Why AT&T Stock Surged Following Verizon's Earnings and What It Means for Telecom Investors

The recent stock surge in AT&T (T) following Verizon Communications (VZ)'s Q2 2025 earnings report highlights a compelling dynamic in the telecom sector: sector synergy and earnings momentum. Verizon's robust results—$34.5 billion in revenue, 5.2% year-over-year growth, and a revised full-year guidance—acted as a catalyst, signaling to investors that the broader industry is regaining traction. This ripple effect extended to AT&T, whose shares rose 1.6% in early April 2025, driven by optimism about the sector's resilience. For long-term investors, this moment offers a critical lens through which to assess AT&T's valuation, strategic positioning, and potential as a high-quality telecom play.

Verizon's Earnings: A Sector-Wide Confidence Builder

Verizon's Q2 results were a masterclass in disciplined execution. Revenue growth, driven by higher average revenue per account (ARPA) and fixed wireless access (FWA) expansion, underscored the company's ability to adapt to a saturated market. Its adjusted EBITDA of $12.8 billion—up 4.1% YoY—surpassed expectations, while free cash flow of $5.2 billion highlighted operational efficiency. Importantly, Verizon's decision to end holiday promotions and implement three-year price guarantees stabilized its subscriber base, even as it lost 51,000 retail postpaid phone users. These moves signaled to investors that profitability and infrastructure investment could coexist, a narrative that spilled over to AT&T.

The sector-wide optimism was further amplified by Verizon's guidance: a projected $1.5 billion to $2 billion benefit from tax reform and a $19.5 billion to $20.5 billion free cash flow outlook. This reinforced the idea that telecom companies could navigate macroeconomic headwinds through pricing power and infrastructure modernization. AT&T, with its own Q1 2025 results showing $30.6 billion in revenue and 4.1% mobility service growth, became a beneficiary of this narrative.

AT&T's Strategic Positioning and Earnings Momentum

AT&T's first-quarter performance demonstrated its ability to balance subscriber growth with profitability. The company added 324,000 postpaid phone net subscribers (churn rate of 0.83%) and 261,000 AT&T Fiber net adds, with fiber revenue growing 19.0% YoY. These metrics outpaced industry benchmarks, particularly against T-Mobile (TMUS), which added 495,000 postpaid subscribers but faced higher churn. AT&T's disciplined approach to promotions—avoiding aggressive holiday deals—allowed it to maintain margins while growing its 5G and fiber base.

The company's financials further solidified its appeal. AT&T reported $3.1 billion in free cash flow for Q1 2025, with a debt-to-EBITDA ratio of 2.5x, aligning with its deleveraging goals. Its guidance for 2025—$16 billion or more in free cash flow and adjusted EPS of $1.97–$2.07—suggested a path to sustainable growth. By contrast, T-Mobile's higher debt-to-EBITDA ratio and aggressive P/E valuation (22.17) positioned AT&T as a more conservative yet equally compelling long-term play.

Valuation Metrics: A Competitive Edge

AT&T's valuation metrics currently strike a balance between growth and income. With a P/E ratio of 17.17 and EV/EBITDA of 7.89x, it sits between T-Mobile's growth-oriented premium and Verizon's income-focused discount. Its 3.95% dividend yield, while lower than Verizon's 6.17%, remains attractive for income investors, especially given its strong free cash flow yield of 10.5%. These metrics suggest AT&T is undervalued relative to its peers, particularly as it continues to expand its fiber footprint (targeting 50 million+ locations by 2029) and deepen its 5G capabilities.

Implications for Long-Term Investors

The recent stock surge reflects not just AT&T's own strengths but also the sector's broader appeal. For investors, the key question is whether this momentum is sustainable. AT&T's focus on high-quality, profitable subscriber growth—rather than aggressive promotions—positions it to outperform in a competitive landscape where margins are under pressure. Its pending share repurchase program (up to $10 billion in 2025) and disciplined capital allocation further enhance shareholder value.

However, risks remain. The telecom sector is highly competitive, with T-Mobile's 5G expansion and aggressive pricing posing challenges. Additionally, regulatory scrutiny and capital expenditure demands could weigh on margins. That said, AT&T's strong balance sheet, expanding fiber network, and alignment with secular trends like remote work and AI-driven connectivity make it a compelling long-term hold.

Conclusion: A Strategic Entry Point

The synergy between Verizon's earnings and AT&T's stock performance underscores a broader industry shift toward profitability and infrastructure investment. For long-term investors, AT&T offers an attractive entry point: a mid-valuation telecom play with strong free cash flow, a growing fiber business, and a disciplined approach to subscriber growth. While the sector remains competitive, AT&T's strategic focus on profitable expansion and its current valuation metrics suggest it is well-positioned to deliver consistent returns over the next decade.

As the telecom landscape evolves, AT&T's ability to balance innovation with financial discipline will be critical. For now, the recent surge—and the sector-wide optimism it reflects—provides a compelling case for investors seeking undervalued exposure to a foundational industry.