It has been about a month since the last earnings report for AT&T (T). Shares have lost about 4.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is AT&T due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for AT&T Inc. before we dive into how investors and analysts have reacted as of late.
AT&T Beats Q1 Earnings Estimates on Wireless & Fiber Demand
AT&T reported solid first-quarter fiscal 2026 results, with earnings and revenues beating the Zacks Consensus Estimate. Earnings were 57 cents per share, up 11.8% from the year-ago quarter and ahead of the consensus mark of 55 cents by 3.6%.
Revenues rose 2.9% year over year to $31.51 billion, topping the consensus estimate of $31.19 billion by 1.0%. Momentum in advanced connectivity, supported by robust customer net additions, buoyed the quarterly results. Adjusted operating income increased to $6.89 billion from $6.35 billion for respective adjusted operating income margins of 21.9% and 20.7%. Adjusted EBITDA improved to $11.79 billion from $11.53 billion. Free cash flow came in at $2.5 billion, which was at the high end of the guided range of $2.0 billion-$2.5 billion.
T Leans on Advanced Connectivity for Growth
AT&T’s first-quarter narrative was shaped by its newer segment reporting structure, which centers on Advanced Connectivity, Legacy and Latin America. The Advanced Connectivity segment delivered operating revenues of $28.47 billion, up 4.7% year over year, as service revenues increased 3.6% to $22.86 billion and equipment revenues improved 9.3% to $5.61 billion.
Within the segment, advanced home Internet stood out. Advanced home Internet revenues jumped 27.3% year over year to $2.80 billion. Wireless service revenues were $16.94 billion, up 1.7%, while business fiber and advanced connectivity revenues rose 7.2% to $1.88 billion.
Operational metrics reinforced the demand backdrop. AT&T reported 584,000 Internet net additions, with 292,000 fiber net additions and 292,000 fixed wireless net additions. Postpaid phone net additions were 294,000, while postpaid phone churn was 0.89% in the quarter.
AT&T Balances Legacy Runoff With Mexico Growth
The Legacy segment remained a drag as customers continue to migrate away from copper-based voice and data services. Legacy segment operating revenues fell 25.3% year over year to $1.77 billion. Operating income declined 39.9% to $612 million, and the operating margin narrowed to 34.6% from 43.0% a year ago.
AT&T also highlighted progress in its legacy transition, noting that 85% of wire centers have been approved to stop offering legacy services, and more than 30% of wire centers have been approved to discontinue providing legacy services by late 2026.
Latin America provided growth but with pressure on profitability. The Latin America segment (Mexico wireless) generated operating revenues of $1.17 billion, up 20.8% year over year. Wireless service revenues increased 22.4% to $753 million and equipment revenues rose 18.0% to $420 million. However, operating income declined to $20 million from $43 million, reflecting higher expenses.
T Highlights Cash Returns Despite Heavier Investment
Cash generation remained a key investor focus given AT&T’s capital intensity. Cash from operating activities from continuing operations was $7.6 billion in the reported quarter compared with $9 billion in the year-ago quarter. Free cash flow was $2.51 billion in the first quarter of 2026, down from $3.15 billion in the year-ago period. Dividends paid were $2.00 billion, leaving free cash flow after dividends of $509 million.
Capital spending and deal activity were meaningful during the quarter. Capital expenditures were $4.88 billion, up 14.0% year over year, and cash paid for capital investment (including vendor financing payments) totaled $5.09 billion. AT&T also reported $2.67 billion of acquisitions, net of cash acquired, including $1.66 billion of business acquisitions and $1.02 billion of spectrum acquisitions.
Balance sheet leverage moved higher sequentially. AT&T ended the quarter with $11.96 billion of cash and cash equivalents and total debt of $138.41 billion. Net debt was $126.44 billion, translating to a net debt-to-adjusted EBITDA ratio of 2.71x. Shareholder returns in the quarter totaled $4.3 billion, supported by $2.3 billion of share repurchases and $2.0 billion of dividends.
AT&T Reaffirms Multi-Year Targets for 2026-2028
Looking ahead, AT&T reiterated its longer-term framework for 2026 through 2028 centered on steady service revenue growth and expanding advanced connectivity. The company continues to target service revenue growth in the low single-digit range annually, with Advanced Connectivity expected to grow in the mid-single-digit range annually, including expected growth of more than 5% in 2026.
Profit and cash goals remain tied to that mix shift. AT&T is targeting adjusted EBITDA growth of 3% to 4% in 2026, improving to more than 5% in 2028, while maintaining capital investment in the $23 billion-$24 billion annual range. Free cash flow is targeted at more than $18 billion in 2026, in excess of $19 billion in 2027, and in excess of $21 billion in 2028, alongside an adjusted earnings outlook of $2.25 to $2.35 per share for 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
At this time, AT&T has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a score of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, AT&T has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
