Brett Feldman – Treasurer & Head of Investor Relations, AT&T

Thank you, and good morning. Welcome to our second-quarter call. I’m Brett Feldman, Treasurer and Head of Investor Relations for AT&T.

Joining me on the call today are John Stankey, our Chairman and CEO, and Pascal Desroches, our CFO.

Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking. As such, they’re subject to risks and uncertainties described in AT&T’s SEC filings. Results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website.

With that, I’ll turn things over to John.

John Stankey – Chairman & CEO, AT&T

Thanks, Brett, and good morning, everyone. I do appreciate you joining us today.

Earlier this year, we provided an outlook for accelerated growth and execution of our strategy, and that’s exactly what we delivered in the second quarter.

We gained more than 1 million Advanced Connectivity subscribers from fiber, fixed wireless, and postpaid phones – with all 3 product categories posting higher net additions year over year. This was our best-ever second quarter for AT&T Fiber net adds and a record quarter for combined fiber and fixed wireless net adds. We also continued to grow our base of converged customers.

At the end of the second quarter, 42.5% of our Advanced Home Internet customers also have a postpaid wireless account with AT&T, and this convergence rate reached 45% when excluding customers within our acquired footprint from Lumen. These are high lifetime value subscribers, and our strong customer growth is a key driver of our accelerated financial growth during the second quarter.

At a consolidated level, we reported faster year-over-year growth in service revenue, adjusted EBITDA, and adjusted EPS compared to our growth in the first quarter. We also achieved our highest consolidated adjusted EBITDA margin since we refocused our business on advanced connectivity at the beginning of this decade. This was driven by our improved operating leverage as we gain scale in 5G and fiber, reduce legacy costs as we shrink our footprint, and through continued implementation of our cost transformation initiatives across the company.

And we are driving growth in our Advanced Connectivity segment across both consumer and business channels. During the second quarter, we achieved year-over-year growth in Advanced Connectivity Business service revenues. This reflects our success at repositioning the business around fiber and 5G – just as we did in Consumer – and expanding our reach through a more balanced direct, indirect and digital distribution model.

The result is growth in converged relationships and new logos, and you are seeing that momentum in our improved financial performance. It has taken a lot of work to get here, and we continue to expect Advanced Connectivity Business service revenues will grow at a low-single digit CAGR through 2028.

The strength of our performance comes from the structural advantages we’ve established after years of consistent and targeted investment.

This will be our largest year ever for fiber expansion with plans to reach 8 million new locations, including over 4 million locations acquired from Lumen.

As I have said in the past, where we have fiber, we win with fiber and wireless. And I expect that as we expand our funnel of new fiber locations, we’ll drive strong growth in our converged customer base and financial results.

In the dense urban and suburban areas where we build fiber at scale, we believe that our competitors cannot – and will not – match our network performance or our operating scale and proficiency. This includes the AT&T Fiber brand, widely recognized among the best home internet products in the market, local teams of technicians and in-home experts, capable technical support infrastructure, extensive owned and partner distribution, sophisticated device logistics, and the ability to harness our national advertising and brand campaigns to rapidly drive penetration as we reach new geographies with our fiber and converged services.

Simply put, we believe that we are the best positioned to serve customers the way they want to be from one trusted connectivity provider. When customers consolidate their internet access with us, we see lower churn, outstanding brand affinity, higher lifetime values, and we carry the vast majority of their internet traffic over our advanced infrastructure.

And for those limited circumstances, when the AT&T network is not available to one of our converged customers, we expect to be in a position to solve many of these corner cases as we move into 2027. Consistent with our ability to extend our scale and operating proficiency, I’d like to give you a brief update on our progress integrating our recently acquired Lumen footprint into our operations.

We’ve spent the past six months standing up operations to support a faster pace of growth in network deployment and customers as we accelerate the branded rollout of AT&T Fiber. But we are already utilizing our existing distribution and converged offers to tap into pent-up demand in these underpenetrated areas, which is translating into improved growth. And we’re not just adding fiber customers. Our June converged gross adds in these territories were up 45% compared to February.

Our convergence playbook is taking hold here – just as it has in our traditional footprint – creating a clear runway to deepen customer relationships and accelerate growth in converged accounts as we complete our integration activities and scale the pace of fiber expansion.

While the benefits of our investment-led strategy are evident today in our improved operating momentum, we continue to build a business that is best positioned to meet the future advanced networking demands of AI-driven connectivity.

The rise of agentic AI is fundamentally reshaping network traffic, not just in volume, but in shape, symmetry, and criticality.

The proliferation of Agentic and autonomous AI workloads will require networks to sense, decide, and act in near real time. Emerging use cases including drones, autonomous driving, robotics and AR glasses will all require ubiquitous, high performing, uplink-optimized connectivity.

Today, industry research shows AI agents generate up to 450% more total traffic per task than a human performing the same work… and Agentic adoption is projected to drive approximately 9x growth in enterprise traffic and approximately 7x growth in consumer traffic by 2035.

Distribution of AI inference to the edge necessitates, low latency, and high bandwidth connectivity to access endpoints. This is why we believe fiber-enabled network convergence at the edge will create a true competitive advantage. Additionally, we are already seeing rapid increases in large-scale data traffic, which demands high-capacity metro and inter-city fiber infrastructure.

As AI fundamentally changes how consumers and businesses connect, it will drive a fundamental change in their expectations for connectivity. We believe AT&T is the only provider building and investing in this infrastructure at the scale necessary today to support the demands a decade from now. And we aren’t missing any critical elements necessary to execute our strategy. We have the necessary building blocks in place, the technology, agreements and assets for our strategic path forward.

The enabling connectivity of the future is in our hands today and by the end of this decade, we expect to operate the most advanced and technologically open communications network in the U.S., built on a foundation of dense interconnected metro fiber and deep nationwide spectrum. This is exactly the asset base we want as AI begins to shape the next era of connectivity, and I wouldn’t trade our assets for anyone else’s.

While we position for the future of connectivity, our shareholders are benefitting from our growth today. This is supporting our improved capital returns and provides us with the flexibility to further increase our pace of planned share repurchases this year by up to 25% to approximately $10 billion to capture what we see as a disparity between our operating fundamentals and the valuation of our stock.

Momentum also picked up this quarter in our work to exit inefficient copper-based services, accelerated by positive actions by the FCC. We appreciate the leadership of FCC Chairman Carr and the Commission for recognizing the urgency to modernize the nation’s communications infrastructure and upgrade customers to more reliable service.

Last month, the FCC gave us permission to discontinue legacy copper voice service in about 60% of our wire centers in California, so we can upgrade our customers to AT&T Phone – Advanced, fiber and wireless.

Looking more broadly at our efforts to discontinue copper network services and operations nationwide, we continue to make great progress on our exit plans. We have approval to discontinue legacy services in over 30% of our wire centers, which will be effective by late 2026, and by the end of the year we expect a couple hundred wire centers to have zero customers. This is an important step, providing a path to unlock access to descaling parts of our cost structure and to further streamline our operations.

Nearly two years ago, we told you we would establish a path to effect an orderly turn-down of legacy copper services by the end of the decade. In my view, we have now reached the tipping point and that goal is firmly in sight.

Finally, before I turn the call over, I’d like to comment on last month’s announcement that Pascal has decided to retire at the end of the year. He’s been a great partner, and I’ll no doubt have much more to say about his contribution when his work is finished.

Until that time, we are executing a deliberate and carefully planned transition, and AT&T is fortunate to welcome back Jennifer Biry. There is no doubt that Pascal is a tough act to follow, but we have the person to do just that in Jennifer, and we will do so without missing a beat.

She knows many on our team. She understands the business. Her views on how we should run the company are aligned with how Pascal and I see the world. And she returns with a broader and deeper understanding of the fundamentals of running a software-driven enterprise. This is something that will be very important to AT&T as we move forward. That said, we still have some important things to accomplish between now and year-end, and we all intend to make good use of the time.

With that, Pascal, over to you.

Pascal Desroches, Chief Financial Officer, AT&T

Thank you, John, and good morning, everyone.

At a consolidated level, total revenues in the second quarter were up 2.3% year over year, driven by service revenue growth of 2.7%. Adjusted EBITDA was up 5.2% year over year, and our adjusted EBITDA margin increased 110 basis points to 39.1%.

For the full year, we continue to expect consolidated service revenues to grow in the low-single-digit range, and consolidated adjusted EBITDA to grow in the 3% to 4% range. Adjusted EPS was $0.65 in the second quarter which was up more than 20% from $0.54 the prior year, driven primarily by growth in adjusted EBITDA and lower depreciation expense.

We continue to expect full-year adjusted EPS to be in the range of $2.25 to $2.35. We added over 1 million fiber locations during the second quarter as we accelerated the pace of our deployment. This contributed to higher capital investment of $6.1 billion compared to $5.1 billion a year ago.

Second-quarter free cash flow increased by roughly $300 million year over year to $4.7 billion, which exceeded the high-end of our guidance range of $4.0 to $4.5 billion. For the full year, we continue to expect $18 billion-plus of free cash flow and $23 billion to $24 billion of capital investment.

Compared to second half of last year – when we were ramping up our fiber deployment, we expect our capital investment to be more ratable during the second half of this year.

We also expect higher cash flow from operations during the fourth quarter of this year compared to last year when our results were impacted by discrete items, including legal settlements and a large contribution to our pension. As a result, we expect free cash flow will be relatively stable year over year in the third quarter with strong year-over-year growth in the fourth quarter.

Our consolidated growth continues to be driven by our Advanced Connectivity segment, which contributes over 90% of our service revenue and nearly all of our adjusted EBITDA.

Advanced Connectivity service revenues grew 5.1% year over year in the second quarter, accelerating by 150 basis points compared to our growth in the first quarter.

EBITDA for this segment grew even faster, increasing 8% year over year, driven by top line momentum and our continued cost transformation initiatives. The team is really doing a good job here, and we remain on pace to achieve $4 billion in consolidated annual cost savings by the end of 2028.

Wireless service revenues grew 3.3% year over year, driven by growth in our customer base, including 432,000 postpaid phone net adds and the uplift from pricing actions that took effect during the second quarter. We are pleased with the execution of our pricing strategy in wireless, including the rollout of new plans and pricing actions during the first half of the year.

Impressively, we grew postpaid phone ARPU year over year while reducing postpaid phone churn. Our wireless growth is increasingly driven by new accounts and not simply additional lines of service. During the second quarter, we added 147,000 consumer postpaid wireless accounts, which is our best result in more than three years. We believe this is a direct result of our converged go-to-market strategy, which is driving improved growth in new customer accounts that choose AT&T for Wireless and Home Internet.

Advanced Home Internet service revenues grew by more than 27% year over year. This was primarily driven by improved fiber net adds as we accelerate our fiber deployment and center our go-to-market strategy around our converged offers as well as our acquisition of fiber assets from Lumen in the first quarter.

Fiber ARPU declined 1.3% compared to a year ago, which primarily reflects a full-quarter impact of our transaction with Lumen whose subscribers have lower ARPUs. Excluding customers in the footprint that we acquired from Lumen, fiber ARPU was approximately flat year over year. This reflects our focus on growing converged customer accounts, which enjoy discounted pricing, but typically stay with us longer and increase their spending over time.

We expect our focus on convergence to drive continued strong net additions in Advanced Home Internet and postpaid phone subscribers during the third quarter and continued growth in converged customers. In the near-term, this will likely put some pressure on fiber ARPU, but we feel really good about our ability to manage our back book pricing as we grow our base of fiber customers that also subscribe to our wireless services.

As we have said before, our goal is not to maximize ARPU of individual products but instead to maximize total Advanced Connectivity service revenues in order to drive attractive returns on our investments in 5G and fiber, and we are expecting continued strong growth in service revenue.

And as John noted, we are achieving this growth in Advanced Connectivity service revenues across Consumer and Business operations. Business Advanced Connectivity service revenues grew 1.8% year over year in the second quarter, driven by momentum in wireless, fiber, and, fixed wireless. We have turned the corner and expect AT&T Business to remain a driver of growth in Advanced Connectivity service revenues going forward.

Our Advanced Connectivity segment enters the second half of the year with strong momentum, and we continue to expect full-year service revenue growth of 5%-plus and EBITDA growth of 6% plus.

In our Legacy segment, service revenues declined 26% year over year, and EBITDA declined about 46% as we accelerate the process of powering down our legacy copper network and migrate customers to more advanced and reliable voice and internet services.

The retirement of our legacy network is a critical piece of our transformation into a scaled-provider of advanced connectivity. As we complete our network modernization and other transformation initiatives, we expect that by the end of the decade, we will have the best performing network with a highly competitive cost structure.

We returned $4.1 billion to shareholders during the second quarter, including approximately $2.2 billion of share repurchases. We are on pace to repurchase nearly $1 billion of stock in July, and as John previously shared, we now expect to buyback approximately $10 billion of our shares in 2026. This compares to our prior target of $8 billion of share repurchases this year and represents a pull-forward of our planned buybacks through 2028. Together, our planned share repurchases and expected dividend payments will total approximately $18 billion this year, which is essentially 100% of our outlook for free cash flow.

Our cash flow and liquidity provides us with flexibility to sustain our dividend and accelerate our planned buybacks, while also maintaining our commitment to reduce balance sheet leverage following our planned acquisition of spectrum licenses from EchoStar. We are well positioned to fund the transaction, which we expect to close by the end of July.

We ended the second quarter with net debt-to-adjusted EBITDA of 2.68-times, which was essentially flat with the first quarter. We continue to expect that our net leverage ratio will increase following the close of our transaction with EchoStar to the 3.2-times range and then return to a level consistent with our target in the 2.5-times range within approximately three years following the close of the EchoStar transaction.

I’m really pleased with how we have the company positioned heading into the back-half of the year. We have great operating momentum, a leading position in fiber and converged connectivity and a team that’s motivated to win in the marketplace.

Brett, we’re now ready for the Q&A.