AT&T (T) Q3 2026 earnings review
AT&T's internet sign-ups set a record, but its debt rises
AT&T is signing up more internet customers than ever, and its profit is growing faster than its sales. Revenue grew 5% and profit per share excluding one-offs climbed 20%. Chief executive John Stankey credits homes and businesses taking both its internet and wireless. The company raised its full-year profit target to about $2.40 and lowered spending plans beyond this year.
| Revenue, excluding the acquired Lumen fiber customers | +4.4% +5.3% as reported |
|---|---|
| Profit per share, excluding one-offs | $0.65 $0.54 a year ago |
| Net debt to adjusted EBITDA | 3.13x 2.68x last quarter |
| Full-year profit per share outlook | Raised to the $2.40 range $2.25–2.35 before |
⚖️ Verdict: 🟢 Bullish
The story got better because the earlier plan proved cautious and the new customers are showing up in service revenue. The bad news: the EchoStar spectrum purchase lifted net debt to 3.1 times yearly profit, and by our math the plan has profit growth slowing to about 2% in the fourth quarter.
The question now is whether the lower spending plan adds to cash flow or only replaces what the Mexico sale takes away. If AT&T lifts its cash flow floors, the saving reaches shareholders; if not, something else absorbs it. The outlook published with the fourth-quarter results will tell.
🐂 Bull Case
Internet Sign-ups Hit a Record and Fiber Led
AT&T sells home internet two ways: AT&T Fiber, a wired connection, and AT&T Internet Air, a wireless box that runs on its 5G network. Chief executive John Stankey said the carrier is winning "more homes and businesses" for "both internet and on-the-go wireless", and that its asset base "positions us well for the AI era".
The sign-up numbers support the first claim. AT&T added 769,000 internet customers, which it called "a record quarter", and that count excludes the customers it bought from Lumen in February. Fiber did most of the work, and the acquired customers are not in these sign-ups.
- AT&T Fiber sign-ups: 416,000, from 288,000 a year ago
- Internet Air sign-ups: 280,000, from 270,000
- Advanced home internet revenue: up 23.4%, or about 13% without the Lumen customers by our math
- Households taking both home internet and wireless: 42.8%, from 42.5% last quarter
This matters because fiber is where the capital goes, so faster sign-ups mean new locations fill sooner. The AI claim is harder to test, because the release ties no revenue to it and gives no revenue per fiber customer either.
What to watch: fourth-quarter AT&T Fiber sign-ups against 283,000 a year ago. Another quarter near 400,000 would mean the faster pace is the new normal rather than one quarter's promotion.
Lower Overhead and Depreciation Lifted Profit
AT&T's profit grew faster than its sales because two cost lines fell as a share of revenue. Selling, general and administrative expense, the overhead that covers advertising and back-office staff, dropped to 23.0% of revenue from 24.3%. Depreciation fell by a further 1.9 points, because the carrier says older copper-era equipment is now "fully depreciated".
Together they lifted operating margin excluding one-offs to 23.5% from 21.3%. Handset costs moved the other way and took a little more of revenue. Depreciation is a book entry rather than cash, so adjusted EBITDA, which leaves it out, grew only slightly faster than revenue.
What to watch: the adjusted EBITDA margin next quarter against this quarter's 38.7%. A rise there would mean the cost programme is cutting cash costs, not only depreciation.
AT&T's Earlier Profit Plan Was Too Cautious
Three months ago AT&T expected profit per share excluding one-offs of $2.25 to $2.35 for the year. By our math that left roughly $0.55 a quarter for the second half, well below the pace of the first half.
The quarter came in at $0.65, so the telecoms group lifted its full-year target to "the $2.40 range". Spending plans moved the other way. It cut planned capital investment beyond this year by $1 billion a year, to $22–23 billion, while keeping its fiber targets.
The beat says the earlier plan was cautious, not that costs have stopped rising, because interest expense grew faster than profit. The raise also changes little about the fourth quarter: by our math the new target leaves about $0.54, close to a year ago. The spending cut is the bigger news, because it leaves more cash for debt or shareholders from 2027.
What to watch: whether AT&T lifts its free cash flow floors with the fourth-quarter results. A higher floor would mean the lower spending plan reaches shareholders rather than absorbing the loss of Mexico's cash.
The Business Unit Earns Money Again
AT&T's business unit sells wireless, fiber and older data links to companies. A year ago it lost money, because the older links, which the carrier calls transitional services, shrank faster than fiber could replace them.
This quarter the unit earned an operating profit of $288 million against a $215 million loss a year ago. Fiber did the work. Business fiber revenue rose 8.7%, while transitional revenue fell 14.6% on "lower demand for virtual private network and wholesale services".
But the swing to profit owes more to depreciation than to sales, because depreciation in the unit fell 13.9% while day-to-day costs barely moved. Service revenue grew 2.5%, slower than the group as a whole, so the unit is stable rather than growing fast.
What to watch: business service revenue growth next quarter against this quarter's 2.5%. A faster figure would mean fiber sales now outrun the decline in older links instead of merely offsetting it.
🐻 Bear Case
Debt Reached 3.1 Times Profit While Buybacks Continued
In the quarter AT&T paid about $22.8 billion for EchoStar's spectrum, the airwaves it needs for 5G. The purchase went straight onto the balance sheet. Net debt rose to $149.8 billion, or 3.13 times the past year's adjusted EBITDA. In June the ratio was 2.68 times.
The carrier kept buying its own shares all the same, spending $2.8 billion on repurchases. Dividends and buybacks together returned $4.8 billion, almost all of the quarter's free cash flow. Over nine months, payouts of $13.4 billion exceeded free cash flow of $12.1 billion.
AT&T calls these "Strong capital returns" and says leverage will "return to a level consistent with its target in the 2.5x range during 2029". That matters because interest expense rose 16% from a year ago, and every dollar spent on shares is a dollar not used to repay debt. Paying out more than the business generates while borrowing for spectrum keeps the debt high for longer.
What to watch: net debt at the end of December against $149.8 billion now, once the Mexico sale proceeds and any Forged Fiber stake sale arrive. A ratio still above three would mean the 2029 target rests entirely on profit growth.
AT&T's Plan Has Profit Growth Slowing in Q4
The fourth quarter is where this year's plan gets tested. Adjusted EBITDA, AT&T's profit before interest, tax and depreciation, grew 5.4% this quarter, yet the carrier only moved its full-year outlook to "the upper portion of the 3% to 4% range".
By our math that leaves fourth-quarter growth of roughly 2%, the slowest of the year. The same arithmetic on profit per share gives about $0.54 for the quarter, up about 4% from a year ago after a run of double-digit gains. The release gives no reason for the slowdown. The plan also needs about $5.9 billion of free cash flow in the quarter, far more than a year ago.
What to watch: fourth-quarter adjusted EBITDA against $11.2 billion a year ago. Growth near this quarter's pace would mean the plan was cautious again rather than a sign of rising costs.
Copper Shutdown Costs Profit Before It Saves Money
The Legacy segment is AT&T's old copper network: landlines and slow data links. The carrier is shutting it down and says the revenue decline is "in line with AT&T's goal to decommission the large majority of its copper-based network by the end of 2029".
Revenue dropped 24.5% from a year ago. Profit shrank faster, by 26.7%, partly because last year's costs included "favorable vendor settlements" that did not repeat.
- Legacy revenue: $1.5 billion, under 5% of the group total
- Drag on company-wide adjusted EBITDA growth: about 1.5 percentage points by our math
- Drag on service revenue growth: about 2 percentage points by our math
This matters because the old network still earns a third of its revenue as profit, so lost revenue takes profit with it. Savings arrive only once a whole area is switched off, and the footnotes warn that "Gaining approvals could delay this decommissioning beyond 2029".
What to watch: the count of wire centers with no remaining copper customers, due with the fourth-quarter remarks. A rising count would show the shutdown is cutting fixed costs before the segment turns loss-making after 2027.
Risks This Quarter Didn't Answer
Four standing concerns got no new number from the release, so they stay where they were. Each has a disclosure that would move it one way or the other.
- Fiber revenue per customer outside the acquired Lumen footprint: not given; the quarterly filing's ARPU table would show whether record sign-ups came with discounts.
- Lumen footprint: the release says the acquired customers lifted home internet revenue but not by how much; a sign-up figure for that footprint would show whether its low penetration is rising.
- Satellite competition: no comment in the release; the next call will show whether management still argues fiber and 5G beat low-orbit satellites.
- Finance leadership: the release names no finance chief; who runs the deleveraging from January is still open.
👓 Other Themes
AT&T Agreed to Sell Its Mexico Business
On October 13 AT&T agreed to sell its Mexico wireless unit, the whole of its Latin America segment, to Grupo Televisa and Fintech Holdings. A $2.6 billion write-down on the unit is the main reason reported profit per share was only $0.13. The unit grew revenue 13.2% in the quarter, helped by the peso. It also lost 512,000 prepaid customers. From 2027 the outlook excludes it.
💲 Other KPIs
Churn, the share of phone customers leaving each month, held at 0.92%, the same as a year ago. It has moved between 0.86% and 0.98% over the past year. Sign-ups slipped: 379,000 new postpaid phone customers against 405,000, inside the year's usual band. Promotional discounts on those new lines held back wireless service revenue, which still grew 5.0%.
Down 4.5% from a year ago. AT&T has bought back $7.5 billion of shares over nine months. The lower count explains roughly a quarter of the 20% rise in profit per share excluding one-offs; higher profit explains the rest. The plan calls for about $10 billion of buybacks this year, so by our math about $2.5 billion remains for the fourth quarter.
Headcount fell 6.3% from a year ago and by about 3,700 since June. AT&T booked employee separation charges worth $0.09 a share this quarter and excluded them from adjusted profit. The cuts sit behind the "cost reductions from transformation initiatives" the carrier credits for lower expenses, and the pace quickened: the drop over the past year is the largest in the series.
🔮 Guidance
Raised. The plan now has profit per share excluding one-offs in the $2.40 range for the year. That is about 13% above last year. By our math it leaves roughly $0.54 for the fourth quarter, up about 4% from a year ago. The earlier range had implied a fourth-quarter decline, so the raise mostly recognises what the first nine months delivered.
Unchanged range, but AT&T now points to its upper part. Growth over nine months is 4.3%, and this quarter's 5.4% was the fastest of the year, so the top of the range was already within reach. By our math the upper part of the range leaves fourth-quarter growth of roughly 2%, the slowest quarter of the year; the main chart shows the step down.
Unchanged. The floors stay where they were even though the company trimmed planned capital investment for the following years, and from next year they exclude Mexico. Nine-month free cash flow is $12.1 billion, so by our math the fourth quarter needs about $5.9 billion. That would be 40% above a year ago, when a pension contribution held cash down. The third quarter matched AT&T's own call for a figure close to last year's.
Cut for the later years. This year's range holds; from next year the plan drops by $1 billion a year. AT&T calls it "lower long-term capital investment" and keeps its fiber targets, so it intends to reach the same footprint for less. Nine-month spending is $16.8 billion, so by our math the fourth quarter runs roughly $6.2 to $7.2 billion. That is close to a year ago.
Unchanged. The plan still has company-wide service revenue growing by a low single digit each year. This quarter's 3.8% is the fastest in years, and nine-month growth is 2.6%, so the year is on course. The gap between the quarter and the plan is the old copper business, whose revenue is shrinking by about a quarter a year.
Unchanged. The plan calls for at least 5% growth this year in service revenue from fiber, 5G and other newer products. Nine months stand at 5.0% and this quarter at 6.1%, so the floor is met with a quarter to spare. About one percentage point of this year's growth comes from the Lumen customers bought in February, which the plan always included.
Unchanged. Legacy revenue is the copper business, and the plan has it shrinking by at least a fifth this year. Nine-month revenue is down 25.3%, so the decline is running well past the floor, as the carrier intends. By 2029 the line is meant to be too small to matter.
Unchanged. Nine-month growth in the segment's EBITDA, its profit before depreciation, is 7.0%, and this quarter's 7.3% is the fastest of the year. By our math the floor leaves fourth-quarter growth of at least 3%, so it says little now, and AT&T did not lift it.
Unchanged. The copper segment still earns a profit, $498 million this quarter, but AT&T expects it to lose money after 2027 until the direct costs of running the network are gone. That loss is the bridge the newer business has to cross before company-wide profit growth can reach the 5% planned for 2028.
Unchanged. The dividend stays at $1.11 a share a year. Buybacks of about $10 billion this year are on schedule after $7.5 billion over nine months. The plan holds even though net debt rose past three times yearly profit, so in effect the carrier is borrowing for spectrum while handing cash to shareholders.
Unchanged in substance. The spectrum deal closed this quarter, so the earlier promise, a return to the 2.5 times range a few years after closing, now reads as "during 2029". That is the same date as before, stated more plainly. The ratio stands at 3.13 times, so it must fall by about 0.6 while buybacks continue. The $2 billion from the Mexico sale will help a little.
Unchanged. AT&T passed 39 million homes and businesses with fiber by September. The year-end target of more than 40 million needs about one million more in the fourth quarter. The 2030 goal now comes with a lower spending plan, so the carrier expects to build the same footprint for less money.
❓ Key Questions
What does a fiber customer pay outside the Lumen footprint?
AT&T says home internet revenue rose 23.4% with help from the acquired Lumen customers but gives no price per customer. Without it, nobody can tell whether record sign-ups came with discounts that will cap revenue later.
Why did lower spending not lift the cash flow floors?
AT&T cut capital investment for 2027 and 2028 by $1 billion a year but left the free cash flow floors at $19 billion and $21 billion, now without Mexico. The gap between the two is the number to ask about.
Which spectrum did AT&T write off last quarter?
A $286 million charge in the second quarter was tied to a reprioritised spectrum strategy, and the EchoStar airwaves have now arrived. Which licences were abandoned, and what does that mean for future auction spending?
How many wire centers have no copper customers left?
Legacy profit fell faster than revenue, and savings arrive only when whole areas are switched off. The count of fully cleared wire centers would show whether the 2029 schedule holds and whether approvals are slowing it.
When does the Mexico sale close, and where does the cash go?
The sale was agreed on October 13 with no closing date in the release. Whether the roughly $2 billion goes to debt or to buybacks will show how seriously AT&T takes the 2029 leverage target.