction.

    Portfolio over-indexed on device subsidiesOngoing

    Not quantified, but noted as a current state

    Mitigation: Implementing strategies like OneConnect and refreshed Unlimited Your Way plans to balance the portfolio, emphasizing network value and driving convergence.

    Potential ARPU dilution from value segment targetingAs fiber penetration moves from 40% to 50%

    Not quantified, but acknowledged as a possibility

    Mitigation: Economically rational and value-creating to add new accounts, even if it means some ARPU dilution, by targeting price-sensitive segments with better fiber pricing and fixed wireless options.

    Q&A highlights

    6

    How widely will OneConnect roll out, what is its target market, and what impact will it have on subscriptions? Can the improved phone churn trend continue despite pricing increases?

    OneConnect is an iterative rollout targeting BYOD customers and those seeking simplicity, aiming to drive churn down by pairing fiber broadband with wireless. It will evolve with more variants over time. The improved churn trend is expected to continue as the strategy of converging customers aligns them to AT&T's asset bases, leading to sustainable growth and profitability.

    “the best way for us to manage churn is to converge customers.”

    asked by John Hodulik · answered by John Stankey

    3 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus on Convergence and Network Advantage

    AT&T is prioritizing converged fixed and mobile internet services, with 42% of advanced home Internet customers also choosing AT&T Wireless, representing a 3 percentage point organic increase year-over-year. This strategy aims to improve customer lifetime values, churn, and account growth by leveraging what the company believes is the best combined service in the market. The company asserts its investments in fiber and 5G have created a structural advantage, reaching over 90 million customer locations with advanced internet services, positioning it with more scalable reach and converged connectivity than peers.

    02

    Lumin Acquisition and Integration Progress

    The acquisition of Lumin closed ahead of schedule, significantly expanding AT&T's fiber footprint by adding 1.1 million fiber customers and over 4 million fiber locations. Early integration indicators are positive, with sales activity in acquired geographies well above pre-transaction trends. The company expects to see improved trends in fiber and wireless customer growth in these areas as engineering, construction, and service delivery scale in the back half of the year, though the acquisition did not materially contribute to EBITDA in Q1 due to increased spending.

    03

    AI-Ready Network Architecture and Policy Advocacy

    AT&T is architecting its converged network to support AI-enabled tools and applications, focusing on ultra-low latency, capacity, and session control across multiple access technologies. The goal is to operate the most advanced and open communications network in the U.S. by the end of the decade, built on dense metro fiber and deep nationwide spectrum. The company also appreciates federal policy efforts to modernize networks, viewing high-performing connectivity as critical for a competitive American AI ecosystem.

    04

    Business Segment Stabilization and Growth Outlook

    For the first time ever, Advanced Connectivity business service revenues stabilized year-over-year, driven by improved growth in fiber and 5G offsetting declines in transitional services like VPN. This stabilization is attributed to better sales execution and an expanding fiber/fixed wireless footprint for businesses. AT&T expects total business service revenues within the Advanced Connectivity segment to remain stable in the near term and grow at a low single-digit CAGR through 2028.

    05

    Cost Transformation and Legacy Copper Wind-Down

    AT&T is making significant progress towards its target of $4 billion in annual cost savings by the end of 2028 through initiatives such as workforce optimization, federal rationalization, AI enablement, and digitalization. The company has secured approval to discontinue legacy services in over 30% of its wireline footprint and is actively migrating customers to advanced services. The long-term plan involves a full shutdown of copper infrastructure by 2030, which is expected to yield substantial cost improvements and remove operational distractions.

    06

    OneConnect and Portfolio Rebalancing Strategy

    The launch of AT&T OneConnect, the industry's first single subscription service for fiber and wireless, is a key part of AT&T's strategy to rebalance its product portfolio. This initiative aims to shift focus away from expensive device subsidies towards the inherent value of the network, particularly targeting BYOD customers and those seeking simplicity. The company plans to iterate and expand OneConnect's offerings over time⏳ to drive deeper fiber penetration and growth in converged customer relationships, ultimately reducing churn.

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