Third-quarter adjusted earnings of 65 cents a share beat estimates by about 8%, and the company lifted its full-year outlook to about $2.40. But average revenue per fiber customer fell, AT&T expects another decline in the fourth quarter, and Verizon and T-Mobile fell with it.
AT&T gave investors a beat, a raise and a lower spending plan. The market answered with a sharp decline. The line item that stood out, revenue per fiber customer, was left out of the press release but disclosed by the chief financial officer on the call.
The company reported third-quarter adjusted earnings of 65 cents a share, up from 54 cents a year earlier and above the 60-cent consensus compiled by LSEG. Revenue rose 5.3% to $32.3 billion, about 2% above the $31.69 billion consensus. Adjusted EBITDA rose 5.4% to $12.5 billion, and free cash flow was $5.0 billion. Earnings from continuing operations under generally accepted accounting principles were 13 cents, against $1.29 a year earlier.
AT&T now expects full-year adjusted earnings of about $2.40, up from a range of $2.25 to $2.35 and above the $2.34 analysts expected, according to FactSet. The chief financial officer said the raise was primarily because of lower depreciation expense tied to held-for-sale accounting for AT&T Mexico.
What fell
The shares were down 6.43% at $21.915 at about 1:46 p.m. Eastern, from a close of $23.42, on 52 million shares. The low of the day was $21.80, down 6.9%. Verizon fell 2.76% and T-Mobile 3.09%, so the decline was not confined to AT&T. Both had already been under pressure from SpaceX's Starlink Mobile spectrum news earlier this month.
The company's own operating figures were solid. It added 379,000 postpaid phone customers at a churn rate of 0.92%, against about 379,300 from FactSet and about 387,400 from a second estimate, and 405,000 a year earlier. It added a record 769,000 internet customers, 442,000 on fiber and 327,000 on fixed wireless.
The number that stood out was revenue per fiber customer. It fell 4% from a year earlier, and AT&T expects it to decline again in the fourth quarter. The company's strategy leans on bundling internet with wireless: 42.8% of its advanced home internet households also buy AT&T wireless. The company gave three reasons for the decline: introductory pricing, converged discounts and lower-revenue fiber customers acquired from Lumen. Postpaid phone revenue per customer rose 4%.
The spending cut
AT&T reaffirmed 2026 capital investment of $23 billion to $24 billion and set 2027 and 2028 at $22 billion to $23 billion a year. At the midpoints, that is about $1 billion a year less than this year. The company said it remains on track for more than 60 million fiber locations by the end of 2030.
A lower capital budget raises cash available to shareholders. It also invites a question about whether the fiber build, which has been the growth story, is moving past its peak.
Two readings
One reading is that the market is overreacting to a pricing detail. Earnings beat, guidance rose, cash flow is solid and customers are being added at a record pace, which leaves the revenue-per-customer figure as the only soft spot.
The other reading is that the detail is the story. If growth in customers depends on discounts, then profit growth will depend on how long the discounts last and how many customers they bring in. A sector-wide decline in the shares of Verizon and T-Mobile on a day neither reported suggests investors may be reading AT&T's results as a message about industry pricing.
What to watch
Fiber revenue per customer in the fourth quarter; the postpaid phone trend; the capital budget path into 2027; and Verizon's and T-Mobile's next reports for confirmation of whether pricing pressure is industrywide. A fourth-quarter decline smaller than the 4% fall would ease the concern.