AT&T Beats Q3 Estimates: 65 Cents, Record 769,000 Internet Adds

AT&T beat Wall Street estimates for the third quarter on Wednesday, and the number that did the work was internet growth. The company added a record 769,000 internet connections in the quarter, 442,000 of them fiber and 327,000 fixed wireless on its Internet Air service. With wireless lines counted in, it was the second straight quarter with more than a million customer additions across the business AT&T now calls Advanced Connectivity.

"We are growing valuable customer relationships as more homes and businesses choose AT&T for all their advanced connectivity needs across both internet and on-the-go wireless," chief executive John Stankey said.

The headline numbers

Adjusted earnings came in at 65 cents a share, up 20.4 percent from 54 cents a year earlier and ahead of the 61 cent consensus estimate tracked by Zacks. Revenue rose 5.3 percent to 32.32 billion dollars, from 30.71 billion a year earlier, also ahead of the 31.68 billion consensus. Adjusted operating income was 7.6 billion dollars, and adjusted EBITDA rose 5.4 percent to 12.5 billion dollars.

On a reported basis, earnings were 13 cents a share against 1.29 dollars a year earlier, a quarter that included a gain on the sale of the DIRECTV investment. The gap is the Mexico impairment and separation charges described below.

The company also added 379,000 postpaid phone subscribers, the lines that carry its wireless business, and it did so with postpaid phone churn of 0.92 percent.

Where the growth came from

Advanced Connectivity, the unit that holds wireless and modern internet, took in 29.48 billion dollars, up 7.2 percent. Home internet revenue jumped 23.4 percent to 2.98 billion dollars, helped by fiber growth and the acquired Lumen fiber business. Wireless service revenue rose 5 percent to 17.76 billion dollars.

Households taking both AT&T home internet and wireless grew by about 350,000 in the quarter, and 42.8 percent of its advanced home internet households now also take wireless. Fiber now reaches more than 39 million homes and businesses, on track for 40 million by the end of 2026 and more than 60 million by the end of 2030.

The outlook, and the money going back out

AT&T raised its full year adjusted earnings outlook to about 2.40 dollars a share and said it targets at least 18 billion dollars of free cash flow in 2026, more than 19 billion in 2027 and more than 21 billion in 2028. Capital investment runs 23 to 24 billion dollars in 2026, then 22 to 23 billion in each of the next two years. Free cash flow in the third quarter was 5.0 billion dollars on 10.5 billion of operating cash flow.

The company returned about 4.8 billion dollars to shareholders in the quarter, including 2.8 billion of buybacks, and it plans to return more than 45 billion across 2026 to 2028 through dividends and buybacks, holding the dividend at 1.11 dollars a share.

The cost line to watch

Operating expenses of 28.2 billion dollars included a 2.6 billion dollar non cash impairment charge on the Mexico wireless business, along with employee separation charges. On Oct. 13 AT&T agreed to sell the Mexico business to Grupo Televisa and Fintech Holdings. Net debt stood at 149.8 billion dollars at the end of the quarter, up in part on the closed EchoStar spectrum purchase. The call with analysts focused on the fiber build, now the center of the company's growth story.