AT&T's Q2 2025 Earnings: A Crucible for Telecom's Future

Eli GrantFriday, May 30, 2025 7:22 am ET
70min read

The telecom sector is at a crossroads: 5G adoption is accelerating, fiber networks are rewriting broadband dominance, and legacy business models are crumbling under the weight of competition and inflation. For AT&T, the July 23 release of its Q2 2025 earnings will serve as a litmus test for whether its $22 billion annual capital allocation strategy—focused on 5G, fiber, and convergent services—is paying off in a market where subscriber growth is commoditized and margins are razor-thin.

The Metrics That Matter

AT&T's Q2 results will hinge on three pillars: subscriber momentum, capital discipline, and cash flow resilience. In Q2 2024, the company reported 419,000 postpaid phone net adds and 239,000 fiber net adds—the latter marking 18 consecutive quarters of 200,000+ growth. These trends, if sustained, will validate AT&T's strategy of bundling wireless and fiber services to deepen customer relationships.


But the real battleground is fiber. AT&T aims to pass 30 million locations with fiber by year-end—up from 27.8 million in Q2 2024—and its Q2 capital expenditures will reveal whether it's accelerating investments to meet this target. A slowdown here would raise concerns about its ability to compete with Verizon's 5G Ultra Wideband and Dish Network's (DISH) aggressive low-Earth-orbit satellite play.

The Dividend Dilemma: Safe Harbor or Storm Warning?

AT&T's common stock dividend of $0.2775 per share has been unchanged since 2021—a point of pride for management, which has prioritized debt reduction over payout growth. In Q1 2025, net debt fell to $126 billion, trimming its debt-to-EBITDA ratio to 2.7x—closer to its 2.5x target. But with free cash flow guidance of $16 billion+ for 2025, investors will scrutinize whether the dividend remains sustainable if macroeconomic headwinds (e.g., tariff risks on networking gear) compress margins.


The dividend's safety hinges on two factors: fiber revenue scalability and cost control. Q2's adjusted EBITDA growth (projected to rise post-2024's 3% expansion) must outpace the 9% year-over-year decline in legacy Business Wireline revenue. If AT&T can convert fiber's 19% revenue growth (Q1 2025) into recurring cash flows, the dividend remains a fortress.

The Risks: A Telecom Minefield

  • Margin Pressures: AT&T's Q2 gross margins could shrink if 5G and fiber capex outpaces revenue gains.
  • Regulatory Uncertainty: FCC rules on pole attachments and broadband subsidies could disrupt ROI calculations.
  • Competitive Erosion: T-Mobile's magenta pricing war and Verizon's 5G enterprise plays are siphoning high-margin customers.

Why Investors Should Position Now

Despite these headwinds, Q2 2025 could be a turning point. AT&T's converged service model—where 40% of fiber households also use wireless—creates sticky revenue streams. If Q2 shows:
1. Fiber net adds >200,000 (a symbolic threshold),
2. Adjusted EPS growth exceeding 2024's $2.20, and
3. Free cash flow >$4.5B,

it will signal that AT&T is winning the “connectivity convergence” race.

The stock currently trades at 8.5x forward EV/EBITDA, a discount to Verizon's 9.2x and T-Mobile's 14.5x—a valuation gap that could narrow if Q2 proves execution is on track.

Final Analysis: The Earnings Call Will Decide

Investors should listen closely to CEO John Stankey's commentary on two metrics:
- Fiber passings: Will AT&T hit 30 million by year-end, or will it revise targets?
- Dividend flexibility: Will management signal confidence in maintaining payouts even if debt remains elevated?

The stakes are high. A strong Q2 will position AT&T as the telecom sector's “value king”—a dividend stalwart with secular growth in fiber. A miss, however, could trigger a rerating as investors bet on nimbler rivals.

Act now: Buy AT&T ahead of the earnings call. The data, not the dividends, will dictate its future—and the Q2 results are the first chapter in a story that could define the next decade of telecom.