AT&T’s Q2 Earnings: Why This Stock Pop Is No Flash in the Pan

Posted on by

(SeaPRwire) –   By: Christian Pierce

Telecom investors have written off AT&T for years. The stock has traded at a persistent discount to peers. Legacy debt and stagnant subscriber growth weighed it down. Q2’s 4.8% pop feels like a wake-up call. But is this a temporary relief rally or a sustainable turnaround?

AT&T’s Q2 numbers tell a mixed but encouraging story. Adjusted EPS hit $0.65, beating the $0.59 consensus estimate. Revenue came in at $31.56 billion. That’s slightly below analysts’ $31.80 billion target. But investors didn’t care. Free cash flow was the star of the report. It hit $4.7 billion, up 6.3% year-over-year. That’s above the company’s own $4.0 to $4.5 billion guidance. Adjusted EBITDA climbed 5.2% to $12.3 billion. Margins expanded 110 basis points to 39.1%. Subscriber gains exceeded expectations too. The company added 432,000 postpaid phone customers. Analysts had forecast only 338,500. It also added over one million advanced connectivity subscribers. Growth here came from fiber and fixed wireless services. AT&T raised its 2026 EPS guidance to $2.25–$2.35. Analysts reacted with mixed signals. Wolfe Research upgraded the stock post-earnings. Sanford C. Bernstein kept its “outperform” rating with a $25.00 target. TD Cowen raised its target to $33.00 but maintained a “hold” rating. Argus cut its target to $30.00 but kept a “buy” rating. Barclays trimmed its target to $24.00 with an “equal weight” rating. The consensus rating is Moderate Buy. The average price target sits at $29.19. The stock trades at 6.7x projected EV/EBITDA. That’s a discount to Verizon’s 7.3x and T-Mobile’s 8.8x. It’s also below AT&T’s own five-year average of 7.5x to 8x. AT&T maintained its quarterly dividend of $0.2775 per share. That works out to a 4.6% annual yield. The payout ratio is a manageable 37.25%. The company has a $10 billion share repurchase authorization in place. Short interest remains low at 1.81% of the float. Institutional investors hold 57.10% of the stock. Heavy call option activity followed the earnings release. It pointed to traders betting on further upside.

The telecom industry’s future hinges on high-margin advanced connectivity. AT&T’s Q2 results prove it can compete in this space. But it needs to sustain the momentum. The free cash flow surge gives it room to invest in fiber expansion. It also lets AT&T pay down debt, reducing long-term risk. The subscriber gains show its strategy resonates with customers. Tired of legacy plans, they’re opting for fiber and fixed wireless. If AT&T keeps beating targets for the next four quarters, it will close the valuation gap. The sector will split into two clear camps. Winners will scale high-margin advanced services. Losers will be stuck in low-margin price wars. AT&T is now positioned to be a winner. But it can’t squander this opportunity.

Author bio: Christian Pierce, chief financial columnist and markets commentator, covers telecom valuations and corporate strategy for top financial publications.