Shares of Telephone and Data Systems, Inc. (TDS Quick QuoteTDS - Free Report) have declined 20.2% over the past three months, reflecting investor concerns around legacy-service declines, rising fiber investment and execution risks. The stock’s weakness comes even as TDS Telecom accelerates its fiber deployment and management raises its 2026 fiber service address target. The second-quarter results show a business in transition, with improving fiber metrics competing with pressure on legacy operations and higher capital requirements.

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TDS Telecom Faces Legacy Revenue Pressure

TDS Telecom’s service revenues declined 6% year over year in the second quarter. The decline reflected divestitures and continued weakness in legacy services, which more than offset gains from the fiber business. Residential fiber revenue increased 13%, underscoring the uneven pace of TDS Telecom’s shift toward higher-value broadband services.

TDS Telecom had about 1.17 million marketable fiber service addresses at the end of the second quarter, representing 60% of its total service addresses served by fiber. Management continues to target 2.1 million marketable fiber service addresses over the long term.

TDS Fiber Growth Accelerates

TDS Telecom delivered approximately 66,000 new marketable fiber service addresses in the second quarter, up about 150% from the year-ago period. Residential fiber net additions totaled 15,100, a 47% increase year over year. The company also reported record construction crew counts to support its network expansion.

The stronger deployment pace prompted management to raise its 2026 target for marketable fiber service addresses delivered to 250,000-300,000 from the previous outlook. The long-term target remains 2.1 million addresses. The higher deployment pace makes fiber a larger driver of TDS Telecom’s operating footprint even as legacy services continue to decline.

TDS Investment Raises Execution Stakes

Fiber expansion is also increasing the company’s near-term capital requirements. TDS Telecom’s second-quarter capital expenditures nearly doubled to $179 million, while full-year capital expenditure guidance increased to $625-$675 million from $550-$600 million previously.

The higher spending can support faster fiber deployment and the company’s long-term broadband transition. It also raises the amount of capital that must be committed before the benefits of a larger fiber footprint are fully reflected in operating results and cash generation. Management lowered its 2026 TDS Telecom revenue guidance to $1.00-$1.025 billion from $1.015-$1.055 billion previously while raising capital expenditure guidance, highlighting the trade-off between network investment and near-term financial performance.

TDS Array Gains Add Capital Flexibility

Array completed a $1 billion spectrum transaction with Verizon Communications Inc. (VZ Quick QuoteVZ - Free Report) in June and about $168 million of spectrum transactions with T-Mobile US, Inc. (TMUS Quick QuoteTMUS - Free Report) in May. TDS said Array also delivered sequential tower tenancy growth, while site rental revenues increased 95% year over year in the second quarter.

The spectrum transactions provide cash proceeds that can support capital allocation and financial flexibility. They should not, however, be viewed as recurring operating earnings. TDS’ 2026 guidance reconciliation deducts a $585 million gain on license sales and exchanges and $65 million of short-term imputed spectrum lease income from Array’s EBITDA to arrive at Adjusted EBITDA. The distinction matters because spectrum monetization can improve liquidity without creating a recurring revenue stream comparable with tower leasing or broadband operations.

Array’s tower business also remains exposed to tenant trends. The company has been transitioning toward a tower-focused model following the divestiture of its wireless operations, while the loss of DISH revenues remains an offset to improving tenancy activity.

TDS Signals From Its Ratings and Scores

TDS currently carries a Zacks Rank #1 (Strong Buy). Its Zacks Style Scores include a Value Score of C, Growth Score of F, Momentum Score of B and VGM Score of F. The combination presents a mixed picture: the Zacks Rank reflects the importance of earnings estimate revisions to the short-term outlook, while the weak Growth and VGM Scores point to less favorable characteristics outside that estimate-revision signal. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Style Scores are complementary indicators to the Zacks Rank. Value, Growth and Momentum scores assess different stock-selection characteristics, while the VGM Score combines the three styles. The Style Score framework emphasizes that the Zacks Rank remains the first step because earnings estimate revisions are a key driver of stock prices.

For TDS, that distinction is relevant. Fiber deployment is accelerating, but legacy revenues remain under pressure and capital spending is rising. Spectrum monetization involving VZ and TMUS adds financial flexibility, yet those proceeds are not a substitute for recurring operating growth. The stock’s 20.2% three-month decline therefore comes against a transition that is producing better fiber operating metrics while requiring heavier investment and continued execution.