AT&T Shows No Sign of Slowing Down

AT&T (T) has long been a bellwether for U.S. telecommunications, and its latest quarterly results reinforce its resilience in an industry marked by shifting consumer preferences and aggressive competition. While legacy businesses like traditional wireline services and Latin American operations face headwinds, the company’s pivot to high-growth areas—5G, fiber broadband, and IoT—continues to drive momentum. Let’s unpack the numbers behind the narrative of AT&T’s sustained progress.

Financial Fortitude Amid Transition

AT&T’s Q1 2025 performance underscored its ability to navigate a complex landscape. Consolidated revenue rose 2% year-over-year to $30.6 billion, while adjusted EBITDA hit $11.5 billion, a 4.5% increase. The standout metric, however, is free cash flow: $3.1 billion in the quarter, up from $2.8 billion in 2024, and on track to exceed $16 billion annually after $22 billion in 2025 capital spending. This cash engine is critical for deleveraging—net debt stands at $119.1 billion, but the planned $5.4 billion reduction from the sale of its stake in DIRECTV by mid-2025 brings net leverage closer to the target of 2.5x EBITDA.

The star of AT&T’s portfolio remains its fiber broadband division. With 261,000 net additions in Q1, AT&T Fiber now serves 29.5 million locations, driving 19% revenue growth to $2.1 billion. Notably, 40% of fiber households also use AT&T’s wireless services—a cross-selling synergy that boosts customer lifetime value. Meanwhile, Mobility revenue grew 4.1%, fueled by postpaid phone net adds (324,000) and a low churn rate of 0.83%. These metrics reflect the power of AT&T’s integrated “connectivity stack,” combining wireless, fiber, and smart home services.

Strategic Bets on Innovation

AT&T’s initiatives are not just about infrastructure. The AT&T Guarantee—offering bill credits for service outages—and SplitPay, which simplifies shared wireless plans, aim to reduce customer friction. On the enterprise front, partnerships like its collaboration with Nokia to test 1.6 Tbps data speeds (a record) highlight investments in future-proofing networks for AI and AR/VR demands. The launch of the Connected Spaces Smart IoT Sensor Kit targets small businesses, a segment often underserved by competitors.

Yet challenges linger. Legacy Business Wireline revenue fell 9.1% as traditional services decline, and Latin America remains a drag due to currency fluctuations. Margins are also under pressure: promotional discounts and rising content costs for DirecTV weakened adjusted EPS to $0.51, missing estimates by a penny. Analysts caution that mid-teens EBITDA contraction in Business Wireline and a $2 billion annual content obligation for the DIRECTV sale could strain profitability.

The Investment Case: Growth vs. Risks

AT&T’s stock has surged 63.6% over the past year, reflecting optimism around its turnaround. With a 6.2% dividend yield and $16 billion free cash flow target, the company appeals to income investors. But valuation metrics like a forward P/E of 12.46—a premium to its five-year average—raise questions about whether the stock is overbought.

The Zacks #3 (Neutral) rating underscores this duality: AT&T’s fundamentals are stabilizing, but execution risks—debt reduction, margin management, and competition from Verizon’s 5G Ultra Wideband and T-Mobile’s Magenta Fiber—remain unresolved. T-Mobile’s fiber now covers 25 markets, and Verizon’s partnerships with Google Cloud aim to undercut enterprise services.

Conclusion: A Steady Hand in a Turbulent Sector

AT&T’s Q1 results validate its strategy: fiber growth, operational discipline, and a focus on customer retention are delivering tangible gains. The company’s ability to generate $16 billion in free cash flow while deleveraging debt positions it to weather near-term headwinds. However, investors must weigh this against its $119 billion debt mountain and the high stakes of its fiber race against T-Mobile and Verizon.

The data is clear: AT&T’s fiber subscriber count has exceeded 200,000 net adds for 21 straight quarters, and its adjusted EBITDA is on a 4-year upward trajectory. While margin pressures and legacy liabilities linger, the company’s balance sheet and dividend resilience suggest it’s not merely surviving—it’s building a foundation for long-term growth. For now, AT&T remains a hold for most investors, a stock to watch as it transitions from a legacy telecom giant to a 21st-century connectivity leader.