AT&T Q3 2026 Earnings Call: Record Fiber Adds, Falling Fiber ARPU and Rising Leverage

AT&T reported its best quarter of Advanced Connectivity subscriber growth in more than four years and raised its EPS outlook, while fiber ARPU fell 4% and leverage rose to 3.13x after the EchoStar spectrum deal.

Maz Vantage ·

AT&T (NYSE: T) is in the news because it reported third-quarter 2026 results on 21 October 2026. Nasdaq carried a recap of the call the same day (What AT&T (T) Said on Its Q3 Earnings Call, 21 October 2026). The call was also notable as the last quarterly report for CFO Pascal Desroches, with Deputy CFO Jennifer Biry due to take the role after the new year. The analysis below is based on the call transcript.

Key takeaways

  • AT&T said it added over 1 million Advanced Connectivity subscribers across fiber, fixed wireless and postpaid phone, which CEO John Stankey called its best quarter in more than 4 years.
  • Consolidated service revenue grew 3.8% year over year and adjusted EBITDA grew 5.4%, with an adjusted EBITDA margin of 38.7%. Adjusted EPS was $0.65, up 20% from $0.54.
  • Full-year adjusted EBITDA growth is now expected in the upper portion of the 3%-4% range, and adjusted EPS around $2.40 (prior outlook $2.25-$2.35), mainly because of lower depreciation tied to held-for-sale accounting for AT&T Mexico.
  • Fiber ARPU fell 4% year over year, and management expects a similar decline in the fourth quarter.
  • Net debt to adjusted EBITDA rose to 3.13x from 2.68x after the $23 billion EchoStar spectrum purchase; management targets a return to about 2.5x during 2029.

Bull case

  • Subscriber momentum. Stankey said the company added about 350,000 converged customer relationships in the quarter, a faster sequential pace than in the second quarter. CFO Pascal Desroches reported 379,000 postpaid phone net adds with stable churn of 0.92%, and 696,000 advanced home internet net adds (416,000 fiber, 280,000 Internet Air), which he called a record.
  • Pricing and margin. Desroches said postpaid phone ARPU grew 4% and wireless service revenue grew 5%. He said Advanced Connectivity service revenue grew 6.1% and EBITDA grew 7.3%. The 38.7% margin was the highest third-quarter consolidated adjusted EBITDA margin since the company refocused on advanced connectivity, despite 12% growth in dilutive equipment revenue.
  • Convergence. Stankey said nearly 43% of advanced home internet customers also have an AT&T postpaid wireless account, and that converged penetration in the acquired Lumen territories is up 250 basis points since closing.
  • Business and AI-related demand. Business Advanced Connectivity service revenue grew 2.5%, with fiber growing nearly 9%, according to Desroches. Stankey said over 90% of mapped U.S. data centers are within 10 miles of AT&T fiber and that hyperscalers including AWS and Microsoft are working with the company.
  • Cash returns and cost programme. Management said it returned $4.8 billion to shareholders in the quarter, including $2.8 billion of buybacks, and targets about $10 billion of repurchases in 2026. Desroches said the $4 billion annual cost-savings target for end-2028 remains on pace.

Bear case

  • Fiber ARPU pressure. Michael Rollins (Citi) and Sam McHugh (BNP) asked about broadband ARPU. Stankey acknowledged "some deterioration in average ARPUs" from introductory pricing, discounts for converged accounts and lower-priced Quantum customers in Lumen territories, though he said service revenue growth and margins matter more. Desroches said overall ARPU should be relatively stable, with growth driven by customer additions rather than pricing.
  • Cash flow and working capital. David Barden (New Street) and Sean Diffley (Morgan Stanley) probed the capex and cash-flow outlook. Desroches said the roughly $1 billion annual capex reduction in 2027-2028 is being reallocated mainly to working capital for customer acquisition (devices are paid for upfront and recovered over time) and higher interest. He said losing AT&T Mexico costs roughly $400 million to $500 million of annual free cash flow.
  • Leverage and interest costs. Net debt to adjusted EBITDA is 3.13x, and Desroches cited higher cash interest tied to higher gross debt and interest rates.
  • Competition and technology shifts. Analysts raised satellite-based mobile (Starlink) and AI agents as possible competitive or deflationary forces. Barden suggested a LEO presence could affect the value end of broadband where fixed wireless has been successful. Stankey said he does not "pretend to know exactly how that is going to play out" for AI agents, and that fixed wireless is likely to see "some kind of a peak and then a downward trajectory" over time.
  • Legacy decline. Legacy service revenue fell about 25% and legacy EBITDA about 27%, and fourth-quarter EBITDA growth will be hit by roughly $100 million of unfavourable vendor dispute settlements.

What management said

  • John Stankey, CEO: "We continued the momentum we established in the first half of the year."
  • Pascal Desroches, CFO: "We are investing upfront and recovering it over time."
  • John Stankey, on buying more fiber assets after Craig Moffett (MoffettNathanson) asked about distressed independents: "Tell me the price and I'll give you the answer to the question."

Risks

  • Continued fiber ARPU declines from introductory pricing, convergence discounts and lower-priced customers.
  • Higher working-capital needs and cash interest, with higher device costs borne by customers over time but paid for by AT&T upfront.
  • Elevated leverage (3.13x) after the EchoStar spectrum purchase, with deleveraging dependent on EBITDA growth, the fiber joint venture closing and the planned AT&T Mexico sale in 2027.
  • Competitive entrants and technologies raised by analysts: satellite-enabled mobile service, fixed wireless, and AI agents changing how customers shop and switch. Stankey said customers would control agent authorisation for their accounts.
  • Execution risk in copper retirement; Stankey said there is still "a lot of work to do."
  • A fourth-quarter hit from higher marketing and customer-acquisition costs from an extended device launch cycle and the fiber go-to-market push, plus the vendor dispute settlements.
  • Seasonal moderation in advanced home internet net adds in the fourth quarter.

Outlook

  • 2026: Consolidated service revenue growth in the low single-digit range; adjusted EBITDA growth in the upper portion of 3%-4%; adjusted EPS around $2.40; free cash flow of $18 billion+; capital investment of $23-24 billion; cash taxes about $750 million. Advanced Connectivity service revenue growth of 5%+ and EBITDA growth of 6%+. Fourth-quarter free cash flow of about $6 billion versus $4.2 billion a year earlier.
  • 2027-2028: Annual capital investment of $22-23 billion, roughly $1 billion lower than previously planned, while still targeting 60 million+ fiber locations by the end of the decade. Free cash flow of $19 billion+ in 2027, with more detail promised with fourth-quarter results. Long-term growth outlooks for service revenue, adjusted EBITDA, adjusted EPS and free cash flow through 2028 were reiterated, presented on a continuing-operations basis excluding Mexico from 2027.
  • Not committed to: Management gave no specific 2027 fiber ARPU figure, saying only that overall ARPU should be relatively stable, and said it would not rule out wholesaling fiber over the long haul without committing to it. Stankey said he would consider acquiring more fiber footprint only at the right price.

Sources