AT&T (NYSE: T) shares climbed 4.8% to $24.06 on Friday after the telecommunications giant reported second-quarter results that exceeded Wall Street's earnings expectations by a wide margin. Trading volume surpassed 80 million shares, approximately 57% above the daily average. The results offered fresh evidence that AT&T's strategy of focusing on its core wireless and fiber businesses — a pivot sharpened after the 2022 WarnerMedia spin-off — is translating into improved profitability and cash generation.

Q2 Financial Results

The company posted adjusted earnings per share (EPS) of $0.65, comfortably beating the consensus estimate of $0.59. Revenue reached $31.56 billion, falling slightly short of the $31.80 billion analysts had projected but not enough to dampen investor enthusiasm.

Free cash flow was the standout metric of the quarter. AT&T generated $4.7 billion, representing a 6.3% year-over-year increase and surpassing the company's own guidance range of $4.0 billion to $4.5 billion. FCF is a particularly scrutinized line item for AT&T, as it must fund both a substantial dividend and ongoing 5G and fiber infrastructure buildouts.

Adjusted EBITDA rose 5.2% year-over-year to $12.3 billion, with the adjusted EBITDA margin expanding by 110 basis points to 39.1%.

Subscriber Growth

On the subscriber front, AT&T added 432,000 postpaid phone customers, well above the 338,500 additions analysts had anticipated. Postpaid phone net additions are the wireless industry's most closely watched growth benchmark, as these customers carry lower churn rates and higher lifetime value than prepaid users. The company also surpassed one million new advanced connectivity subscribers overall, fueled by growth in fiber and fixed wireless services.

Raised Guidance

AT&T raised its full-year 2026 EPS guidance to a range of $2.25 to $2.35. Analysts currently expect full-year EPS of $2.31.

Analyst Reaction

Wolfe Research upgraded AT&T following the earnings release. Several other firms adjusted their targets:

• Sanford C. Bernstein maintained an "outperform" rating with a $25.00 price target.
• TD Cowen raised its target from $32.00 to $33.00 while keeping a "hold" rating.
• Argus lowered its target from $33.00 to $30.00 but retained a "buy" rating.
• Barclays trimmed its target from $26.00 to $24.00 with an "equal weight" rating.

The overall consensus stands at Moderate Buy, with an average price target of $29.19.

AT&T trades at approximately 6.7x projected EV/EBITDA, a discount to Verizon at 7.3x and T-Mobile at 8.8x, and below AT&T's own five-year historical average of 7.5x to 8x.

Dividend and Share Repurchases

AT&T declared a quarterly dividend of $0.2775 per share, payable August 3rd. This translates to $1.11 annualized and a 4.6% yield, with a payout ratio of 37.25%. The current dividend remains below the pre-spin-off level, reflecting the reduced revenue base after WarnerMedia's separation, but the improving free cash flow trajectory has been central to investor confidence in its sustainability.

The company also has a $10 billion share repurchase authorization in place.

Key Metrics

• Short interest: 1.81% of float
• Institutional ownership: 57.10%
• 50-day moving average: $22.79
• 200-day moving average: $24.24
• Market capitalization: $167.14 billion
• P/E ratio: 7.97
• Beta: 0.24

Unusually heavy call option activity following the earnings release indicated traders were positioning for further upside.