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

AT&T reported better-than-expected Q2 results, with adjusted EPS of 54 cents and revenue of $30.8 billion, driven by strong wireless subscriber additions of 401,000 and 243,000 new fiber customers, attributed to discounted bundles. The company plans to invest $3.5 billion from tax savings into accelerating its fiber network build-out, expecting $6.5 billion to $8 billion in cash tax savings through 2027 and a $1 billion increase in free cash flow for 2026/2027. Despite shares being down 1.5% premarket, AT&T's stock is up over 20% year-to-date, outperforming rivals, signaling strategic success in its growth areas.

Analysis

AT&T delivered a strong second quarter, outperforming market expectations on both profitability and subscriber growth. The company reported adjusted earnings of 54 cents per share on $30.8 billion in revenue, surpassing LSEG estimates of 51 cents and $30.50 billion, respectively. A key driver was the addition of 401,000 net wireless phone subscribers, significantly exceeding FactSet estimates of 295,700 and standing in stark contrast to rival Verizon, which reported a net loss of 9,000 customers. This momentum is attributed to a successful bundling strategy combining 5G and fiber services, which also attracted 243,000 new fiber customers. Looking forward, AT&T is reinforcing its growth strategy by allocating $3.5 billion in tax law savings toward accelerating its fiber network build-out. This initiative is supported by a robust financial outlook, with the company projecting an additional $1 billion in free cash flow for both 2026 and 2027. Despite the strong report, shares declined 1.5% in premarket trading, a move that should be viewed in the context of the stock's more than 20% year-to-date gain, which has outpaced telecom peers.

Key Decisions for Investors

• The results validate AT&T's converged network strategy, with strong subscriber growth in both wireless and fiber demonstrating a clear competitive advantage over rivals like Verizon.
• The upward revision to free cash flow guidance, driven by operational performance and multi-year tax benefits, strengthens the company's financial foundation for continued investment and potential shareholder returns.
• Given the stock's significant year-to-date outperformance, the modest premarket dip on strong news could be viewed as a tactical entry or accumulation opportunity for long-term investors aligned with the fiber expansion thesis.
• Investors should closely monitor the continued execution of the fiber network expansion and subscriber growth rates in coming quarters, as these are the critical metrics underpinning the positive outlook.