T Q1 Earnings Call: Fiber Expansion, Converged Strategy, and Tariff Risks Highlight Outlook

Telecommunications conglomerate AT&T (NYSE:T) announced better-than-expected revenue in Q1 CY2025, with sales up 2% year on year to $30.63 billion. Its non-GAAP profit of $0.51 per share was in line with analysts’ consensus estimates. The stock traded up 2.2% to $27.55 following the earnings release and call.

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StockStory’s Take

AT&T’s first quarter results reflected management’s emphasis on expanding high-value customer relationships through its converged fiber and wireless offerings. Executives attributed performance to increased customer acquisition and retention investments, the ongoing transition from legacy copper to fiber and 5G, and operational improvements in both mobility and consumer wireline segments. CEO John Stankey highlighted the company’s progress toward its fiber expansion goals and underscored the strategic importance of converged accounts, noting that more than 40% of AT&T fiber households now also subscribe to mobility services, which carry a higher lifetime value.

Looking forward, management’s guidance centers on maintaining growth and margins despite a less predictable economic environment and the potential impact of new tariffs on equipment and devices. Stankey acknowledged the fluidity of current market conditions, stating, "We are well-positioned to drive sustainable growth through a range of market and economic cycles," but cautioned that cost pressures from tariffs could affect consumer and business demand. The company aims to manage these risks by accelerating cost reduction initiatives and leveraging its balance sheet to continue share repurchases and strategic investments.

Key Insights from Management’s Remarks

AT&T’s management detailed how its investment-led strategy and ongoing network modernization are driving growth in high-value customer segments, while also outlining the challenges of a shifting macro environment and the company’s response.

• Converged Customer Penetration: The integration of fiber and wireless services within households continues to rise, with more than 40% of AT&T fiber customers now also subscribing to mobility services. Management emphasized that converged accounts deliver lifetime values over 15% higher than stand-alone services, driving the company’s focus on bundling and cross-selling.

• Fiber Expansion Milestone: AT&T is ahead of schedule in its fiber buildout, expecting to surpass 30 million locations passed before midyear 2025. Management reaffirmed the target of reaching over 50 million locations by 2029 through a combination of organic builds and partnerships, positioning fiber as a long-term growth engine.

• Mobility Segment Dynamics: Strong postpaid phone net additions and ARPU (average revenue per user) growth were cited as key drivers in mobility, although increased competition led to higher churn rates compared to last year. The launch of the AT&T guarantee and elevated promotional activity increased marketing expenses but were viewed as necessary for customer acquisition.

• Cost Efficiency and Legacy Transition: Cost savings from retiring legacy copper infrastructure and executing on workforce and vendor reductions contributed to margin stability. Recent FCC orders are expected to further accelerate the retirement of legacy assets, with management noting that operational execution is now the primary focus.

• Tariff and Macro Environment Risks: Management flagged potential cost increases from announced tariffs on smartphones and network equipment, acknowledging limited visibility into how much of the cost will be passed to consumers. The team believes it can manage these pressures within its current financial plan but will adjust strategy as needed if economic conditions deteriorate.

Drivers of Future Performance

AT&T’s outlook for the coming quarters is shaped by its expanding fiber footprint, efforts to drive higher-value converged accounts, and proactive cost controls amid macroeconomic uncertainty and potential tariff impacts.

• Fiber and 5G Buildout: Continued investment in fiber and 5G networks is expected to drive customer growth and higher ARPU, particularly as more households adopt bundled services. Management believes this will support both revenue growth and long-term margin improvement.

• Tariff-Driven Cost Uncertainty: Announced tariffs on devices and equipment introduce a risk of higher costs for both the company and its customers. Management is monitoring how these costs may affect consumer demand and upgrade cycles, with contingency plans to adjust expenses and product offerings as needed.

• Operational Efficiencies: Accelerated cost-reduction initiatives—including workforce optimization, digital channel improvements, and vendor renegotiations—are intended to offset inflationary and competitive pressures, helping safeguard free cash flow and support capital return programs.

Top Analyst Questions

• Peter Supino (Wolfe Research): Asked how AT&T plans to address increased handset costs if tariffs take effect and whether expense reductions outside consumer wireline can be accelerated; management said costs would be largely passed to customers and outlined ongoing efficiency measures across the business.

• Benjamin Swinburne (Morgan Stanley): Inquired about the company’s openness to acquiring additional fiber assets, referencing rumors about Lumen’s business, and about the impact of recent FCC orders; CEO John Stankey declined to comment on M&A speculation but confirmed regulatory changes are enabling faster legacy network retirements.

• John Hodulik (UBS): Asked about the financial implications of higher upgrade rates and whether improved business wireline EBITDA trends are sustainable; CFO Pascal Desroches attributed recent trends to promotions and cost actions, cautioning that some benefits are nonrecurring and legacy revenue declines are expected to resume.

• Michael Rollins (Citi): Requested updates on the expansion and profitability outlook for fixed wireless and the company’s ability to increase ARPU; Stankey emphasized improved network efficiencies and targeted use of fixed wireless as a complement to fiber, with ongoing opportunities to adjust pricing based on value delivered.

• Bryan Kraft (Deutsche Bank): Sought clarification on churn dynamics and gross add trends; management explained higher churn is primarily due to contract roll-offs and expects 2025 trends to mirror 2023, with a continued focus on high-value customer acquisition.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will monitor (1) progress on AT&T’s fiber expansion pace and the resulting uptick in converged account penetration, (2) the impact of tariffs on device upgrade activity and customer demand, and (3) the company’s ability to deliver cost savings from legacy network retirements and broader expense initiatives. Execution against these signposts will be critical to maintaining both growth and margin targets as the competitive and regulatory landscape evolves.

AT&T currently trades at a forward P/E ratio of 13.2×. Should you double down or take your chips? Find out in our free research report.

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