AT&T's Discount Bundles Fuel Subscriber Gains, Tax Savings To Supercharge Fiber Expansion

AT&T Inc. T announced strong financial results for its fiscal second quarter of 2025 on Wednesday, surpassing analyst expectations for both revenue and earnings.

The telecom giant reported operating revenues of $30.80 billion, marking a 3.5% increase compared to the same period last year and exceeding the consensus estimate of $30.45 billion. Adjusted earnings per share (EPS) stood at $0.54, also beating the analyst forecast of $0.52.

Key Performance Indicators

The positive results were largely driven by significant growth in wireless phone subscribers, which AT&T attracted through various perks and incentives to draw customers away from competitors.

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The company reported 401,000 postpaid phone net additions, a slight decrease from 419,000 in the prior year but still a robust performance. This contrasts sharply with rival Verizon Communications VZ, which saw a net loss of 9,000 postpaid phone connections in its latest quarter, falling short of analyst predictions for a gain of 13,000.

AT&T’s postpaid phone churn, a measure of customer attrition, increased slightly to 0.87% from 0.70% a year ago, while prepaid churn was 2.64%, up from 2.57%. Despite this, the postpaid phone-only Average Revenue Per User (ARPU) grew by 1.1% year-over-year to $57.04.

In its Consumer Wireline segment, AT&T continued to expand its fiber optic footprint, adding 243,000 AT&T Fiber net subscribers and 203,000 AT&T Internet Air net additions.

Financial Highlights

AT&T demonstrated solid improvements across several metrics. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased to $11.7 billion from $11.3 billion in the year-ago quarter. The company’s net income rose to $4.9 billion from $3.9 billion previously, reflecting enhanced profitability.

Operating cash flow also saw a healthy increase, reaching $9.8 billion compared to $9.1 billion in the same quarter last year, contributing to a free cash flow of $4.4 billion, up from $4.0 billion. Capital expenditures for the quarter were $4.9 billion.

Looking at segment performance, the Mobility segment’s operating income grew 3.2% year-over-year to $6.93 billion, maintaining a strong margin of 31.7%, though slightly down from 32.8% a year ago. The Consumer Wireline segment showed significant improvement, with its operating margin expanding to 9.5% from 5.5%. Conversely, the Business Wireline segment reported an operating margin loss of 4.7%, a decline from a 2.1% positive margin in the previous year. Overall, operating income for the company was $6.5 billion, compared to $5.8 billion in the year-ago quarter.

Future Outlook and Strategic Investments

AT&T reiterated its full-year 2025 financial outlook, anticipating consolidated service revenue growth in the low-single-digit range. The company expects Mobility service revenue to grow by 3% or more, an increase from its prior guidance of the higher end of 2%-3%. Consumer fiber broadband revenue growth is projected to remain in the mid-teens, and adjusted EPS is forecast to be between $1.97 and $2.07, aligning with the analyst consensus estimate of $2.06.

The company reaffirmed its long-term financial targets, committing to a low-single-digit annual growth rate for consolidated service revenue in 2026 and 2027. Adjusted EBITDA is expected to grow by at least 3% annually over the same period, with adjusted EPS accelerating to double-digit growth by 2027.

A significant driver for AT&T’s updated outlook is the anticipated cash tax savings of $6.5 billion to $8.0 billion between 2025 and 2027 due to provisions in the One Big Beautiful Bill Act. This includes estimated savings of $1.5 billion to $2.0 billion in 2025 and $2.5 billion to $3.0 billion in both 2026 and 2027. These savings will enable AT&T to increase its annual capital investments to a range of $23 billion to $24 billion from 2026 to 2027. Consequently, free cash flow is now projected to exceed $18 billion in 2026 and $19 billion in 2027.

AT&T plans to strategically allocate these tax savings. A substantial $3.5 billion will be invested to accelerate its fiber internet rollout, aiming for an annual build-out rate of 4 million locations by the end of 2026. This accelerated deployment is expected to expand AT&T’s in-region fiber footprint to approximately 50 million customer locations by 2030. Including the acquisition of Lumen’s Mass Markets fiber assets, its Gigapower joint venture, and other open-access partners, AT&T anticipates reaching over 60 million fiber locations. The acquisition of Lumen’s mass markets fiber business is still on track to close in the first half of 2026, as per a Reuters report.

Additionally, AT&T intends to contribute $1.5 billion of these savings to its employee pension plan by the end of 2026, which would boost its funding level to approximately 95%. The remaining tax savings will provide increased financial flexibility for further strategic investments, capital returns, and debt reduction.

Price Action: Following these announcements, AT&T’s stock was trading lower by 2.84% to $26.64 in premarket trading on Wednesday.

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