Should T Stock Be Part of Your Portfolio Post Robust Q4 Earnings?

AT&T Inc. T reported solid fourth-quarter 2025 results, with both adjusted earnings and revenues surpassing the respective Zacks Consensus Estimate on healthy mobility and broadband demand trends. The company witnessed solid wireless traction and customer additions, which were partially offset by lower demand for legacy voice and data services. AT&T recorded strong subscriber growth backed by a resilient business model and robust cash flow position, driven by a diligent execution of operational plans. AT&T expects to continue investing in key areas of 5G and fiber and adjust its business according to the evolving market scenario to fuel long-term growth.

T Buoyed by Fiber Convergence   

AT&T is benefiting from increased fiber convergence with accelerated growth in fiber customers in areas where it has solid wireless services. During the fourth quarter, fiber convergence rate climbed 200 basis points year over year to 42%. An integrated fiber expansion strategy is expected to improve broadband connectivity for enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. AT&T recorded net fiber additions of 283,000, while Internet Air added 221,000 subscribers during the quarter. By the end of 2030, AT&T expects to reach approximately 50 million customer locations with its in-region fiber network and more than 60 million fiber locations when including the Lumen Mass Markets fiber assets.

With a customer-centric business model, AT&T is riding on the increased deployment of mid-band spectrum and greater fiber densification. The company's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress as the digital landscape evolves. AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices. 

AT&T intends to restructure its operating segments effective first-quarter 2026 to better reflect the evolution of its business model to delivering converged advanced connectivity services across 5G and fiber to consumer and business customers. The new operating segments will include Advanced Connectivity, which represents domestic 5G and fiber-based wireless, Internet and other advanced connectivity services; Legacy, comprising domestic legacy voice and data services provided over copper-based networks to consumer and business customers; and Latin America, representing the wireless business in Mexico.

T Aims for Healthy Return to Shareholders

Over 2026-2028, AT&T expects to drive accelerated growth in adjusted EBITDA with double-digit adjusted EPS growth and strong free cash flow. The company expects to return $45 billion plus to shareholders through attractive dividends and a consistent share repurchase program. The company achieved more than $1 billion of cost savings in 2025 and expects to achieve an additional $4 billion annual cost savings by the end of 2028 through higher operational efficiencies, along with reductions in legacy operations and support costs. By 2029, AT&T aims to exit legacy copper network operations across most of its wireline footprint and has already discontinued the sales of all legacy copper-based services in 85% of its wire centers.

AT&T anticipates completing major capital projects by the end of 2030, thus freeing up capital for a durable long-term cash flow. With improved growth, declining capital intensity and higher free cash flow, the company is likely to have greater flexibility to support enhanced shareholder returns in the future.

Price Performance

AT&T has gained 8.4% over the past year against the industry’s decline of 4.4%, outperforming peers like T-Mobile US, Inc. TMUS, but lagging Verizon Communications Inc. VZ. While Verizon has gained 12.1%, T-Mobile declined 17.8% over this period.   

One-Year T Stock Performance

T Plagued By Waning Legacy Services, Eroding Margins

Despite solid wireless traction, AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.

Estimate Revision Trend of T

Earnings estimates for AT&T for 2026 have moved up 0.9% to $2.28 over the past year, while the same for 2027 has increased 0.8% to $2.54. The positive estimate revision depicts bullish sentiments for the stock.

End Note

By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. The uptrend in estimate revisions further portrays optimism about the stock’s growth potential.

However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. With a Zacks Rank #3 (Hold), AT&T appears to be treading in the middle of the road, and investors could be better off if they trade with caution. 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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