T-Mobile (TMUS) Q3 2026 earnings review
T-Mobile lifts revenue per account, but customer cancellations hit high
T-Mobile is leaning on price increases and cost cuts as its customer account growth slows down. Once the wireless carrier passed the one-year mark of buying UScellular and Metronet, total postpaid account growth dropped to 3%, while monthly revenue per account climbed 4% on plan price hikes. Chief executive Srini Gopalan raised the full-year profit outlook slightly, but by our math the plan has core operating profit growth slowing to about 7% in the fourth quarter.
| Postpaid accounts | 35.0M +2.9% from a year ago (vs +10.2% in Q2) |
|---|---|
| Monthly revenue per account (ARPA) | $155.73 +4.2% from a year ago |
| Postpaid account monthly churn | 1.09% up 0.12 percentage points from a year ago |
| Full-year Core EBITDA outlook | Raised $100M middle of the range: 10.2% growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because higher revenue per account and lower payroll costs offset rising customer cancellations. Beating its own third-quarter target on new accounts shows the target was cautious, not that customer losses have eased: the monthly share of accounts cancelling hit 1.09%, and the kept full-year outlook points to an 11% drop in fourth-quarter account additions by our math.
The question now is whether T-Mobile can keep growing service revenue near 6% through higher prices now that account volume is growing below 3%. Either the third-quarter cancellation jump was a one-time blip from repricing older plans, or higher bills and broadband-only accounts have permanently lifted customer turnover. Fourth-quarter account churn and revenue per account will settle it.
🐂 Bull Case
Higher Prices Lift Revenue Per Account
T-Mobile measures customer value through average monthly revenue per postpaid account, which it calls ARPA. Chief executive Srini Gopalan said the company's network and value drive durable growth. In the third quarter, T-Mobile raised prices on older plans and moved more customers onto plans that charge taxes and fees separately. Those actions lifted monthly revenue per account to $155.73, up 4.2% from a year ago and $2.82 higher than last quarter.
The $2.82 quarterly jump is the largest in the past two years and beat the pace needed to hit management's full-year goal. Because T-Mobile passed through price increases and added more lines to business and home-internet accounts, postpaid service revenue grew 9.3% even after the company lapped last year's acquisitions.
What to watch: fourth-quarter revenue per account when T-Mobile reports full-year results. Another increase after the third-quarter price changes would show that higher monthly bills are sticking without promotional givebacks.
Lower Payroll Costs Expand Operating Margin
T-Mobile tracks its operating profitability using Core Adjusted EBITDA, which measures profit before interest, taxes, depreciation and one-off restructuring charges, as a share of service revenue. That margin rose 2.1 percentage points from a year ago to 49.7%, while reported operating profit margin on total revenue rose 3.4 percentage points to 24.0%.
Overhead savings drove the improvement. Selling, general and administrative expenses—advertising, store costs and corporate overhead—excluding one-offs fell by 2.1 percentage points of service revenue to 29.8%, because T-Mobile spent less on "lower personnel-related costs, including payroll and benefits, and lower external labor and professional services expenses." Cost of services—the expense of running the cell network—excluding one-offs also edged down 0.2 percentage points to 15.2% of service revenue.
What to watch: one-off store-closure and merger charges in the fourth quarter, which totaled $312 million before tax this quarter. A drop in those charges would let the overhead savings flow through to reported profit without adjustments.
Spectrum Sale Funds Debt Paydown and Dividend
T-Mobile has been reserving capital capacity ahead of government wireless license auctions in 2027 and 2028 while still returning cash to shareholders. In the third quarter, the wireless carrier collected $2.93 billion in cash from selling property and intangible assets, matching its planned $2.9 billion sale of 800-megahertz licenses.
That cash inflow allowed T-Mobile to cut net debt (excluding cell-tower obligations) by $3.76 billion from last quarter to $80.34 billion, lowering net debt to 2.2 times yearly Core Adjusted EBITDA from 2.3 times. At the same time, the board raised the quarterly cash dividend by 15% to $1.17 per share and bought back $2.42 billion of stock, plus another $791 million in October.
What to watch: cash tax payments in the fourth quarter after only $7 million paid in the third quarter. A jump in tax payments for the license sale gain would test how much free cash flow remains for year-end buybacks.
Positives this quarter didn't test
Two long-term growth plans received no numerical update in the third-quarter release and presentation.
- 5G home internet and fiber joint ventures toward the 2030 target of 18 to 19 million broadband customers: T-Mobile again omitted broadband subscriber counts from its tables, so the earnings call or quarterly filing must provide the quarterly addition pace.
- Connecting robots and artificial-intelligence devices to the 5G network: no commercial metrics appeared in the release, and early contract announcements remain the next test.
🐻 Bear Case
Account Growth Slows and Cancellations Hit High
"More families and businesses are choosing T-Mobile, fueling our industry-leading financial growth," Gopalan said. The account numbers show that net customer additions are slowing while cancellations rise. In August and July, T-Mobile passed the one-year mark of buying regional carrier UScellular and fiber provider Metronet, which had added 2.08 million postpaid accounts last year.
- Total postpaid accounts: up 2.9% from a year ago, down from 10.2% growth last quarter
- Postpaid net account additions: 274 thousand, down 30.8% from 396 thousand a year ago
- Postpaid account churn (the monthly share of accounts cancelling): 1.09%, up 0.12 percentage points from a year ago to a multi-year high
- Fourth-quarter net additions implied by the full-year outlook: 232 thousand by our math, down 11.1% from a year ago
T-Mobile beat its own call target of roughly 250 thousand new accounts, but that shows the target was cautious rather than that customer losses have stopped. The company blamed higher cancellations on "the temporary impact of our rate plan modernization" and "higher average broadband-only accounts which have higher churn." Because the kept full-year outlook points to another year-over-year drop in fourth-quarter additions, volume growth remains weak.
What to watch: fourth-quarter postpaid account churn and net additions against the 232 thousand implied by the outlook. If churn stays above 1.00% after the price-plan changes end, the customer losses are ongoing rather than temporary.
Bad Debt Rises Faster Than Revenue
T-Mobile finances phones for customers through equipment installment plans, which are two-year loans for handsets, and sells devices below its own cost to attract accounts. In the third quarter, both phone subsidies and unpaid customer bills grew much faster than T-Mobile's 7.4% total revenue growth.
Equipment revenue rose 13.4% to $3.93 billion on "an increase in the high-end phone mix and higher manufacturer pricing," while equipment costs rose 12.2% to $5.44 billion. By our math, T-Mobile's net loss on selling phones widened by 9.2% from a year ago to $1.52 billion. Meanwhile, bad debt expense and losses from selling receivables jumped 27.7% from a year ago to $452 million, reaching 1.9% of total revenue against 1.6% a year ago.
What to watch: bad debt as a share of revenue and subprime installment-plan disclosures in the third-quarter filing. A further rise during the fourth-quarter holiday upgrade season would show that higher phone prices are straining customer credit.
Risks this quarter didn't answer
Four standing concerns could not be fully tested from the third-quarter release and presentation alone.
- Prepaid revenue decline: prepaid service revenue fell 7.5% from a year ago to $2.43 billion, worse than last quarter's 6.4% drop, and T-Mobile still withholds prepaid customer counts and revenue per user.
- Missing phone and broadband unit disclosures: for a third straight quarter, the release omitted postpaid phone and 5G home-internet subscriber additions, hiding whether phone lines or home internet drove account growth.
- Satellite and fiber competition for home internet: the release gave no update on rival low-Earth-orbit satellite services or fiber building; the conference call Q&A is the next check.
- Controlling-shareholder governance: the quarterly filing will show any updates on intercompany dealings with majority owner Deutsche Telekom and shareholder lawsuits over buybacks.
💲 Other KPIs
Wholesale revenue—fees other mobile brands pay to use T-Mobile's network—rose 3.3% from last quarter to $679 million, though it remained 7.5% below a year ago. After falling in the first half as DISH and TracFone traffic rolled off, sequential growth supports management's plan for wholesale revenue to stabilize this year.
T-Mobile's weighted-average diluted share count fell 4.9% from a year ago and 1.0% from last quarter after the carrier spent $2.42 billion buying back 13.6 million shares in the third quarter. The smaller share count lifted diluted earnings per share growth to 33.6%, adding 6.3 percentage points on top of 27.3% net income growth.
Handset and device inventory on the balance sheet rose 30.2% from a year ago and 40.8% from last quarter to $3.09 billion. Building that inventory ahead of autumn phone launches absorbed $892 million of working capital in the third quarter, which pushed operating cash flow down 1.6% from a year ago despite higher profit.
🔮 Guidance
Unchanged at the middle of the prior range. The wireless group now states its full-year target as approximately 1.0 million net new accounts rather than a 950 thousand to 1.05 million band. With 768 thousand added in the first nine months, that leaves about 232 thousand for the fourth quarter by our math, down 11.1% from 261 thousand a year ago.
Raised. Management lifted the middle of the range by $100 million to $37.4 billion, or 10.2% growth for the year. By our math, that leaves $9.0 billion for the fourth quarter, meaning growth slows to 6.6% from 10.8% in the third quarter as the UScellular acquisition sits in both years. Across four quarters, midpoint changes were +$50 million, $0, and +$100 million.
Raised. The company lifted the bottom of the range by $300 million, raising the middle by $150 million to $28.75 billion, up 2.9% for the year. By our math, that leaves $6.69 billion for the fourth quarter, or 0.5% growth from a year ago. It is the third straight raise: +$50 million in the first quarter, +$200 million in the second, and +$150 million now.
Unchanged. Cash spending on property and equipment stays at approximately $10.0 billion for a fourth straight quarter. Because T-Mobile slowed capital spending by 14.0% in the third quarter to $2.27 billion, the full-year plan leaves $2.40 billion for the fourth quarter by our math, a 6.0% step-up from the third quarter and 2.6% below a year ago.
Raised. T-Mobile lifted the bottom of the outlook by $300 million, moving the middle up $150 million to $18.75 billion, or 4.2% full-year growth. By our math, that leaves $4.28 billion for the fourth quarter, up 2.3% from a year ago against 5.3% growth in the third quarter. Midpoint raises across the last three quarters were +$50 million, +$200 million, and +$150 million.
Cut. Management lowered the expected full-year effective tax rate by 1 percentage point to between 24% and 25%, after holding it at 25% to 26% for the prior three quarters. In the third quarter, the effective tax rate was 23.9% ($1.09 billion on $4.54 billion of pre-tax income), down from 25.2% in the second quarter.
❓ Key Questions
How many 5G broadband and phone subscribers joined in Q3?
T-Mobile stopped reporting phone and broadband subscriber counts this year, but its 2030 target of 15 million 5G broadband customers requires roughly 330 thousand additions a quarter. Without the unit numbers, investors cannot tell if broadband is still on track.
Why did bad debt jump 28% while revenue grew 7%?
Bad debt and receivable sales losses reached $452 million, or 1.9% of total revenue, while equipment installment-plan receivables shrank from the start of the year. Management has not explained whether specific customer groups or higher phone prices are driving defaults.
When will cash taxes on the $2.9B spectrum sale hit?
T-Mobile collected $2.93 billion from selling property and intangible assets in the third quarter, but paid only $7 million in cash income taxes during the period. Investors need to know if the expected $850 million tax bill lands in the fourth quarter.
What split drove the 7.5% drop in prepaid revenue?
Prepaid service revenue fell $198 million from a year ago to $2.43 billion, accelerating from last quarter's decline. Because T-Mobile no longer reports prepaid subscriber counts or monthly revenue per user, it is unclear how many customers left for rivals versus moving to postpaid plans.