Is Former Dividend Aristocrat AT&T a Buy After Q2 Earnings?

AT&T reported strong Q2 financials, beating EPS estimates and showing significant growth in revenues ($30.8B), net income, and cash flows, contributing to its 19% YTD stock gain. Operational highlights include 3.5% YOY growth in mobility services and 18.9% in consumer fiber broadband, alongside solid net adds. Strategically, AT&T completed its DirecTV divestiture, anticipating $6.5-8 billion in tax savings, and initiated a $1 billion share repurchase. Despite its diminished dividend status, the company maintains a 4.06% yield and garners a "Moderate Buy" consensus from analysts, reflecting positive sentiment on its operational strength and future outlook.

Analysis

AT&T demonstrated robust operational and financial performance in its Q2 2025 results, reinforcing its strong year-to-date stock appreciation of over 19%. The company surpassed consensus estimates with an EPS of 54 cents and delivered significant year-over-year growth across key metrics, including a 3.4% increase in revenue to $30.8 billion, a 25.6% rise in net income to $4.9 billion, and a 10% increase in free cash flow to $4.4 billion. This fundamental strength is driven by solid execution in core business segments, highlighted by 3.5% growth in mobility service revenues and a notable 18.9% surge in consumer fiber broadband revenues. Operationally, the company's growth is supported by strong subscriber gains, including 401,000 postpaid phone net adds and 243,000 AT&T Fiber net adds. Strategically, the company has streamlined its focus by completing the divestiture of its DirecTV stake and is poised to realize an estimated $6.5 to $8 billion in tax savings through 2027. This, combined with a new $10 billion share repurchase program under which $1 billion has already been executed, signals strong confidence in future cash flow generation. Despite losing its Dividend Aristocrat status in 2022, the stock's forward P/E of 13.30 marks a 20.78% improvement over its trailing P/E, reflecting market anticipation of its projected 6.07% earnings growth next year. This positive outlook is echoed by Wall Street's "Moderate Buy" consensus, low short interest of 1.24%, and net positive institutional ownership changes.

Key Decisions for Investors

• Given the strong Q2 earnings beat, positive forward guidance, and a forward P/E ratio that suggests value, investors may see an attractive entry point for a company demonstrating successful operational execution and strategic simplification.
• For income-oriented investors, the 4.06% dividend yield, while no longer growing annually, is supported by strong free cash flow and complemented by an aggressive $10 billion share repurchase program, offering a solid total capital return profile.
• Investors should monitor the continued growth rate in the consumer fiber segment and the company's ability to maintain its target of 3% or better mobility service revenue growth, as these are key drivers for meeting future earnings expectations.
• The completion of the DirecTV divestiture and significant anticipated tax savings represent material financial tailwinds that may not be fully priced into the stock, providing potential for further upside beyond the consensus price target of $29.17.