AT&T (T) closed Friday at $24.80, down 0.3%, as the broader market rallied to new highs. The telecom giant lagged behind the Dow Jones, S&P 500, and Nasdaq, all of which hit fresh intraday records, driven by strong tech earnings and artificial intelligence enthusiasm.
The company used the week to reaffirm its long-term capital allocation strategy ahead of its June 9 investor event. AT&T reiterated its plan to return more than $45 billion to shareholders between 2026 and 2028 through dividends and share buybacks. For the second quarter, management expects free cash flow in the range of $4.0 billion to $4.5 billion. Free cash flow, which is cash from operations minus capital expenditures, is a key metric for the company's ability to fund both network investments and shareholder returns.
AT&T's underperformance came as the S&P 500 communications services sector slipped 1.7%. Wells Fargo Chief Equity Strategist Ohsung Kwon attributed the broader market's strength to AI-driven earnings optimism, noting that the rally is fundamentally supported. However, telecom stocks faced headwinds from concerns over debt levels, competitive pricing pressures, and the hefty capital required to sustain network growth.
Verizon and T-Mobile also declined, falling roughly 0.3% and 0.8%, respectively, indicating a sector-wide pullback. Investors remain cautious about the industry's ability to generate sufficient cash flow to cover dividends, buybacks, and ongoing network upgrades.
AT&T's core strategy hinges on its wireless and fiber businesses generating enough cash to support its payout and reinvestment plans. In the first quarter, the company reported revenue of $31.5 billion, adjusted EBITDA of $11.8 billion, and free cash flow of $2.5 billion. Adjusted EBITDA excludes certain items and removes interest, taxes, depreciation, and amortization. The company added 294,000 postpaid phone subscribers and 584,000 new fiber internet customers. CEO John Stankey described the quarter as the company's best first quarter ever for fiber net adds, citing a solid foundation of assets. Postpaid phone churn remained low at 0.89%.
On the pricing front, AT&T launched its Build-A-Plan wireless offer on May 27, starting at $15 per month for one line with unlimited talk, text, and 1GB of data. The plan requires an unlocked eSIM-compatible phone. Jenifer Robertson, executive vice president and general manager of AT&T Consumer, called the plan a win-win for customers seeking flexibility.
AT&T also announced a $19 billion investment in fiber and wireless networks in California through 2030. This includes expanding fiber to an additional 4 million homes and businesses and adding over 1,200 new cell sites. Susan Santana, state president of AT&T California, described it as the company's largest-ever California investment commitment.
In a notable industry development, AT&T, Verizon, and T-Mobile reached an agreement in principle on May 14 to form a joint venture aimed at closing rural coverage gaps using direct-to-device satellite technology. The Federal Communications Commission has also approved EchoStar's $40 billion spectrum sale to SpaceX and AT&T, which FCC Chairman Brendan Carr said provides a clear pathway for Starlink to expand direct-to-cell services.
Analyst ratings remain largely positive. RBC Capital's Jonathan Atkin reiterated an outperform rating and $31 price target on AT&T on May 20. However, risks persist. The company ended the first quarter with $126.4 billion in net debt and plans $23 billion to $24 billion in capital spending this year. If interest rates remain elevated, wireless price competition intensifies, fiber demand softens, or copper network decommissioning faces delays, AT&T's ability to execute its $45 billion return plan could be challenged.
AT&T is scheduled to present at the Mizuho Technology Conference on June 9. Until then, the stock's performance will likely hinge on whether steady telecom cash flows can attract investors in a market chasing faster-growing earnings stories.
