AT&T surpasses Q3 expectations despite business challenges.
AT&T delivered a mixed but largely positive third-quarter performance for 2024, showcasing strong wireless subscriber growth while grappling with challenges in its business wireline segment.
The telecommunications giant’s results paint a picture of a company successfully navigating consumer markets while facing headwinds in its enterprise operations.
Strong Financial Performance
The company’s adjusted earnings reached $60 per share, significantly beating analysts’ expectations of 51 cents. While this represents a 6% decline from the previous year, the results demonstrate AT&T’s resilience in a competitive market.
Free cash flow emerged as a particular bright spot, reaching $5.1 billion—well above market estimates of $4.3 billion. This strong cash flow performance helps secure AT&T’s dividend payments and has sparked discussions about potential stock buybacks in 2025.
Subscriber growth remains robust.
In the crucial wireless segment, AT&T added 403,000 postpaid phone customers during the quarter. While slightly below some analysts’ expectations of 435,000, these numbers reflect healthy growth in the company’s most valuable customer segment.
The company maintained strong customer loyalty, with a postpaid phone churn rate of just 0.78%, a slight improvement from 0.79% in the previous year.
Fiber Business Expansion
The company’s fiber-optic network continued its growth trajectory, adding 226,000 new customers. This marks the 19th consecutive quarter with over 200,000 net additions, though the numbers fell short of projected figures. CEO John Stankey attributed this shortfall to two main factors:
- Hurricane Helene’s impact in September
- There is a labor dispute in the Southeast that is affecting installations.
Business challenges and write-offs
The quarter wasn’t without its challenges. AT&T incurred a $4.4 billion goodwill impairment charge in its business wireline unit, a reflection of the unexpected decline in traditional business voice services. This charge led to a net loss of approximately $200,000 for the quarter, compared to a $3.4 billion profit in the same period last year.
Revenue Performance
Overall revenue showed a slight decline of 0.5%, coming in at $30.2 billion, marginally below analyst expectations of $30.4 billion. However, the crucial mobility service revenue segment grew by 4% to $16.5 billion, offsetting a 5.7% drop in mobility equipment revenue.
Market Response and Future Outlook
AT&T’s stock responded positively to the earnings report, rising 2.8% in pre-market trading to $22.11. The company has maintained its full-year guidance, expecting:
- Free cash flow between $17-18 billion
- Capital investment of $21-22 billion
- Continued growth in wireless service revenue
However, management updated its forecast for the business wireline division, now expecting a decline in the “high teens” range compared to the previous projection of “mid teens.”
Looking Ahead
AT&T’s performance this quarter reflects its successful focus on core connectivity services while managing the transition away from legacy business services.
Despite ongoing challenges in its enterprise business, the company’s strong performance in the consumer wireless and fiber segments, along with its robust free cash flow, positions it well for future growth.
Year-to-date, AT&T’s stock has shown remarkable strength, climbing 28% in 2024, marking a significant turnaround from its 9% decline in 2023. Strong fundamentals and this performance suggest the company maintains a solid foundation for future growth despite evolving market challenges.
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