AT&T, Inc.’s T 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 and T-Mobile US, Inc. TMUS. 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%.
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From a valuation standpoint, AT&T trades at a forward price-to-earnings ratio of 10.42, below the industry tally of 37.57.
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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.
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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.
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