Telus (TU) Q3 2026 earnings review
Telus steadies its wireless business, but its tech units shrink
Telus steadied its Canadian wireless business, but write-downs and client losses in its technology units dragged down overall results. Total revenue slipped 2% to $5.0 billion, and an $800 million write-down at Telus Health pushed the telecom and digital group to a $660 million net loss. Chief executive Victor Dodig kept the full-year outlook unchanged and launched a cost plan to save $900 million a year by the end of 2028, but by our math the unchanged plan leaves fourth-quarter free cash flow down 52%.
| Profit before interest, taxes and depreciation, excluding one-offs | $1,760M -5.5% from a year ago (-2% excluding prior-year one-offs) |
|---|---|
| Free cash flow | $396M -35% from a year ago |
| Monthly bill per mobile phone user (ARPU) | $57.22 $57.21 a year ago |
| Full-year 2026 outlook | Unchanged middle of the range: -1% service revenue, -3% Adjusted EBITDA |
⚖️ Verdict: 🔴 Bearish
The story got worse because the non-telecom businesses that Telus wants to sell or grow are losing value. Writing down Telus Health by $800 million during an active sale process signals weaker buyer valuations, while large tech clients at Telus Digital are automating work away from the company faster than expected. On the positive side, monthly mobile phone bills stopped falling after years of price pressure, and phone cancellation rates hit a three-year low.
The question now is whether Telus can hit its 2028 debt reduction target without getting premium prices for its non-core assets. Either the new $900 million cost-saving program and steady mobile bills generate enough cash to pay down debt on their own, or weaker sale proceeds from Telus Health keep debt leverage elevated. Concrete sale terms for Telus Health and fourth-quarter wireless billing results will show which path holds.
🐂 Bull Case
Mobile Phone Churn Drops and Billing Stabilizes
Chief executive Victor Dodig said "our core telecom business has shown clear signs of stabilization". In Canadian wireless, carriers have fought a promotional price war that pushed down average revenue per user (ARPU), the monthly bill per phone customer. This quarter, Telus stopped that slide and kept more of its existing customers from leaving.
- Monthly phone bill (ARPU): $57.22, unchanged from $57.21 a year ago and up from $56.36 last quarter
- Monthly phone cancellation rate (churn): 1.01%, down 0.10 percentage points to a three-year low
- Net new mobile phone customers: 84,000, up 2,000 from a year ago
- Mobile network revenue: $1.78 billion, up 1.4% from a year ago
This matters because the telecom group grew its phone base even while gross additions fell by 24,000. Management placed a "greater emphasis on premium and profitable loading" and pushed unlimited data and Canada-US-Mexico plans. Those plans give customers predictable roaming bills and give the carrier steadier monthly revenue without costly handset subsidies.
What to watch: fourth-quarter mobile phone ARPU during the Black Friday and holiday shopping season. Holding the monthly bill steady through the year's heaviest discounting period would prove the wireless price war has cooled.
Connected Devices Carry Subscriber Growth
Telus connects more than phones and home routers; its TTech telecom division also sells wireless links for machines and fleet vehicles, which it counts as connected devices. While phone and internet customer additions stayed below 100,000 combined, machine connections expanded rapidly and drove total telecom connections up 6% from a year ago to 18.3 million.
The carrier added 289,000 connected devices in the third quarter, up by 120,000 from the 169,000 it added a year ago. Its total base of connected devices rose 22% to 5.1 million, led by commercial customers in transportation and connectivity. Because these business links use existing cellular towers with little extra marketing cost, they help lift mobile network revenue.
What to watch: connected device net additions and business data service revenue in the fourth quarter. Continued additions near 290,000 would help offset declines in older business data contracts.
🐻 Bear Case
Telus Health Takes an $800 Million Write-Down
Telus wants to reduce its debt by "accelerating the monetization of TELUS Health and TELUS Agriculture & Consumer Goods". Earlier this year, leadership framed the health division — which provides digital medical records, virtual pharmacy, and employee wellness programs — as a major growth engine covering over 160 million people.
This quarter, the company took an $800 million non-cash goodwill impairment charge on Telus Health, equal to 15.9% of total revenue. That write-down pushed operating expenses up 21% and caused a net loss of $660 million. Telus recorded the charge "due to updated growth expectations, broader market conditions and valuation update within the health portfolio as a result of the active divestiture process".
Testing the portfolio with real buyers showed the health assets are worth $800 million less than their book value. At the same time, customer cancellations and pricing pressure in employer wellness plans cut healthcare lives covered by 6.1 million from a year ago to 154.5 million, while Health Adjusted EBITDA fell 5% to $92 million.
What to watch: the sale price and cash proceeds from any Telus Health partner transaction or asset sale. A lower valuation means asset sales will pay down less debt than planned.
Customer Automation Shrinks Telus Digital
Telus Digital, the outsourcing and customer service subsidiary that Telus bought back in late 2025, was supposed to lead the group's expansion into artificial intelligence services. Instead, its largest technology clients are using automation to do the work themselves, cutting their spending with Telus Digital.
External operating revenue at Telus Digital fell 10.5%, or $75 million, to $637 million as two giant cloud customers scaled back trust-and-safety and data work. Segment EBITDA dropped by $29 million to $1 million because restructuring charges rose by $24 million to $61 million. Excluding those charges, segment Adjusted EBITDA fell 9% to $62 million despite job cuts in Europe.
The company noted that growth in its new AI services cannot offset client cutbacks "as these services are being automated faster than anticipated". This follows a $2.14 billion goodwill write-down on Telus Digital last quarter and shows that artificial intelligence is currently taking away more revenue than it brings in.
What to watch: Telus Digital external revenue in the fourth quarter. A further double-digit decline would show that large tech clients are still replacing outsourced staff with their own software.
Free Cash Flow Drops and Debt Load Ticks Up
Finance chief Gopi Chande wants to bring net debt down to 3.0 times Adjusted EBITDA or lower by the end of 2028, supported by July's 55% dividend cut. However, in the third quarter, lower operating profit and higher capital spending squeezed cash generation and pushed the leverage ratio in the wrong direction.
- Free cash flow: $396 million, down 35% from $611 million a year ago
- Capital expenditures: $701 million, up 8% from $652 million as TTech network builds rose $85 million
- Consolidated Adjusted EBITDA: $1.76 billion, down 5.5% (or down 2% excluding prior-year real estate gains and one-offs)
- Net debt to Adjusted EBITDA: 3.6 times, up from 3.5 times last quarter
Because Telus generated $1.52 billion of free cash flow across the first three quarters, its reaffirmed full-year target of about $1.8 billion leaves only $276 million for the fourth quarter by our math, a 52% drop from a year ago. Rising debt leverage shows that operational cash flow alone is not yet reducing the debt burden.
What to watch: year-end net debt to Adjusted EBITDA and fourth-quarter cash restructuring outflows. Full-year cash restructuring is now projected at $650 million, up from $450 million earlier in the year.
Internet Additions Fall by Three Quarters
Telus relies on its PureFibre fiber-optic network to win home broadband customers and bundle them with wireless service. For years, steady broadband additions anchored its fixed wireline business, where fixed data revenue rose 2% this quarter to $1.19 billion.
In the third quarter, internet net additions dropped to 10,000, down by 30,000 from the 40,000 added a year ago and down from 20,000 last quarter. The company blamed lower gross customer sign-ups as it focused on profitable loading. Fixed voice revenue also fell 7% to $155 million, pulling total fixed direct contribution down by $11 million.
What to watch: fourth-quarter internet net additions. If broadband sign-ups stay near 10,000, fixed data revenue growth could slow below its current 2% pace next year.
👓 Other Themes
New Efficiency Plan Targets $900 Million
To support its transformation plan, Telus launched a cost program "targeting annualized cash savings of approximately $900 million exiting 2028". About 80% of the savings will come from core telecom through customer care automation, digital sales channels, procurement, and capital spending cuts, with 20% from global platform units. To fund these layoffs and changes, management raised its 2026 restructuring cost estimate to $900 million, with $650 million paid in cash.
Lower Tax Bill Cushions Cash Flow
Telus lowered its full-year cash income tax assumption to a range of $190 million to $290 million, down from an earlier projection of $540 million to $620 million. The company cited higher tax refunds, lower pre-tax earnings, and Canadian Bill C-15 receiving royal assent in March 2026. This ~$340 million tax reduction helps Telus keep its $1.8 billion free cash flow target intact despite higher cash restructuring payouts.
💲 Other KPIs
Operating cash flow dipped 0.5% from $1,493 million a year ago, improving from a 2.5% decline in the first quarter and a 15.1% jump in the second quarter. Lower operating profit was cushioned by $301 million of positive working capital movements and $29 million in lower cash interest paid.
Restructuring charges nearly doubled from $109 million a year ago, rising 2.1 percentage points to 4.2% of total revenue. Over the past three quarters, charges totaled $315 million, $189 million, and $211 million. Management expects about $900 million for the full year, reducing reported operating profit and consuming $650 million in cash.
Net financing expenses rose by $222 million from $154 million a year ago, though they fell from $420 million in the second quarter. The year-ago period was artificially low because Telus booked a $222 million one-time gain from buying back long-term debt at a discount. Cash interest paid in the quarter was $370 million.
🔮 Guidance
Unchanged. The full-year plan still calls for service revenue to fall by about 1% at the middle of the range, matching the 1% decline reported in the third quarter. Telus had initially targeted 2% to 4% growth at the start of the year before cutting the outlook in July due to client cutbacks at Telus Digital.
Unchanged. The outlook still points to a 3% drop in Adjusted EBITDA at the middle of the range, after management cut it from a 2% to 4% growth target in July. By our math, after a 5.5% drop in the third quarter, the full-year midpoint implies a 4.4% decline in the fourth quarter.
Unchanged. Capital spending remains set at about $2.6 billion, including $75 million for real estate development, after Telus raised the budget from $2.3 billion in July. By our math, having spent $2.03 billion across the first nine months, the plan leaves about $570 million for the fourth quarter, down 12% from a year ago.
Unchanged. Management kept its free cash flow target at about $1.8 billion, down 18% from last year's $2.2 billion and below the initial $2.45 billion plan set in February. By our math, after generating $1.52 billion in the first three quarters, the outlook leaves $276 million for the fourth quarter, a 52% drop from a year ago.
❓ Key Questions
What valuation does the Telus Health write-down imply for buyers?
Telus wrote down $800 million of goodwill at Telus Health during an active sale process while covered lives fell by 6.1 million. Investors need to know what multiple or cash proceeds management now expects from selling a stake in the health unit.
How much of the $900 million savings is net new?
Telus announced $900 million in annual cash savings exiting 2028, including capital spending cuts. Management has not clarified how much of this figure comes from cutting operating expenses versus lowering capital budgets, or when the net cash benefits will exceed restructuring payouts.
Is the $2 billion AI revenue target for 2028 still intact?
Earlier in 2026, Telus targeted $2 billion in artificial intelligence revenue by 2028 from an $800 million base. With hyperscale customers automating work and Telus Digital revenue down 11%, management did not state whether that $2 billion target still stands.
Why did home internet additions drop to 10,000?
Quarterly internet net additions fell from 40,000 a year ago to 20,000 in the second quarter and 10,000 in the third quarter. Clarifying how much of this slowdown stems from cable competitor discounting versus slower housing growth will show if broadband growth can recover.