We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
AT&T Benefits From Margin Expansion: Can the Trend Last?
Read MoreHide Full Article
Key Takeaways
AT&T's adjusted EBITDA margin expanded to 39.1% as operating income and EBITDA improved.
AT&T targets $4 billion in annual cost savings by the end of 2028 through cost transformation.
Wireless gains, fiber growth and service bundling are supporting T's customer growth and profitability.
AT&T, Inc.’s (T - Free Report) consolidated operating income increased 8.3% year over year to $7.04 billion in the second quarter. Adjusted operating income rose to $7.46 billion from $6.49 billion, while adjusted EBITDA improved 5.2% to $12.34 billion. The adjusted EBITDA margin expanded to 39.1% from 38%. There are several factors driving this improvement in profitability.
T is benefiting from increased scale across its 5G and fiber operations. The company's Advanced Connectivity business remained a major contributor, with service revenues increasing 5.1% year over year and EBITDA growing 8% in this segment. 432,000 postpaid phone net additions and pricing adjustments during this quarter propelled the wireless service revenues.
Cost transformation was another major contributor. AT&T remains on track to achieve $4 billion in consolidated annual cost savings by the end of 2028. The company is gradually shutting down its older copper-based network and moving customers toward fiber, wireless and other advanced services. This transition is expected to eliminate costs associated with maintaining an increasingly inefficient legacy network.
Its strategy of combining wireless and home internet services is supporting customer growth and improving customer economics. Converged subscribers generally have lower churn and higher lifetime value. This is strengthening profitability and customer base.
How Are Competitors Faring?
AT&T faces competition from Verizon Communications, Inc. (VZ - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) . Verizon continues to strengthen its financial profile through disciplined execution, improving customer economics and cost transformation initiatives. Mobility and broadband service revenue increased 2.8% year over year in second-quarter 2026, while adjusted EBITDA reached a company record of $13.7 billion and adjusted EPS rose 6.6% to $1.30, exceeding consensus estimates.
Reported profitability, however, reflected sizable special items. Verizon’s net income declined 22.9% year over year to $3.95 billion, while GAAP EPS fell to 92 cents from $1.18. The decline primarily stemmed from $1.8 billion of pretax special charges, including losses related to business dispositions, asset rationalization and severance expenses.
During the second quarter, T-Mobile’s operating expenses increased to $17.30 billion from $15.92 billion in the prior-year quarter. Higher costs of services, equipment sales, selling, general and administrative expenses, and depreciation and amortization all contributed to the increase.
Despite elevated expenses, profitability remained resilient. Net income rose modestly to $3.24 billion from $3.22 billion a year earlier, while diluted earnings per share increased 5.3% year over year to $2.99. Core adjusted EBITDA increased 11.7% year over year to $9.54 billion, reflecting continued operating leverage as service revenues expanded.
T’s Price Performance, Valuation & Estimates
AT&T shares have lost 11.2% over the past year against the industry’s growth of 81.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, AT&T trades at a forward price-to-earnings ratio of 10.42, below the industry tally of 37.57.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have increased 1.3% to $2.35 over the past 60 days, while the same for 2027 have increased 1.2% to $2.57.
View the Zacks #1 Rank List
Image: Bigstock
AT&T Benefits From Margin Expansion: Can the Trend Last?
Key Takeaways
AT&T, Inc.’s (T - Free Report) consolidated operating income increased 8.3% year over year to $7.04 billion in the second quarter. Adjusted operating income rose to $7.46 billion from $6.49 billion, while adjusted EBITDA improved 5.2% to $12.34 billion. The adjusted EBITDA margin expanded to 39.1% from 38%. There are several factors driving this improvement in profitability.
T is benefiting from increased scale across its 5G and fiber operations. The company's Advanced Connectivity business remained a major contributor, with service revenues increasing 5.1% year over year and EBITDA growing 8% in this segment. 432,000 postpaid phone net additions and pricing adjustments during this quarter propelled the wireless service revenues.
Cost transformation was another major contributor. AT&T remains on track to achieve $4 billion in consolidated annual cost savings by the end of 2028. The company is gradually shutting down its older copper-based network and moving customers toward fiber, wireless and other advanced services. This transition is expected to eliminate costs associated with maintaining an increasingly inefficient legacy network.
Its strategy of combining wireless and home internet services is supporting customer growth and improving customer economics. Converged subscribers generally have lower churn and higher lifetime value. This is strengthening profitability and customer base.
How Are Competitors Faring?
AT&T faces competition from Verizon Communications, Inc. (VZ - Free Report) and T-Mobile US, Inc. (TMUS - Free Report) . Verizon continues to strengthen its financial profile through disciplined execution, improving customer economics and cost transformation initiatives. Mobility and broadband service revenue increased 2.8% year over year in second-quarter 2026, while adjusted EBITDA reached a company record of $13.7 billion and adjusted EPS rose 6.6% to $1.30, exceeding consensus estimates.
Reported profitability, however, reflected sizable special items. Verizon’s net income declined 22.9% year over year to $3.95 billion, while GAAP EPS fell to 92 cents from $1.18. The decline primarily stemmed from $1.8 billion of pretax special charges, including losses related to business dispositions, asset rationalization and severance expenses.
During the second quarter, T-Mobile’s operating expenses increased to $17.30 billion from $15.92 billion in the prior-year quarter. Higher costs of services, equipment sales, selling, general and administrative expenses, and depreciation and amortization all contributed to the increase.
Despite elevated expenses, profitability remained resilient. Net income rose modestly to $3.24 billion from $3.22 billion a year earlier, while diluted earnings per share increased 5.3% year over year to $2.99. Core adjusted EBITDA increased 11.7% year over year to $9.54 billion, reflecting continued operating leverage as service revenues expanded.
T’s Price Performance, Valuation & Estimates
AT&T shares have lost 11.2% over the past year against the industry’s growth of 81.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, AT&T trades at a forward price-to-earnings ratio of 10.42, below the industry tally of 37.57.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have increased 1.3% to $2.35 over the past 60 days, while the same for 2027 have increased 1.2% to $2.57.
Image Source: Zacks Investment Research
AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.