AT&T Wins on Fiber, but Investors Want Proof in Wireless

Record broadband growth, a higher 2026 earnings outlook and a leaner capital plan could not lift AT&T shares, as softer phone additions and rising leverage drew investor scrutiny.

Key Takeaways

• Third-quarter revenue rose 5.3% to $32.3 billion and adjusted EPS reached $0.65, both above forecasts, as AT&T added a record 769,000 fiber and fixed wireless customers.
• AT&T raised its 2026 adjusted EPS outlook to about $2.40 and cut 2027 and 2028 capital investment to $22 billion to $23 billion a year, while holding free cash flow targets steady.
• Shares fell more than 3% before the open as postpaid phone additions slowed to 379,000, churn rose to 0.92% and net debt climbed to $149.8 billion following the EchoStar purchase.

The Quarter Beneath the Headline

AT&T delivered the kind of quarter that usually buys a telecom stock a calm session. Third-quarter revenue reached $32.3 billion, up 5.3% from a year earlier and roughly $600 million ahead of the $31.69 billion LSEG consensus. Adjusted earnings per share rose to $0.65 from $0.54, five cents above expectations, and adjusted EBITDA grew 5.4% to $12.5 billion. Free cash flow edged up to $5.0 billion, and the company returned about $4.8 billion to shareholders, $2.8 billion of it through buybacks. Management described the period as its strongest consolidated service revenue growth in more than four years, a claim the segment data supports.

The reported figures read very differently. Diluted EPS from continuing operations fell to $0.13 from $1.29, and operating income dropped to $4.1 billion from $6.1 billion. The explanation is portfolio housekeeping rather than operating strain. A $2.6 billion non-cash impairment on the Mexico wireless business, now held for sale, removed 41 cents a share, and employee separation charges took another nine. The prior-year figure, meanwhile, was flattered by a 79-cent gain on the sale of AT&T’s DIRECTV stake. Neither period offers a clean GAAP comparison, which makes this one of the rare quarters in which adjusted numbers are the more faithful guide. On that basis, the underlying business was the firmest it has looked all year.

Fiber Becomes the Center of Gravity

Home internet is now the engine of the company. AT&T added 769,000 fiber and fixed wireless subscribers, a quarterly record, made up of 442,000 fiber customers and 327,000 on its Internet Air service, up from 646,000 in the second quarter. Advanced home internet revenue climbed 23.4% to just under $3.0 billion, lifted by the Lumen mass markets fiber business acquired in February. Fiber now passes more than 39 million consumer and business locations, leaving AT&T on course for over 40 million by year end and more than 60 million by 2030.

The strategic value lies less in broadband itself than in what it anchors. The share of AT&T internet households that also buy its wireless service rose to 42.8% from 42.5% a quarter earlier. Customers who take both tend to stay longer and spend more, which turns the fiber footprint into a retention asset for the mobile business. The gain looks modest because the Lumen territories arrived far less penetrated than AT&T’s legacy markets, about 25% against roughly 40% by the company’s own account, so they dilute the ratio even as they enlarge the base. Closing that gap is the most tangible growth lever AT&T controls over the next several quarters.

Wireless Trades Volume for Value

The mobile business was steadier than spectacular. Postpaid phone net additions of 379,000 fell from 432,000 in the second quarter and came in slightly below the roughly 387,000 analysts expected, according to Bloomberg data. Postpaid phone churn rose to 0.92% from 0.86% sequentially, in line with its level a year ago. Yet wireless service revenue grew 5.0% to $17.8 billion, a clear acceleration from the 3.3% pace of the second quarter, as pricing actions more than offset promotional discounts. Equipment revenue rose 12.2%, a reminder that the quarter’s activity was supported by device spending as well as service plans.

The pattern is deliberate. AT&T is extracting more revenue from its existing base while accepting fewer net additions, a reasonable exchange in a mature market where the incremental subscriber is costly to win. The risk is that repricing works until it suddenly does not. Churn is the variable that decides which side of that line the company stands on, and the fourth quarter is when it is tested hardest, with new device launches, holiday promotions and aggressive cable bundles all competing for the same households. A churn rate that holds near current levels would vindicate the approach. A sustained drift higher would expose how much of this year’s revenue growth was borrowed from customer goodwill.

Capital, Leverage and a Smaller Map

Management raised its 2026 adjusted EPS target to around $2.40, above the prior $2.25 to $2.35 range and the $2.34 consensus, and now expects adjusted EBITDA growth in the upper portion of its 3% to 4% range. The more consequential change concerned spending. Capital investment for 2027 and 2028 was lowered to $22 billion to $23 billion a year, from the $23 billion to $24 billion annual range set at the start of the year, while free cash flow targets of $18 billion-plus, $19 billion-plus and $21 billion-plus were left untouched. That combination invites two readings: deliberate conservatism, or a structural shift, since the later outlook excludes Mexico and AT&T plans to reach roughly 10 million of its 60 million fiber locations through partners rather than its own construction. The company has not said how much of the reduction each factor explains.

Those partners are being assembled quickly. In October alone, AT&T agreed to sell AT&T Mexico to Grupo Televisa and Fintech Holdings for $2 billion in cash, combined the acquired Lumen network and its Gigapower venture into a 50-50 wholesale fiber joint venture with Global Infrastructure Partners and CPP Investments, and formalized a satellite coverage venture with T-Mobile and Verizon. The urgency is visible on the balance sheet. Net debt reached $149.8 billion after the roughly $23 billion EchoStar spectrum purchase closed in July, adding valuable mid-band and low-band airwaves but leaving leverage at roughly three times adjusted EBITDA. AT&T expects to return to its 2.5 times target during 2029, and the proceeds from Mexico and the fiber venture form much of the bridge between those two numbers.

The Market’s Reservation

Investors were unmoved by the beat. AT&T shares, which closed at $23.42 on Tuesday, fell more than 3% before the opening bell, within the roughly 4.6% move options markets had priced in advance. The selling reflects a familiar tension in the stock: a business executing well in fiber, set against doubts about wireless momentum, leverage and the durability of cash returns. Sentiment was already fragile. Bernstein cut the shares to Market Perform on October 12, pointing to SpaceX’s expanding ambitions in broadband and mobile after its agreement to buy Grain Management’s 800 MHz spectrum. At a dividend yield close to 5% and a single-digit earnings multiple, AT&T is priced as though investors expect competition to absorb much of the benefit of its investment cycle.

The quarter is also among the last under Pascal Desroches as chief financial officer before his retirement on December 31. Jennifer Biry, formerly finance chief at McAfee and WarnerMedia, takes over on January 1 and inherits a company whose strategic logic is coherent and whose fiber execution is increasingly difficult to dispute. Chief Executive John Stankey said AT&T’s asset base “positions us well for the AI era.” The market has accepted the premise but not yet the payoff. Fiber has earned AT&T the benefit of the doubt in broadband; wireless, where growth is cooling just as new rivals arrive, is where that credibility must now be defended.