AT&T's bundled plans spur subscriber surge, tax savings to fund fiber expansion

AT&T reported a robust second quarter, exceeding profit, revenue ($30.8B vs $30.5B est.), and adjusted EPS (54 cents vs 51 cents est.) expectations, fueled by the addition of 401,000 net wireless subscribers and 243,000 fiber customers. The company plans to deploy $3.5 billion from significant tax law savings to accelerate its fiber network expansion, projecting $6.5-$8 billion in total cash tax savings through 2027 and a $1 billion increase in free cash flow for both 2026 and 2027. This strategic focus on fiber, bolstered by the pending Lumen acquisition, aims to drive growth and challenge competitors amid wireless market saturation and surging internet demand.

Analysis

AT&T demonstrated robust performance in its second-quarter results, exceeding consensus estimates for revenue at $30.8 billion versus $30.5 billion and adjusted EPS at 54 cents versus 51 cents. A key operational highlight was the addition of 401,000 net monthly bill-paying wireless subscribers, significantly outpacing the 295,700 forecast and standing in stark contrast to rival Verizon, which reported a loss of 9,000 customers. This subscriber momentum, driven by bundled 5G and fiber offerings, contributed to a 6.7% growth in mobility revenue. Looking forward, the company is leveraging tax law benefits to accelerate its strategic pivot to fiber, earmarking $3.5 billion from tax savings for network expansion. This initiative is supported by a favorable long-term financial outlook, with AT&T projecting a $1 billion increase in free cash flow for both 2026 and 2027 and total cash tax savings of $6.5 billion to $8 billion through 2027. The pending acquisition of Lumen's fiber business is integral to this strategy, aiming to expand its footprint to over 60 million locations by 2030 and strengthen its competitive position against broadband incumbents like Comcast amid a saturating wireless market.

Key Decisions for Investors

• Given the strong outperformance in subscriber growth against key rivals and the comprehensive beat on revenue and EPS, investors should view the results as a validation of AT&T's current bundling strategy.
• The strategic deployment of tax savings into an accelerated fiber build-out, combined with a significant upward revision to long-term free cash flow projections, strengthens the company's long-term growth and capital return narrative.
• Investors should closely monitor the execution of the fiber expansion plan and the successful integration of Lumen's assets, as these are critical to achieving growth targets and sustaining a competitive edge against broadband incumbents.