PLDT Inc.'s Q2 2025 Earnings: Navigating Growth, Debt, and Digital Transformation

PLDT Inc.'s Q2 2025 earnings report paints a nuanced picture of resilience and reinvention in a sector grappling with rising operational costs and evolving consumer demands. While the company's revenue grew to PHP 54.3 billion in the quarter—a 2.1% year-over-year increase—its net income of PHP 9.1 billion and EPS of PHP 42.1 reflected a more cautious narrative. The first-half net income dip to PHP 18.1 billion, despite a 2.8% rise in service revenue, underscores the pressure from non-service revenue declines and rising expenses. Yet, PLDT's strategic pivot toward digital transformation, particularly through its digital bank Maya, and its disciplined capital allocation offer a compelling case for long-term investors.

Earnings Resilience: Service Revenue Growth vs. Structural Headwinds

PLDT's core telco business remains a cornerstone of its earnings resilience. Service revenue in Q2 2025 hit PHP 52.9 billion, up 3.1% year-over-year, driven by 5G adoption and expanded broadband penetration. This growth is critical in a market where the Philippines' digital economy is projected to grow at a 12% CAGR through 2030. However, non-service revenue plummeted 33% to PHP 1.4 billion, primarily due to the winding down of one-time asset sales and gains. This decline highlights the company's reliance on recurring service income, a trend that could stabilize as digital services mature.

The CEO's optimism about the second half is warranted. Maya, PLDT's digital bank, turned a PHP 406 million profit in the first half of 2025, reversing a PHP 1.1 billion loss in the same period last year. This turnaround, coupled with a 6.1% increase in telco core income, suggests that PLDT's digital ecosystem is beginning to scale. Analysts at AP Securities note that Maya's integration with PLDT's telecom network could unlock cross-selling opportunities, potentially boosting ARPU (average revenue per user) by 5–7% over the next two years.

Debt Management: A Balancing Act

PLDT's leverage remains a double-edged sword. Its debt-to-equity ratio of 2.26 as of Q2 2025, while high, is a marginal improvement from 4.37 in 2021. The company's revised full-year capex guidance of PHP 63 billion—down from PHP 68 billion—reflects cost discipline, but its gross debt of PHP 257 billion still poses risks. Moody's Baa2 rating (stable outlook) acknowledges PLDT's strong liquidity (PHP 40.2 billion in cash as of 2024) and market dominance, but warns that capex-heavy growth could strain free cash flow.

A key development is PLDT's rumored sale of 49% of its $1 billion data center business, which could generate PHP 28.2 billion in proceeds. This would cover nearly all of its 2024–2025 debt maturities (PHP 30.5 billion) and reduce gross debt by ~11%. Such a move would not only strengthen PLDT's balance sheet but also free capital for expansion into prepaid fiber—a segment where Globe Telecom and Converge ICT Solutions are aggressively competing.

Valuation and Analyst Optimism: Justified or Overdue?

At PHP 1,315 per share, PLDT trades at a 30.5% discount to the consensus price target of PHP 1,716.25. This premium is partly justified by its projected 2026 revenue of PHP 247.5 billion and EBITDA of PHP 127.9 billion, which imply a 12x EBITDA multiple—well below global peers like KDDI (16x) and America Movil (14x). However, the stock's 31.9% five-year total shareholder return already factors in these growth assumptions, raising questions about its ability to outperform in a high-debt environment.

Analysts' bullish stance hinges on three pillars:
1. Digital Synergies: Maya's profitability and PLDT's 5G rollout could drive cross-platform revenue.
2. Cost Optimization: Reduced capex and debt restructuring are expected to improve free cash flow margins.
3. Market Position: PLDT's 49% mobile subscriber share and 50% revenue dominance in the Philippines provide a moat against new entrants.

Yet, risks persist. Regulatory pressures on telecom pricing, rising interest rates, and the capital intensity of fiber expansion could erode margins. PLDT's EBITDA margin of 50.3% in Q2 2025, while robust, is below its 2020 peak of 53.8%, signaling potential headwinds.

Investment Thesis: Buy or Wait?

PLDT's Q2 2025 results affirm its ability to navigate a challenging macroeconomic landscape, but investors must weigh its structural risks against its growth potential. The company's digital transformation and debt management efforts are promising, yet the PHP 1,716.25 price target assumes a smooth execution of its capital-light strategy and sustained profitability from Maya.

For long-term investors, PLDT offers a compelling blend of defensive cash flow (from its telco core) and growth (from digital services). However, those with a shorter time horizon may prefer to wait for a pullback or clearer signs of debt reduction. The key will be monitoring PLDT's Q3 2025 guidance, particularly its capex efficiency and Maya's contribution to EBITDA.

In conclusion, PLDT's earnings resilience and strategic agility justify its current valuation, but the road to PHP 1,716.25 will require disciplined execution. For now, the stock remains a buy for those comfortable with its leverage and bullish on the Philippines' digital economy.