AT&T Rides on Strength in Communications Segment: Will it Persist?

AT&T, Inc. T is benefiting from solid demand trends in the Communication segment. During the second quarter, segment revenues rose to $29.7 billion, up from $28.58 billion in the year-ago quarter. The growth is primarily driven by healthy traction in the Consumer Wireline and Mobility business. 

During the second quarter, the Consumer Wireline business revenues were up 5.8% to $3.54 billion. The uptick is a result of solid momentum in the fiber broadband business. AT&T recorded net fiber additions of 243,000, while Internet Air added 203,000 subscribers during the quarter. The company has been taking several strategic initiatives to expand its fiber footprint nationwide. Its fiber broadband network has reached 30 million consumer and business locations across the United States. The major milestone was realized ahead of schedule. 

The company is also acquiring Lumen's fiber connectivity business for $5.75 billion. Following the buyout, AT&T will acquire 1 million fiber customers and 4 million fiber locations across 11 U.S. states. These factors are expected to drive growth in the Consumer Wireline vertical in the upcoming quarters. Per our estimate, from the Consumer Wireline business, the company is expected to generate $15 billion in revenues in 2025, indicating 10.5% year-over-year growth.

Mobility business improved on the back of strong subscriber and postpaid average revenue per user gains. During the second quarter, net sales improved 6.7% year over year to $21.84 billion. Healthy growth in Equipment revenues is also a positive. Per our estimate, the company is estimated to generate $89.7 billion in revenues from Mobility. The consolidated Communication revenues are expected to be $122.3 billion, indicating a 4% year-over-year rise. In a highly competitive and saturated U.S telecom market, this is a healthy growth prospect.

How Are Competitors Faring?

The company faces stiff competition from Verizon Communications, Inc. VZ and T-Mobile US, Inc. TMUS in the telecom market. 

In the second quarter, Verizon’s Consumer revenues were up 6.9% year over year to $26.65 billion, driven by growth in both services and wireless equipment. However, its business revenues declined. The company is also actively expanding its fiber footprint nationwide with strategic acquisitions and network expansion. In the second quarter, Verizon registered solid broadband growth with total fixed wireless access net additions of 278,000, growing the subscriber base to more than 5.1 million. 

T-Mobile remains the fastest-growing telecommunication service provider in terms of net adds. In the second quarter, the company added 1.7 million postpaid net customers while postpaid net account additions were 318,000, both metrics being the best in the industry. AT&T reported a 479,000 post-paid net addition during the second quarter. T-Mobile’s Equipment revenues were $3.43 billion, up from $3.1 billion in the year-ago quarter.

T’s Price Performance, Valuation & Estimates

AT&T stock has rallied 33.1% over the past year compared with the Wireless National industry’s growth of 21%.

Going by the price/earnings ratio, the company’s shares currently trade at 13.49 forward earnings, lower than the industry’s 13.74 but above its mean of 12.34.

Earnings estimates for 2025 and 2026 have moved upward in the past 60 days.

AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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