Earnings call transcript: AT&T Q3 2025 sees steady EPS, stock dips

AT&T Inc. reported its third-quarter earnings for 2025, maintaining its earnings per share (EPS) at $0.54, in line with analysts’ forecasts. Revenue slightly missed expectations, coming in at $30.7 billion compared to the projected $30.89 billion. Despite stable earnings, AT&T’s stock saw a decline in pre-market trading, dropping 4.26% to $24.94, reflecting investor concerns over the revenue miss and market conditions.

Key Takeaways

• AT&T’s EPS matched analyst expectations at $0.54.
• Revenue fell short of forecasts by $190 million.
• Pre-market trading showed a 4.26% decline in AT&T’s stock price.
• The company reported a 1.6% year-over-year revenue growth.
• AT&T plans significant acquisitions to enhance its spectrum and fiber assets.

Company Performance

AT&T demonstrated steady performance in the third quarter of 2025, with revenues growing by 1.6% year-over-year. The company’s adjusted EBITDA increased by 2.4%, and it expanded its adjusted EBITDA margins by 30 basis points. AT&T’s free cash flow rose to $4.9 billion, compared to $4.6 billion in the previous year. This growth reflects the company’s focus on operational efficiency and strategic investments in its fiber and wireless services.

Financial Highlights

• Revenue: $30.7 billion, up 1.6% year-over-year.
• Earnings per share: $0.54, unchanged from the prior year.
• Free cash flow: $4.9 billion, up from $4.6 billion.
• Capital investment: $5.3 billion, down $200 million year-over-year.

Earnings vs. Forecast

AT&T’s EPS of $0.54 met the forecast, resulting in no earnings surprise. However, the revenue of $30.7 billion fell short of the expected $30.89 billion, marking a 0.62% miss. This minor revenue miss, while not drastic, was enough to influence investor sentiment negatively, contributing to the stock’s decline.

Market Reaction

In the pre-market session, AT&T’s stock decreased by 4.26%, trading at $24.94. This drop reflects investor concerns over the revenue shortfall and broader market conditions. The stock’s current price sits closer to its 52-week low of $21.05, indicating cautious investor sentiment amid competitive pressures in the telecom sector.

Outlook & Guidance

AT&T maintains its full-year guidance, expecting service revenue growth in the low single-digit range and adjusted EBITDA growth of 3% or better. The company projects full-year adjusted EPS to range between $1.97 and $2.07. Looking ahead, AT&T plans to finalize the acquisitions of Lumen and EchoStar assets by early 2026, which are expected to bolster its spectrum and fiber capabilities.

Executive Commentary

CEO John Stankey emphasized the company’s strategic focus, stating, "Where we have fiber, we win," highlighting the importance of fiber in AT&T’s growth strategy. He also noted, "Our job now is to organically invest in this business and make it a better company," underscoring the commitment to internal growth and efficiency.

Risks and Challenges

• Competitive wireless market with high customer switching rates.
• Potential delays in closing the Lumen and EchoStar transactions.
• Macroeconomic pressures that could impact consumer spending.
• Challenges in expanding fiber and fixed wireless networks.
• Regulatory changes affecting the telecommunications industry.

Q&A

During the earnings call, analysts inquired about AT&T’s strategy in the fiber and fixed wireless markets. Executives addressed concerns about competitive threats and emphasized the complementary role of LEO satellite technology. They reiterated the company’s focus on organic growth and strategic market segmentation to enhance customer value and reduce churn.

Full transcript - AT&T (T) Q3 2025:

Conference Operator: Good morning and welcome to AT&T’s third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Should you need assistance during the call, please press star, then zero, and an operator will assist you offline. Following the presentation, the call will open for your questions. If you would like to ask a question, please press star, then one, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing star, then two. As a reminder, this conference is being recorded. I would now like to turn the conference call over to our host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead.

Brett Feldman, Head of Investor Relations, AT&T: Thank you and good morning. Welcome to our third quarter call. I’m Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our Chairman and CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T’s SEC filings. Results may differ materially. Additional information, as well as our earnings materials, are available on our Investor Relations website. With that, I’ll turn the call over to John Stankey. John?

John Stankey, Chairman and CEO, AT&T: Thank you, Brett. Good morning, everyone. I appreciate you making the time to join us, and I hope everybody’s doing well. I’m pleased to report that we had another solid quarter and remain on track to achieve this year’s consolidated financial guidance. We continue to attract and retain high-value customers and execute well across different operating environments, thanks to the durable and differentiated connectivity franchise we continue to build. In mobility, we delivered over 400,000 postpaid phone net adds in the quarter, which is slightly ahead of our performance a year ago. In consumer wireline, the scale we have achieved as a nationwide provider of home internet services through our significant investments in fiber and 5G wireless network is proving to be a winning play.

At the end of the third quarter, we passed more than 31 million total locations with fiber, and we expect to reach more than 60 million customer locations by the end of 2030. We also offer our fixed wireless service, AT&T Internet Air, in parts of 47 states, and we continue to expand availability into new areas as we open and modernize our mobile network. You can see the durable impact of these investments in our third quarter results, which include over 550,000 new subscribers to our most advanced broadband services, AT&T Fiber and AT&T Internet Air. This resulted in our highest total broadband net adds in more than eight years. Let me say that again. We achieved our highest total broadband net adds in eight years.

This includes a major milestone by reaching over 10 million premium AT&T Fiber subscribers, more than doubling our fiber customer base in less than five years, and nearly tripling our quarterly fiber revenues over that same period, and the train keeps a-rolling. We offer fast and reliable connectivity for 5G wireless network and fiber at attractive price points, and more people are choosing AT&T for both wireless and home internet services. Today, more than 41% of AT&T Fiber households also choose AT&T for wireless, and the pace of this convergence trends within our customer base continues to grow. These customers remain our most valuable, with the lowest churn profile and highest lifetime values. Our success with convergence also extends to fixed wireless, where more than half of our AT&T Internet Air subscribers also choose AT&T for their wireless service.

Similar to fiber, these customers exhibit lower churn and drive higher lifetime values than customers with standalone services. We continue to make solid progress, but our work is not done. Our goal is to become the best advanced communications provider in America and to lead our industry in share of retail connectivity service revenue by the end of this decade. This year, we’ve made a series of strategic moves that both strengthen our ability to lead in convergence and accelerate our future growth trajectory. Our planned acquisitions of spectrum licenses from EchoStar and fiber assets from Lumen significantly enhance and expand our advanced connectivity portfolio. This aligns with our vision to build the most efficient, high-performance network with an ability to deliver traffic at the lowest marginal cost. We believe this will establish a durable competitive advantage for AT&T in the coming years.

The EchoStar spectrum we agreed to acquire will improve our 5G wireless performance in a cost-efficient manner, while allowing us to grow AT&T Internet Air at a faster pace. We’re already making great progress delivering on our commitment to deploy this valuable spectrum for the benefit of American consumers and businesses. We started deploying the 3.45 gigahertz spectrum that we have agreed to acquire from EchoStar under a short-term Spectrum Manager lease. Based on our current rate and pace, we expect these mid-band licenses will be deployed in cell sites covering nearly two-thirds of the U.S. population by mid-November. This should position us to further expand the availability of AT&T Internet Air in our sales channels in 2026. Our ability to move this quickly reflects the great work of our teams and the FCC’s pro-investment and supportive policy environment.

We’re also making great progress at preparing to close our transaction with Lumen. Most of the Senior Leadership Team has been identified, and we now expect to close this transaction in the early part of 2026. As I’ve said before, where we have fiber, we win, with both fiber and 5G, and we plan to win even more as our investments in these assets bring advanced connectivity to more Americans. The supportive policy environment is also making it easier for us to transition away from outdated legacy copper infrastructure and invest in the AI-ready connectivity that Americans want and need. The bottom line is that we now have the right building blocks in place to realize our scaled fiber and fixed wireless ambitions, complete our wireless modernization, and successfully transition away from legacy copper infrastructure.

As we complete our key investments, acquisitions, and transformation initiatives, we expect to increase our fiber and convergence penetration rates and see a majority of incremental revenue growth originate from converged customer relationships. For several consecutive years, we’ve demonstrated that this strategy works by efficiently growing our business while investing in our network, strengthening our balance sheet, and returning value to shareholders. The opportunities ahead of us are in our control, and I wouldn’t trade our assets and position for anyone else’s in our marketplace. Now it’s up to us to continue executing on our vision to become the best advanced communications provider in America. With that, I’ll turn it over to Pascal for a detailed review of our third quarter results and outlook.

Pascal Desroches, CFO, AT&T: Thank you, John, and good morning, everyone. At a consolidated level, total revenues grew 1.6% year over year. Adjusted EBITDA grew 2.4%, and we expanded adjusted EBITDA margins by 30 basis points. Adjusted EPS was $0.54 in the quarter, consistent with the prior year. Adjusted EPS excludes a gain recognized on the sale of the DIRECTV investment, legal settlement costs, and other items. Third quarter free cash flow was $4.9 billion versus $4.6 billion a year ago. Capital investment was $5.3 billion, which was down $200 million year over year. We also contributed $400 million to our employee pension plan in the third quarter, which is reported within cash from operations and therefore impacts free cash flow.

As we discussed in our second quarter results, we expect to contribute $1.5 billion to our pension plan by the end of 2026 using a portion of the cash tax savings from provisions within the One Big Beautiful Bill Act. This includes an additional $400 million of contributions planned in the fourth quarter, with the remaining $700 million of contributions next year. Turning next to our business unit results. Starting with mobility, our third quarter performance highlights how our differentiated strategy enables us to deliver consistent results across various operating environments. Similar to the first half of the year, switching activity remains elevated. However, our playbook is working, and we continue to execute well. We grew mobility service revenue by 2.3% year over year, which contributed to EBITDA growth of 2.2%.

As a reminder, the prior year quarter included approximately $90 million in one-time service revenues related to certain administrative fees. This impacted our reported growth rates during the third quarter in mobility service revenue by about 60 basis points and in mobility EBITDA by about 100 basis points. We reported 405,000 postpaid phone net adds, which is up slightly from the third quarter of last year. Postpaid phone churn was 0.92%, up 14 basis points versus a year ago. This reflects increased marketplace activity and, to a lesser degree, an increase in the portion of our customer base reaching the end of device financing periods, which normalized as we exited the quarter.

Based on this operating environment, we continue to plan for postpaid phone churn and upgrades to follow seasonal patterns in the fourth quarter, when we typically see more switching and upgrade activity due to new device launches and the holiday season. Postpaid phone ARPU was $56.64, essentially consistent with a year ago when normalizing for the previously mentioned one-time service revenue impact in the third quarter of 2024. ARPU was also impacted by our success in attracting customers in underpenetrated segments that have lower ARPUs, such as our plan that targets adults 55 years old or older. Success in these underpenetrated segments drives higher incremental service revenues and attractive returns. The trend also reflects our success in growing our base of converged customers with higher lifetime values. These subscribers are typically eligible for a service discount, but support growth in home internet revenues, which we report in consumer wireline.

We expect these dynamics to continue in the fourth quarter, which typically sees seasonally lower ARPU, with some offsetting benefits related to a pricing action that becomes effective at the beginning of December. Similar to the first half, we continue to operate in a marketplace where the cost of acquiring and retaining subscribers has increased. However, our continued success at adding high-value converged customer relationships points to the attractive returns we’re driving through our offers. While total mobility operating expenses were up year over year, this was primarily driven by higher equipment costs and other acquisition-related expenses. We otherwise continue to execute well at managing our costs through operational efficiencies, including reductions in cost of service and customer support.

I’m really pleased with how well the team is executing and remain confident in our ability to deliver on our full-year outlook for mobility service revenue growth of 3% or better and mobility EBITDA growth of approximately 3%. Our consumer wireline business unit also delivered another strong quarter. Total revenues grew 4.1% year over year, driven by 16.8% growth in fiber revenue. Consumer wireline EBITDA grew more than 15% for the quarter. This was driven by top-line growth and cost takeout, including lower expenses associated with our legacy copper infrastructure. As a result, consumer wireline EBITDA margins expanded by a robust 350 basis points year over year. Customer demand for our leading home internet offerings is growing, as we reported strong gains in both fiber and Internet Air customers. We added 288,000 AT&T Fiber customers during the third quarter, reflecting seasonal tailwinds and the continued expansion of our fiber footprint.

As a reminder, in the fourth quarter of last year, we benefited from some pent-up demand following the third quarter work stoppage in the Southeast. This year, we expect our fiber net adds to exhibit typical seasonality in the fourth quarter, when we usually see lower levels of new connections as we get deeper into the holiday season. Once again, we saw strong growth in the portion of our fiber customer base that also subscribes to mobility services. At the end of the third quarter, this convergence rate reached 41.5%, up 180 basis points from a year ago. This represents one of our largest convergence gains over the past three years. We also reported 270,000 AT&T Internet Air net adds, doubling our subscriber gains year over year.

Based on our operating momentum and strong performance through the first three quarters of the year, we continue to expect to achieve full-year growth in consumer fiber broadband revenue in the mid to high teens and consumer wireline EBITDA growth in the low to mid-teens range. Business wireline revenues declined 7.8% year over year, while EBITDA declined about 13%. As we shared last quarter, we’ve been reinvesting some of our cost savings into driving improved growth in fiber and fixed wireless, and our third quarter results reflect early traction with these efforts. Fiber and advanced connectivity service revenues grew 6% year over year, representing an acceleration from 3.5% growth in the second quarter. Value-added services, which contribute to about one-third of these revenues, can be variable from quarter to quarter, but we expect continued acceleration in our fiber and fixed wireless connectivity revenues in the fourth quarter.

While business wireline continues to manage through structural declines in legacy services, the team is doing a great job positioning the business to drive sustained growth and advanced connectivity services while operating more efficiently. Based on this solid execution, we continue to expect business wireline EBITDA pressures to moderate versus last year, with a full-year decline in the low double-digit range. During the third quarter, we returned $3.5 billion to our shareholders. This includes nearly $1.5 billion of stock repurchases, keeping us on pace to achieve our full-year target of $4 billion in buybacks. We ended the third quarter with net debt to adjusted EBITDA of 2.59 times, down slightly from 2.64 times last quarter, reflecting strong cash generation and growth in adjusted EBITDA. We ended the quarter with more than $20 billion of cash, including proceeds from recent debt issuances.

This puts us in a great position to fund our capital returns program and pending acquisitions. We closed the sale of our remaining stake in DirecTV in July and received approximately $320 million in cash in the quarter. We expect to receive an additional $3.8 billion of cash, with the large majority expected over the course of the fourth quarter and the early part of next year. As a reminder, these post-sale proceeds are reported within investing activities in the statement of cash flows and excluded from our reported free cash flow. Overall, our third quarter results show that we’re executing well and are reiterating our full-year financial guidance. At a consolidated level, this includes service revenue growth in the low single-digit range and adjusted EBITDA growth of 3% or better.

We had an opportunity to settle some out-of-pattern legal settlement that will impact our fourth quarter free cash flow by approximately half a billion dollars. The expense associated with these settlements was accrued in the third quarter and excluded from adjusted EPS. However, we continue to expect full-year free cash flow in the low to mid-$16 billion range, including about $4 billion in the fourth quarter. We also continue to expect full-year capital investment in the $22 to $22.5 billion range, which implies fourth quarter capital investments of roughly $7 to $7.5 billion. We also reiterate our full-year outlook for adjusted EPS of $1.97 to $2.07 and expect that we will come in closer to the high end of this range. Embedded within this guidance is an outlook for full-year depreciation and amortization expense that is up slightly versus 2024.

In the fourth quarter, we expect to see sequentially lower depreciation and amortization expense as certain legacy assets become fully depreciated. We expect our fourth quarter depreciation and amortization expense of about $5 billion is more aligned with the quarterly run rate we expect heading into next year. As John noted, we’re making great progress towards closing our pending acquisitions of fiber assets from Lumen and spectrum licenses from EchoStar. We expect to provide an update to our long-term financial outlook early next year. We expect both of these transactions to boost our organic growth in revenues and profitability, and you should expect that this will be reflected in our updated outlook. In summary, we continue to deliver value for our customers and our shareholders, and we’re really pleased with the team’s performance through three quarters of the year. Brett, that’s our presentation. We’re now ready for the Q&A.

Brett Feldman, Head of Investor Relations, AT&T: Thank you, Pascal. Operator, we are ready to take the first question.

Conference Operator: We will now begin the question and answer session. To ask a question, press star, then one. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause to assemble our roster. The first question today comes from Peter Supino with Wolfe Research. Please go ahead.

Hi, good morning. The broadband results were really striking, and I have two questions on broadband, and take them in whichever order you like. First, your 60 million fiber home target is the most important among numerous industry-wide fiber expansion plans. Our best attempt to estimate the intentions of all the fiber expanders, builders, developers rolled up is about 110 million in a country with 135 million homes. A question we hear frequently and I think is important is, at what point do AT&T investors have to worry about insurgents getting to some of the homes that AT&T plans to pass before you do? If they do, could that alter your plans at all? Would you be responsive to that? A related question is, within two years, your DSL base will be gone or declining much more slowly? I mean, your VDSL base.

What should that mean for your broadband strategy and for your competitive outlook? Thank you.

John Stankey, Chairman and CEO, AT&T: Hi, good morning, Peter, and thank you for noting the broadband results. They are very, very strong. I’m delighted with them. As I said in my comments, you know, despite all the other things going on in the industry and the questions that come in around change of tactics by various other players, this team continues to consistently deliver results quarter over quarter in this space because we have a great product. We feel really good about that. I’ll tell you, we pride ourselves on being smart about how we build. We think we have the most scaled build engine in the industry. With that scalability comes a degree of agility. It means we have the flexibility to work with our base and move supply around.

We try to be very deliberate about ensuring that everybody knows when the train rolls into town, that the train’s in town, and that’s probably not a good place for anybody else to come and deploy their capital because this is a company that has a track record of going in and penetrating aggressively and being successful in markets, and there’s probably easier places for people to go than come up against us. We try to be very, very deliberate in how we allocate our capital in the markets that we’re building in to make sure everybody knows where we’re going and how aggressively we’re going because we believe the right thing to do is to ensure that there’s a good solid market structure for ourselves moving forward.

Occasionally, there are times where, while we lay our plans out three years in advance and we believe we have some insight and fidelity of what’s going on in the market, something changes in that period and we have to recalibrate and think differently about how we’re going to draw the boundaries about where we’re going to build and how we’re going to build. While I know there’s a lot of announcements out there that maybe add to 110 million homes being built, that doesn’t mean they’re getting built. It doesn’t mean that people are effective at getting permits or they have their supply chain issues worked out. Our job is to remove that friction and be better than everybody else and ensure the 60 million that we’re building are, in fact, the first and that we’re doing it more effectively than anybody else.

When we run into those occasional circumstances where they’re not, we rethink about where we deploy our capital and what we do. I feel pretty comfortable that the team understands that and has been doing that by and large. We also know that when somebody overbuilds a small portion of a metropolitan area, this is a scale business. Having 230,000 homes passed isn’t going to cut it. When we come in and we’re able to use our brand and use our marketing position, we can do very, very well when there’s those small amounts of overlap and still get the share we need to drive the returns into our business. Your observation on the DSL base is accurate. As you know, we’re trying to turn down our legacy infrastructure. The DSL base is part of that. We don’t want that equipment on our network anymore.

We don’t want it sucking down power. We don’t want to be maintaining copper. Part of what you’re seeing is a very deliberate approach. In almost all instances, we can replace DSL with fixed wireless in places where we’re not building fiber, or we can actively replace it with fixed wireless if we’re in a holding pattern where we know we’re not going to be getting our overbuild in place of fiber for another two years or so. We’re actively trying to hold those customers with more attractive converged offers. That’s part of the motion and the momentum that you’re seeing in our converged basis and how we’re using these products.

We’re really excited about the mid-band spectrum that we picked up because we think it’s going to give us even more tools to make that happen both within our base where we’re going to overbuild and those places where we will be wireless first. We don’t intend to build fiber as part of that deployment of capital that gets us just above 60 million. We’ll actively manage it. As you can see, we’re getting better at managing it. That’s why our nets are the best they’ve been in eight years. I’m really confident that we haven’t quite hit our full stride on that yet, that we can do even better on that front as we move forward in the coming quarters.

To my point in my comments, I would not change position with any company in this industry right now, given the asset base we have and the plays it affords us to run.

Brett Feldman, Head of Investor Relations, AT&T: Thanks, Peter. We’ll take next question, operator.

Conference Operator: The next question comes from Benjamin Swinburne with Morgan Stanley. Please go ahead.

Thank you. Two questions. John, the AT&T Internet Air momentum is pretty clear in your results. I’m wondering if you could talk a little bit, as the company expands your footprint. You mentioned parts of 47 states. How are you making sure you’re sort of segmenting the market the right way between fiber and fixed wireless and being efficient with your marketing, et cetera? Maybe you could comment on how you’re approaching SMB as well. For Pascal, you’ve mentioned the competitive environment in wireless this year has led to some higher equipment costs and subscriber acquisition costs, which we can see in mobility EBITDA margins being a little pressured this year. Your three-year guidance assumes that gets better, that margins expand the next couple of years.

Just wondering if you could talk a little bit about how you deliver that if we think that the competitive environment maybe stays this elevated over the period. Thank you.

John Stankey, Chairman and CEO, AT&T: Good morning, Brett.

Morning.

First of all, one of the big changes you’ve seen us make in our messaging is we’re no longer leading top-of-funnel awareness and advertising with a specific technology bent. We talk about getting internet from AT&T, and we’re doing that in the business market and the consumer market because we’re now approaching this point that we can offer internet nationwide. The first thing is to make awareness that people just think about going to AT&T for internet and that our messaging supports that. You’ve probably picked up on that if you watch any football or anything else in mass media. To your point, underneath that top-of-funnel messaging is to make sure that we’re tuning the messaging for what we offer in a particular geography. Digitally, that’s really straightforward because we can ring-fence literally what we want to do with a lead offer.

That’s one reason why we’re spending a little bit less in mass media because given our targeted approach to how we want to converge customers, we can get a lot more out of digital marketing based on knowing where the customer is and what the right best offer is to put in front of them. We’ve had pretty good success doing that. I think we even shared with you in December during the analyst day, if I recall correctly, an example of a map of a metropolitan area where we sell both products. You will see that there isn’t AT&T Internet Air subscribers sitting in fiber footprint. There really shouldn’t be. There not only shouldn’t be any of our AT&T Internet Air subscribers in a fiber footprint, but there shouldn’t be anybody else’s AT&T Internet Air subscribers in a fiber footprint.

My intent is to ultimately market and sell and structure the product in a way that we make sure that that is, in fact, the case because there is no lower marginal cost way to deliver broadband than fiber. Once it’s in, it’s in, and it should basically have a preferred run at the market. I think we can still even get better than that. That’s one reason why I’m not as attached to ARPUs right now and worried about that. I’m worried about our growth in service revenues and managing our profitability because I think there are segments in the market that we can even do better at given the technology and what we’ve deployed. You’ll see us be very targeted in that, and it’s very specific in our support systems when people come into the stores, et cetera.

A lot of this is not left to the discretion of the individual. It’s supported to them as to what they should be selling and can sell. Our effectiveness, as I mentioned when I answered Peter’s question, and doing that over the coming years is a really important part of the success of this management team and managing the sustainability and durability of our profitability in the company. We’re very focused on making that happen operationally, both with our messaging as we work our way through the funnel and operationally how people move forward on it. We’re getting our momentum in business around AT&T Internet Air. We’re still not as good as we can be.

As I’ve told you many times before, we’ve always viewed fixed wireless as a good solution in the business market, given the usage characteristics of a small business or a medium-sized business and the nature of how those companies operate. You know it’s getting your distribution lined up. I think we’re doing pretty well on our owned and operated distribution channels. In the mid and low portion of the market, a large part of your distribution comes through third party. We’re not fully ramped in the third-party distribution yet when I compare our effectiveness to others in the market. We can get there, and we will get there, and we’re scaling it and ramping into it. That’s why you’re seeing results improve. I think our mix of business can be a little bit stronger moving forward.

I think it will hinge on how effectively we ramp in third-party channels to make that happen. That’s part of the, when I say I think we can even get better than where we are, which I’m really pleased with the strong results, but I think we can get better. This would be an area, for example, where I think we can get better. Pascal.

Pascal Desroches, CFO, AT&T: Hey, Ben. Good morning. With regards to margins, we continue to expect overall company margin expansion, consistent with what you saw this quarter. Keep in mind when you look out the next several years, we are working through several transformations, all of which will continue to drive overall efficiency. With each passing day, we have less and less copper in the network and less underlying infrastructure to support it. Similarly, we’re in mid-flight in modernizing our wireless network. We expect that to be substantially complete by the end of 2027. As more and more towers get modernized, it’s going to drive efficiency, not in maintenance and power, and it’s going to deliver superior service. Also, embedded in our strategy is a goal to continue to drive convergence. Over time, the more convergence we drive, the overall churn should come down.

As a result, the efficiency of our acquisition spend should also improve. All those things together make me feel really good about how we’re positioned for the future to continue to drive profitable growth.

Thank you.

Brett Feldman, Head of Investor Relations, AT&T: Thanks for the question. Thanks, Ben. Operator, we’ll take the next question, please.

Conference Operator: The next question comes from John Hudlick with UBS. Please go ahead.

Great. Thanks. Good morning, guys. Two, if I may, maybe first on wireless. John, how would you say that the company is positioned if we see higher promotional activity in the fourth quarter, given the changes at Verizon and at T-Mobile, actually? Maybe touch on the sort of cohorts coming off plan, if you could, given versus what you’ve seen in the last couple of quarters. For Pascal, you know, the comments on ARPU, and actually with a follow-up comment from John in your recent response, it sounds like you guys are down. The pressure on ARPU is a little bit stronger than we expected, both in wireless and in broadband. With most of the growth coming from converged services going forward and your comments, should we expect continued pressure on ARPU on both wireless and broadband as we look out over the next several quarters? Thanks.

John Stankey, Chairman and CEO, AT&T: Good morning, John. I think the answer to the question is we’re well positioned for a competitive market. Excuse me. It’s been competitive. It continues to be competitive. There are shifts in tactics all the time that occur in this market, and we’re in a cycle right now that because of the maturity level, tactics have shifted. As Pascal just very effectively articulated to you, our shift in tactic is to focus on converged customers.

We know that there are some things we have to do differently for that to happen, but we also can project out, given how we know they behave and their lifetime values and what occurs, that when we’re successful doing this and we drive the percentages of our base up higher on converged customers, we’re going to get in a position where we drive down churn, we make that base more profitable, we have happier customers who ultimately move up the continuum and buy more. I mean, we believe that. That is why we’re architecting the business the way we are with the asset base we have and the strategies we’re using moving forward. In terms of the fourth quarter, I may be, I’m probably sitting in a little different chair.

I actually don’t believe many of my peers walk into their job and say, "My goal is to lose share, and I’m going to deliberately do things to make that happen." I think most CEOs want to win, and I think they try to operate their business to win. You can debate whether or not the tactics are right or need to be adjusted. We all make good decisions and bad decisions. Just because there’s a change at the top, I don’t know that that suggests to me that there’s going to be a 180-degree posture change. I think our competitors have been pretty aggressive, and they’ve tried to win, and they’re going to continue to try to win moving forward. We’ve demonstrated that we can be successful against all those tactics.

If there’s a recalibration or a change, just like there may have been a recalibration or change in one of my competitors early this year or last quarter, we’re going to adjust to that, and we’re going to continue to run the plays that we’ve outlined, which is to focus on convergence and focus on those customers that we can bring together and make sure that when we’re acquiring new customers, we’re getting those that we think can be accretive, which may be leaning into what Pascal is going to talk to you about on ARPU. I would describe what’s going on in ARPU more as a feature, not a bug.

When we talk to you about the fact that we’re underpenetrated in certain segments and we know that we can do better in certain places, and we talk to you about our desire to push convergence, which at the front end of investing in convergence means that we give the customer a square deal and a lot of value, that’s what happens at the front end of those things, and we believe we get to a more sustainable place moving forward. Over time, what we do is we end up getting more value out of the customer as a result of that. We deepen that relationship with the customer. We move them up a continuum of products and services. As I’ve said before, we don’t just raise prices to raise prices. We raise prices when we think we’ve given the customer greater value. We try to time it to that.

Investing in our wireless network to deliver massively superior performance with new spectrum that we’re deploying opens up opportunities for us to do things like drive more value-price relationship into the customer base to return on those investments. Pascal, do you want to talk about the ARPU characteristic?

Pascal Desroches, CFO, AT&T: Sure, Ben. Good morning, John. Here’s the thing to keep in mind. When we look at our base of customers, we have a pretty broad base of customers. Candidly, we tend to over-index on the higher ARPU continuum. In order to grow service revenue, we have to be willing to also target other places where we’re underpenetrated. As John effectively laid out, that is part of our strategy. It doesn’t mean that going down ARPU is at the sacrifice of overall service revenue. We are trying to maximize service revenue. In the fourth quarter, as an example, we expect to have a pricing action that becomes effective that will contribute to service revenue growth.

Overall, when you’re managing a big base of customers like we are, it’s important that we try to expand that base as well as, over time, drive more value by giving the customer more and driving more overall top-line growth.

Great. Thanks, guys.

Brett Feldman, Head of Investor Relations, AT&T: Thanks, John. Operator, we will take the next question.

Conference Operator: The next question comes from David Barden with New Street. Please go ahead.

Hey, guys. Thank you so much for taking the questions. I appreciate it. John, if I put all the pieces together, the Lumen deal, the spectrum deal, the desire to get leverage back down to 2.5 times, the desire to maintain a dividend and an equity stock buyback return, recognizing the upper C-band auction is coming, is it fair to say that when you say that you wouldn’t trade assets with anybody, that you don’t need any more assets, that AT&T is out of the M&A acquisition game, the inorganic game, and now it’s time to build on what you have organically at the margin? I have a follow-up. Thank you.

John Stankey, Chairman and CEO, AT&T: Hi, Dave. First of all, I’m never going to answer a question absolutely and say never. I will tell you what I’ve shared with the management team, which is we have all the assets in front of us, and we’ve run the plays that we need to run to be successful over the next five years. Everything that’s going on outside of our business right now is external and distraction. There’s going to be, to the question earlier, maybe new leadership or different tactics taken or approaches used. I feel very, very confident in the path we set for this business, and I feel very confident that the actions we’ve taken over the course of the last several years have put us in a position to be the leader in this industry, to lead on retail service revenues.

By the time we get to 2030, to effectively have better and deeper relationships with more customers for communication services than anybody else. We have that asset base to do that at this point. Our job now is to organically invest in this business and make it a better company, operate better, serve customers better, become more efficient, and put a nail in the coffin of the legacy infrastructure that we have. Those plays all sit in front of us and are all contained within the four walls of AT&T, and they don’t require uncertain regulatory approvals or difficult external issues or other partners to get it done. It’s about us getting it done. That is absolutely the focus and the rallying cry within the four walls of AT&T and how we’re talking about it at the leadership level.

I think you should take that as a strong indication that the management team right now is focused internally about doing the things we need to do to run those plays and do them effectively and not worrying much about what’s going on outside of our industry and where assets are.

John, thank you so much for that. To key off that comment, I feel like I have to ask, outside the four walls of AT&T, there’s been a lot of change in the C-suites. That’s obviously what people don’t know, what they don’t know. What is your or AT&T board’s succession plan? How would that look? When might it happen? Would you become Chairman and give up the CEO title to Jeff and then watch that happen? Could you just kind of elaborate a little bit because everybody’s talking about it?

Dave, nice question, but we’re focused on what we need to do to operate our business every day right now. We don’t have those distractions that others have. I know what I’m entirely focused on, which is making sure that the management team understands their priorities and executes effectively. That’s all we’re worried about. We’re not worried about your question.

Okay. Great. Thank you very much, guys.

Brett Feldman, Head of Investor Relations, AT&T: Thanks, Dave. Operator, we’ll take the next question.

Conference Operator: The next question comes from Michael Ng with Goldman Sachs. Please go ahead.

Hey, good morning. Thank you for the questions. Following up on the comment related to boosting the long-term organic revenue growth and EBITDA outlook early next year, has your confidence around accretion from the Lumen fiber assets and the EchoStar spectrum licenses, you know, has that confidence increased as you’ve spent more time strategizing and looking at those assets? Maybe you could spend a little bit of time also talking about kind of the key buckets in terms of the EchoStar spectrum accretion, whether that’s, you know, AT&T Internet Air, passing acceleration, some of the kind of infrastructure deployment, cash tax savings, the boost hybrid MNO. That would be very helpful. Thank you.

John Stankey, Chairman and CEO, AT&T: Hi, Mike. I don’t think there’s any change in our point of view. First of all, we’re not that far down the road of when we did the transactions to where we stand. I think we continue to get data points to support that we had very conservative modeling in our approach to these things. The most notable would be the Lumen asset base. Certainly, we have not seen anything in our planning that is unexpected that we said, "Where did that come from?" or "That’s different than what we expected." I think most importantly, because we did pretty good diligence before we announced the transaction. We were buying a hard asset in this case, and we did our diligence literally at the hard asset level. I think we know what we’re getting. We’ve managed to get additional confidence.

As you know, we’re operating out of region with Gigapower, and Gigapower has been scaling nicely. We’re in that point right now where we can see the data coming in and markets that we’ve been able to build enough that we’re beyond very small pox of overbuild. The assumption set that we’ve used in Lumen is based on our experience in having built outside the footprint. We see that results are coming in the way we would have expected. It’s doing all the things that we said we need to do on a converged basis, which is driving both products into a household, driving them at the right ARPU, seeing customer satisfaction levels go up, brand gets a better image, churn goes down. All those things are happening, and that data is coming in. It gives us confidence that we’re on the right path.

That’s why I said earlier that our job is to look organically internally and go execute the plays that we know we need to go execute. I would tell you on probably the upside around that is, as you know, we’ve largely built this as a consumer-oriented play. As we build brand reputation in a market and presence in a market, there’s no reason to think we can’t even move beyond that. I think there’s upside in our conservative modeling on these things. On EchoStar, there’s the old-fashioned way that accretion is driven in, which is it’s going to defer some capital because of the depth we get in the network in places for capacity. We defer out splits and augments on capacity. That’s an important driver. That’s pretty rote. We do that every time we buy spectrum. We know how to do those things.

We have a better wholesale play. As you know, this moves into a network as a service construct for the Boost brand and for whatever EchoStar chooses to do moving forward. That movement is underway now. I know that EchoStar is working through some of the regulatory issues around their consent decree to give them the freedom to do everything they need to do. That’s probably a question better suited for them to ask how that progress is going. I can see it on my side that they’re migrating a lot of customers over to our network right now. What we expected to have happen is happening, which is our wholesale revenues are growing and improving right now as a result of that.

We expect some incremental accretion over what we would have had in the business plan because of our previous wholesale relationship with EchoStar, which will add value into the acquisition. Of course, as you noted, the scaling that’s going on in AT&T Internet Air, this is only going to allow us to be more successful in places where we’re not building fiber and find those right business customers and find the right segment of the consumer base that we think has more durability with a converged offer and grow in that area.

When Pascal shared with you that we’re going to be out talking with you in the early part of next year as we get close to the approval of both of these transactions that we would expect to happen early next year, we’ll come out and we’ll give you the texture around that as to how we have that market segment and what we expect to do. The good news is, as you can see, operationally, we’re moving through those continuums now, including deploying the 3.45 spectrum that allows us to get the machine up and running even before we close that transaction, which should, by the time we get those things in order, start to reflect our volumes in 2026, that we can ultimately give you some better insights to as we move forward.

Pascal Desroches, CFO, AT&T: Mike, one other point to note, John said this, but I think it’s worth underscoring. When you look at, in addition to adding fixed wireless, the mobility attachment associated with that, currently across our footprint, we are at 50%, we’re better than 50%. That is really before any meaningful marketing has been put behind it. As the spectrum is deployed and as we become more aggressive with marketing, that’s another pool of value that we’re really excited about.

Great. Thank you, Pascal. Thanks, John. That’s very clear.

Brett Feldman, Head of Investor Relations, AT&T: Thanks, Mike. We’ll take the next question, please.

Conference Operator: The next question comes from Sebastiano Petty with JPMorgan. Please go ahead.

Hi, thanks for taking the question. Maybe Pascal or John, just a clarification question on FWA. You talked about the seasonality within the fiber business, typically in the fourth quarter, as you get towards the holidays, you see a little bit of a step down and 4Q24 had a little bit of a one-timer because of the work stoppage. In FWA, have you noticed a similar pattern on an underlying basis? Obviously you will see an acceleration. I think, John, you talked about lighting up some of the three, four, five, or two-thirds, I think, of pops by mid-November. Any help on how we think about the pacing of FWA, underlying subscriber results, and as we kind of think about the broader expansion from the EchoStar spectrum coming on. I guess also sticking with the broadband, any update on Gigapower and how that’s perhaps going?

I think there was a press report in the third quarter about Gigapower perhaps bringing on a new ISP onto their network. Any way to kind of think about that and the risk that your wholesale partners within the, I think, piggybacking on Peter’s question about getting to the 60 million, within that, obviously, you know, a decent portion of that would come from open access wholesale partners. How do you assess the risk of your partners meeting that target over time? Thanks, John.

John Stankey, Chairman and CEO, AT&T: Morning, Sebastiano. I’d say there are elements about the holiday season that I can speak to the Stankey household and what we notice in some of our customer base. People become busy and distracted, and they have a lot going on. As a result of that, I think we all prioritize our time and energy. While we like to make an acquisition of our product and service seamless and without friction, it isn’t yet there. People sometimes do research and have to ask themselves some questions. Is this the time they want to change a very important relationship in their life, which is their internet service provider? I think because of that nature of that season and the bandwidth that people have, haha, to get things done, there’s just some decisions that are deferred as a result of that.

I wouldn’t expect that that would be entirely different for fixed wireless, and it might be for a fiber installation, short of the fact that somebody doesn’t have to come out to the house. Do I think we can still move the product during the period? Yes, I do. I think businesses are a little bit different than consumers, and certainly fixed wireless has a little bit more of a bent on the business side right now with some of the penetration. I wouldn’t expect that to be as dramatic, but I do believe there’s some seasonality that just works its way into consumers and businesses that are busy at that time of year. That’s why you get a degree of seasonality that occurs. Moves are down. People don’t move homes. They’re in the fourth quarter. I don’t think that’s going to change. That’s a dynamic of a buying decision.

We don’t have multiple years of experience on fixed wireless where I can be perfectly empirical with you and tell you I know exactly where that’s going to come in. On Gigapower, I think our relationship with our partner there has been great. I think they’re really satisfied. I think we’re satisfied. We’d all like to go a little bit faster, but once the footprint is turned up, I think people are looking at the model and saying it’s working exactly the way it’s working. I would expect with our partner, the way we meet our obligations around rate of penetration and how we bring customers on, we are going to continue to be the anchor provider on that network and have the dominant share of customers that are supported over that network.

That is, as it was intended to do when the construct was designed, will be the foundation of the profitability and the return on that network. I don’t see anything changing in our results to date or anything that’s going to be done going forward to be inconsistent with that. I’m confident that we’re going to get the customers that we need to get and that we’re penetrating in the way we want to penetrate. I don’t worry about, you know, whether or not a second or third provider on the network ultimately creates a problem for AT&T’s retail activities and brand in the market, as opposed to are we attacking a segment that we just weren’t effective at getting at that wholesale can be an extension and increase in penetration at the margin.

Brett Feldman, Head of Investor Relations, AT&T: Thanks, Sebastiano. All right, we’ll take our next question.

Conference Operator: The next question comes from Michael Rollins with Citi. Please go ahead.

Thanks, and good morning. John, there’s some questions about whether or not LEO satellites pose competitive threats to your mobile services. Direct-to-device LEOs get access to spectrum and improve their technology. Also, whether these constellations will impact the future competitive landscape for broadband to the home and business locations. Just curious if you can give us an update on your views with respect to these constellations as competitors to your strategic wireless and broadband services. If you can also give us an update on how you’re planning to offer your own direct-to-device satellite offering to customers. Thanks.

John Stankey, Chairman and CEO, AT&T: Hi, Mike. I don’t know that I’m going to add anything to what you’ve probably heard me say before publicly. The LEO technology is a really exciting technology. I think it’s going to be fantastic for consumers and businesses. I think it’s going to bring a realm of innovation into networking that we’re going to see new things pop up that are going to make networks more resilient, more trusted, do some things that they couldn’t do before. I’m really excited about them. I think we’re a natural integrator of that technology, given our extensive customer relationships, our ability to market, use our brand to aggregate, take friction out of acquisition. I would expect moving forward that we can be a big purveyor of those products and services. As you know, we have a very close relationship with AST. We want to help them move along and scale their product.

We think it’s a unique approach to it where they, right from the start, were designing satellites to be perfectly compatible with consumer and user devices that were out there that didn’t require large investment in CPE and equipment to make it work. We think there’s a space for that. That’s why we’ve advocated for that. I’m interested to see now that others in the LEO space are understanding that they maybe need to engineer these constellations to do more direct-to-device. That will be good because I’d like to see a market where there’s more than one purveyor of products and services. I think that would be healthy. We’d certainly support that occurring over time. The way I think about it is mostly complementary. I can give you my reasons for that in a minute.

There’s going to be places where the LEO constellation becomes maybe a better alternative to a terrestrial solution. Certainly, in the IoT space, there’s going to be circumstances where it might be easier to use LEO to solve certain types of IoT-related applications. That’ll be part of the innovation of what they bring forward. Complete replacement of terrestrial wireless networks strikes me as a, you know, it’s probably not that it couldn’t be done, but it would require an awful lot of time and money. I think you could probably ask Charlie Ergen about that. People don’t always recognize the fact that we do deploy cell sites, and that’s part of our capital deployment. We do an awful lot of deployment of capital inside buildings: hospitals, stadiums, high-rises, hotels.

Those aren’t things that are easily served necessarily from just laying up some, you know, 40 MHz of spectrum on a satellite. If you really want a cohesive network that is going to deliver on the kind of AI demands moving forward, which is really managing traffic aggressively, giving strong quality of service on the uplink, low latency, I would tell you that just generally speaking, it takes a lot of engineering to do that. It’s embedded over years and years of deployment of capital and work. It’s not replaced quickly, and it’s not necessarily optimal to see from the sky. I would tell you the other thing you need to think about is while spot beam technology will, of course, get better than maybe a 20-mile radius over time, there are physical limitations to what that can do.

A typical cell site right now is probably running at, you know, roughly about a two-mile radius, a little bit more, a little bit less in some cases. When you have, you know, over 300 MHz of spectrum in a two-mile radius, it’s really hard to see 40 MHz of spectrum over a 20-mile radius replacing that capacity, especially when you multiply the fact that there are three providers on a stick, you know, that are doing that and have those kind of scaled networks that have massive backhaul at that cell site, 10 gig or better. It’s hard to replace that, and it’s also hard to outperform that from a performance perspective. I do believe they can be really complementary. I believe that ultimately hybrid networks can play.

I think it’s very hard in an AI world to build a hybrid network that’s going to deliver the kind of performance indoor and outdoor over time that we’re building. That’s why we think fiber is so important. When you have dense fiber and you can pick up workloads closer to the customer, you’re always going to have a better-performing network and a more scalable network and a network that operates at a lower marginal cost. That’s our belief in why we’re playing the way we’re playing.

Brett Feldman, Head of Investor Relations, AT&T: All right. Thanks for the question. We have come to the end of our time. That was going to be our last one. Operator, I’ll turn it back over to you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

Brett Feldman, Head of Investor Relations, AT&T: We’re all set. Thanks everyone for joining us today.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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