T Q3 2026 Earnings Analysis
AT&T Q3 2026 delivered 3.8% service revenue growth and $0.65 EPS (up 20%), driven by strong Advanced Connectivity growth with 696K home internet adds and fiber convergence strategy.
Key Metrics
Puntos clave
- Q3 service revenue grew 3.8% (best in 4+ years) with 20% EPS growth driven by fiber and 5G convergence.
- Added 696K advanced home internet customers with 42.8% convergence rate; targeting 60M+ fiber by 2030.
- Free cash flow ~$5B; FY guidance $18B+. Reallocating lower capex to customer acquisition and interest costs.
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Transcript
// Full episode scriptWelcome to Beta Finch, your AI-powered earnings breakdown! I'm Alex.
And I'm Jordan. Today we're diving into AT&T's third quarter 2026 results, and honestly, there's a lot to unpack here — strong numbers, a leadership transition, and some pretty big strategic moves.
Before we get into it, quick reminder: This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.
Good to have that out there. Okay, Alex, let's set the scene — this was actually a pretty impressive quarter for AT&T.
It really was. Consolidated service revenue grew 3.8% year-over-year — their best performance in more than four years. Adjusted EBITDA was up 5.4%, and adjusted EPS came in at $0.65, up 20% from $0.54 a year ago.
And that EPS growth wasn't just an accounting quirk — it's the second straight quarter of EBITDA growth above 5% and EPS growth above 20%. That's real operating momentum, not just easy comparisons.
Right, and the engine behind all of this is their "convergence strategy" — basically getting customers to bundle fiber or home internet with wireless service. They added over a million Advanced Connectivity subscribers this quarter — fiber, fixed wireless, and postpaid phone combined. Best quarter in four-plus years.
The convergence number really jumped out at me — 42.8% of their advanced home internet customers also have a postpaid wireless plan. That's up meaningfully, and management thinks there's a lot more room to run. CEO John Stankey actually said his "goal" is 100% penetration eventually, though he was quick to temper that with realism.
Yeah, he said their investment case assumes a 40% terminal penetration rate, but they think they can beat that — maybe get into that 40-to-50% range over time, partly by leaning into converged offers and even potentially opening up wholesale access to their network down the road if they hit a ceiling in certain markets.
That wholesale comment was interesting — it's not the current plan, but it shows they're thinking creatively about monetizing excess fiber capacity once they've exhausted the easy retail wins.
Let's talk fiber specifically, because the home internet numbers were strong — revenue up more than 23% year-over-year, with 696,000 net adds between fiber and Internet Air. That's a record.
But — and this is the nuance — fiber ARPU actually declined 4% year-over-year. CFO Pascal Desroches explained that's driven by introductory pricing to hook new customers, converged discounts, and lower-ARPU customers coming in from the Lumen acquisition under the Quantum brand.
So it's a classic "land and expand" play — get them in the door cheap, then upsell wireless and higher tiers later.
Exactly, and management was pretty explicit that they're optimizing for total revenue and EBITDA growth, not any single metric like ARPU. They expect Q4 fiber ARPU to decline at a similar rate, but they're holding firm that long-term ARPU should stabilize as the base matures.
Let's touch on the big-picture strategic stuff, because there was a lot of news packed into this call. They announced a joint venture with Global Infrastructure Partners — that's part of BlackRock — and CPP Investments to accelerate fiber builds outside AT&T's traditional footprint.
And a multi-year supply deal with Corning to make sure they've got enough fiber to hit that ambitious goal — 60 million-plus fiber locations by the end of 2030.
Oh, and they're selling their Mexico wireless business. That came with a $2.6 billion non-cash impairment charge this quarter, but it sharpens their U.S. focus going forward.
Can't forget the AI angle either — Stankey highlighted that over 90% of mapped U.S. data centers sit within 10 miles of AT&T fiber, and they're already working with AWS and Microsoft on high-capacity connectivity for AI workloads. That's a growth avenue investors should keep an eye on.
One more big theme — they're aggressively retiring legacy copper infrastructure. Over 100 wire centers now have zero customers left on legacy copper service — that's an industry first at scale. They're targeting 50% of wire centers outside California decommissioned by 2027.
That matters because it feeds directly into their cost-cutting target — $4 billion in annual savings by 2028. Fewer legacy technologies to maintain means real margin expansion over time.
Now, we do have to mention — this was Pascal Desroches' final earnings call as CFO. He's retiring after nearly six years, and Jennifer Biry steps into the role starting next year.
Stankey had some genuinely warm things to say about him — called him an inspiring example of "quiet determination" through AT&T's transformation. Leadership transitions are always worth watching, but this one looks smooth and well-planned.
On guidance — full-year adjusted EPS outlook moved up to around $2.40, from a prior range of $2.25 to $2.35, mostly due to lower depreciation from the Mexico sale accounting. Free cash flow guidance holds steady at $18 billion-plus for the year, with $23-24 billion in capital investment.
And looking ahead to 2027 and 2028, they're actually trimming capex guidance by about a billion dollars annually thanks to building efficiencies, while reallocating that capital into customer acquisition costs and — notably — higher interest payments, given their debt load went up after that EchoStar spectrum purchase.
Right, net debt to EBITDA jumped to 3.13x this quarter from 2.68x, mainly due to that $23 billion EchoStar deal. But management reaffirmed they expect to get back down to their 2.5x target by 2029, helped by the Mexico sale proceeds and the fiber JV closing.
So what's the takeaway for investors here? AT&T is executing well on its core convergence thesis — fiber plus wireless bundling is clearly working, margins are expanding, and they're positioning for AI-driven connectivity demand. The flip side is watch that rising leverage and the fact that free cash flow growth next year is going to lean partly on working capital dynamics around device costs rather than pure operational strength.
Before we wrap up — Jordan, want to take us out?
Absolutely. Everything discussed is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.
Well said. Looking ahead, keep an eye on that Q4 report early next year — we should get more color on the 2027 free cash flow outlook and how the Mexico and fiber JV transactions are progressing.
Should be a busy few months for AT&T. Thanks for tuning in to Beta Finch, everyone.
Catch you next time!