T-Mobile's Q1 Earnings Beat on Solid Demand for Postpaid Services

T-Mobile US, Inc. TMUS, a leading wireless service provider, reported better-than-expected first-quarter fiscal 2025 results. Non-GAAP earnings of $2.58 per share surpassed the Zacks Consensus Estimate by 13 cents.

Revenues surged 6.6% year over year to $20.88 billion. The figure surpassed the Zacks Consensus Estimate of $20.57 million. Healthy traction in multiple verticals boosted the top line.

TMUS’ Segment Performance

In the fiscal first quarter, T-Mobile's total postpaid revenues rose 7.6% year over year to $13.59 billion, surpassing our estimate of $13.54 billion. T-Mobile witnessed its strongest first-quarter postpaid net addition. Gross additions were also improved significantly across all categories, including postpaid phones, non-phones and 5G broadband. Postpaid net customer additions were 1.3 million, up 117,000 year over year. Postpaid phone net customer additions were 495,000, while postpaid net account additions were 205,000. The company successfully expanded its customer base in rural markets and also in the top 100 markets across the nation. 

The majority of new customers joining T-Mobile are opting for premium plans. The company reported 4% year-over-year growth in Postpaid average revenues per account, which is the best first-quarter growth in eight years.

In 5G broadband, T-Mobile has solidified its position as an industry leader. The company witnessed 424,000 net high-speed Internet additions with record-low churn. TMUS undertook a strategic approach to update its long-outdated pricing plans. Its pricing adjustments aligned well with its differentiated offerings of good, better and best mobile plans. This resonates well with customers’ evolving requirements. The company recorded its highest-ever growth in average revenue per user. T-Mobile’s focus on expanding network slicing features, deployment of advanced 5G infrastructure, competitive pricing and fiber expansion are driving growth across verticals.

TMUS reported prepaid revenues of $2.64 billion, up 10% year over year. The figure surpassed our estimate of $2.61 billion. Despite some macroeconomic headwinds, the company’s prepaid service business remains stable with a 25.5 million customer base.

TMUS’ Financial Position

In the March quarter, cost of services declined to $2.6 billion from $2.68 billion in the year-earlier quarter. Cost of equipment sales rose to $4.79 billion from $4.39 billion a year ago. Selling, general and administrative costs were $5.48 billion, up from $5.13 billion in the year-ago quarter.

In the fiscal first quarter, T-Mobile generated $6.84 billion of cash from operating activities compared with $5.08 billion in the prior-year quarter. Adjusted free cash flow was $4.39 billion. Its robust cash flow position underscores efficient capital management and strong operational efficiency. 

As of March 31, 2025, the company had $12 billion in cash and cash equivalents, with $76 billion of long-term debt compared with respective figures of $5.4 billion and $72.7 billion at the end of the previous quarter. Total current liabilities increased to $23.6 billion from $20.2 billion at the end of the December quarter.
 
During the March quarter, this Zacks Rank #3 (Hold) company bought back 10.1 million shares for approximately $2.5 billion. At the quarter’s end, the company had $10.5 billion left under its 2025 buyback program. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

TMUS’ Guidance

For 2025, The company expects postpaid net customer additions between 5.5-6 million. Backed by strong subscriber momentum, management now anticipates solid growth in service revenues. TMUS raised its growth expectation for postpaid ARPA to 3.5% for the full year, up from the prior estimation of around 3%. Postpaid phone ARPU is expected to grow 1.5% year over year in 2025.

Capex guidance is at $9.5 billion, reflecting the company’s disciplined approach in capital spending. The company expects free cash flow in the range of $17.5-$18 billion, increasing the lower end of the guidance from $17.3 billion. Core adjusted EBITDA is expected at $33.2-$33.7 billion, raising the guidance by $100 million at midpoint.

Stocks to Consider

InterDigital IDCC carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the trailing four quarters, InterDigital delivered an earnings surprise of 158.41%. It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. InterDigital boasts a comprehensive portfolio of more than 33,000 granted patents and applications. The company witnessed an exceptional year in innovation in 2024, with more than 5,000 new patent filings worldwide.

Ubiquiti Inc. UI carries a Zacks Rank #2 at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. In the trailing four quarters, Ubiquiti delivered an earnings surprise of 7.48%.

Ubiquiti’s excellent global business model, which is flexible and adaptable to evolving market changes, helps it overcome challenges and maximize growth. The company’s effective management of the strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory supervision techniques.

Ericsson ERIC carries a Zacks Rank #2 at present. Ericsson is well-positioned to cash in on the market momentum with its competitive 5G product portfolio. The company continues to execute its strategy to become a leading mobile infrastructure provider and establish a focused enterprise business. In the last reported quarter, Ericsson delivered an earnings surprise of 33.33%.

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