AT&T’s Fortunes: A Comedy in Markets, Three Acts, and Several Thousand Miles of Fiber

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There are few spectacles so diverting to the connoisseur of human folly as a stock market disappointed. Here, in the grand theatre of finance, AT&T—ticker T, as if the alphabet itself placed it at the head of the table—has played its hand with, perhaps, too much decorum for the liking of the crowd. Its shares, once moving with the languid confidence of a debutante at her first ball, tripped rather publicly when the company declined to aggrandise its own forecasts after the second quarter—an omission that titillated the audience with all the scandal of an unraised glass at a toast.

Of Subscribers, Surges, and Polite Thefts

Let us first turn our opera glasses toward subscriber growth—a performance less chamber music than outright burglary. AT&T, in a gesture of supreme opportunism that rivals a duchess switching allegiances at the whiff of a superior vintage, has parlayed Verizon’s price increases into 479,000 new retail postpaid supplicants, of whom 401,000 pledged their monthly oblations via the sacrament known as the mobile phone. There was, alas, a not wholly lamented shedding of 34,000 prepaid acolytes, but one does not mourn the departure of the uninvited from an exclusive salon.

Their mobility revenue swelled a delicious 6.7% to $21.8 billion, with the service portion rising to $16.9 billion—a decent showing, if one cares for things as bourgeois as numbers. Equipment, meanwhile, soared a decadent 18.8% to $5 billion. Postpaid ARPU, that charming mosaic of penny-grabbing and psychology, inched up to $57.04, reminding us that “average” is seldom so glamorous as it sounds.

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The broadband division is possessed of a similarly voracious appetite, having wooed 243,000 new fiber clients and 203,000 of the internet air variety. Some 93,000 non-fiber customers, glorying in their obsolescence, decamped, giving fiber ARPU the chance to rise, ever the social climber, to $73.26. Total consumer broadband revenue shimmered upwards by 5.8%, settling at $3.5 billion.

And fiber—a word unspeakably vulgar in polite drawing rooms—remains AT&T’s chosen form of conquest. Management aspires to ensnare 4 million new households per year in this silky web, having already crossed the thoroughly symbolic 30-million-locale Rubicon, with aims for 60 million by 2030. The cast of characters includes BlackRock in the risqué role of co-venturer (via Gigapower) and a chorus of open-access providers. And, as in all great productions, the props department receives a helping hand: tax changes in that most American of legislative extravaganzas (“One Big, Beautiful Bill”) courtesy of which depreciation now arrives not with age, but upon arrival.

When a Segment Declines With Dignity

Yet every drama requires a shadow to sharpen its light. Business wireline—AT&T’s whip-thin, sepulchral cousin—demonstrated an admirable commitment to tragedy, seeing revenue shrink 9.3% to $4.3 billion. An operational profit of $102 million last year was politely turned out into a loss of $201 million; adjusted EBITDA was whisked downward by 11.3% to $1.3 billion. If history repeats itself first as farce and then as statistics, we appear to be entering the farcical stage.

Nonetheless, AT&T’s grand ledger crept upward: total revenue up 3.5% to $30.8 billion, adjusted EPS up 5.8% to $0.54—a figure that confounded analysts, who had wagered on a paler $0.52. Cash, that everlasting necessity of living well beyond one’s means, flowed $9.8 billion in operation and $4.4 billion as a free agent. Dividends, the only occasion upon which money returns to its rightful owners, amounted to over $2 billion—a coverage ratio that would surely make one’s butler blush. The quarterly dividend, held at $0.28 with the silent rectitude of a Victorian hostess since May 2022, bestows a forward yield of about 4%—which, while not precisely champagne, is certainly not tap water.

Whither now? Guidance, that flinty oracle to which all market sophists repair, remains stoically unchanged. Mobility service revenue is projected to grow 3% or better; adjusted EPS is expected to saunter demurely between $1.97 and $2.07, a decline from $2.26 of the prior year—a fact investors received with all the enthusiasm of an unwanted houseguest. Free cash flow, too, resides in the “low to mid” $16 billion range. The table, like a proper dinner party, contains nothing new, just the confirmation that the silverware is accounted for:

Metric Prior Guidance New Guidance
Mobility service revenue growth The higher end of 2% to 3% 3% or better
Adjusted EPS $1.97 to $2.07 $1.97 to $2.07
Adjusted EBITDA 3% or better 3% or better
Free cash flow $16 billion-plus In the low to mid $16 billion range

Looking beyond the garden wall, capital expenditures will remain at the dizzying level of $23–24 billion annually in 2026 and 2027, supporting dreams of free cash flow swelling to over $18 billion and $19 billion, respectively. The future will be expensive, but at least it will be funded.

On the Art and Artifice of the Dip

And so we arrive at the hapless question that bedevils all would-be philosophers of finance: Should one “buy the dip”? AT&T, in this season’s performance, has surpassed Verizon in attracting subscribers—by virtue not only of better deals and lower prices, but, one suspects, of appearing less grasping. Reliability? It is the last refuge of the unimaginative, but alas, it is what one seeks in network providers.

Yet the drama’s true climax is fiscal, not artistic. Investors indicated distaste at guidance held flat, especially when Verizon had the courtesy to upgrade its forecasts posthaste. But tax largesse will eventually wend its way to AT&T’s ledger, and the bid to lace America with new fiber is a pre-emptive gesture against Verizon’s impending union with Frontier Communications. Indeed, wireless may soon be sold à la carte, but fiber will arrive en filigrane.

Let us speak, as equity researchers must, of valuation—a subject about as romantic as haggling over cab fares. At present, AT&T commands a forward P/E of 13.5 on 2025 estimates, a premium that might make even Oscar blanche, compared to Verizon’s paltry 9. Once, this state of affairs would have seemed as fanciful as a dandy’s hat.

However, where there is substance—Verizon’s higher yield (some 6%), the prospective cannibalism of Frontier, and a staid sensibility—there is appeal. As for AT&T: it remains, as ever, the sort of investment one is seen with, but not the sort that sets tongues wagging.

To buy or not to buy? That is best left, like all good dilemmas, unresolved at the end of Act III. If both survive the One Big, Beautiful Bill, the true reward may lie less in choosing the star and more in applauding the spectacle. 🎩

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2025-07-27 22:04