AT&T Inc. (NYSE:T) continued its upward momentum in premarket trading on Thursday, following a strong earnings report that highlighted robust subscriber growth and a renewed commitment to shareholder returns. The stock was indicated at $23.24 just before 5:00 a.m. EDT, after closing Wednesday's session at $23.04, representing a 0.9% gain on top of a 3.5% rise the previous day.
The telecommunications giant reported second-quarter results that surpassed expectations on several key metrics. Postpaid phone net additions reached 432,000, exceeding consensus estimates of 338,500 by 27.6%. Adjusted earnings per share came in at $0.65, beating the $0.59 consensus by 10.2%. However, revenue of $31.6 billion fell slightly short of the $31.8 billion estimate, missing by 0.6%.
The most significant takeaway from the report was management's confidence in returning nearly all of its anticipated free cash flow to shareholders. Chief Financial Officer Pascal Desroches stated that the company expects to return approximately $18 billion through dividends and share repurchases in 2026, representing "essentially 100% of our outlook for free cash flow." This includes a $10 billion share repurchase program, up from a previous target of $8 billion.
The combination of dividends and buybacks implies a projected gross return to shareholders of nearly 11% based on Wednesday's closing price. The annual dividend of $1.11 per share yields 4.8%, while the proposed $10 billion buyback represents 6.2% of the company's market capitalization.
Investors focused on the strong subscriber metrics rather than the slight revenue miss. AT&T added 646,000 new fiber and fixed-wireless connections, bringing total net additions to 1.078 million. Postpaid phone churn improved to 0.86% from 0.89% in the first quarter, while the penetration of advanced-internet households with AT&T wireless increased to 42.5% from 42.0%.
The company's Advanced Connectivity division saw revenue grow 4.1%, while operating income surged 20.3%, expanding the operating margin by 350 basis points to 25.7%. This margin expansion underscores the operational leverage from cross-selling initiatives, as noted by David Wagner, head of equities at Aptus Capital Advisors. "The cross-selling that they've been building towards, it's actually showing up in the numbers right now," he told Reuters.
AT&T accelerated its buyback activity in the second quarter, distributing $4.1 billion to shareholders, including $2.2 billion in share repurchases. The company's capital expenditures rose to $6.1 billion from $5.1 billion a year earlier, reflecting ongoing investments in network infrastructure. Net debt stood at $126.4 billion, representing 2.68 times adjusted EBITDA.
Trading volume surged on Wednesday, with 187.3 million shares changing hands, more than three times the 65-day average. The stock has gained 4.8% over the past five sessions. Upcoming reports from rivals T-Mobile US Inc. (NASDAQ:TMUS) and Verizon Communications Inc. (NYSE:VZ) will provide further context on market share dynamics.
Despite the positive momentum, risks remain. Legacy revenue declined 25.9%, and overall revenue fell short of forecasts. Higher capital spending or more intense pricing competition could pressure cash conversion, while the company's debt level leaves limited room for error. AT&T reaffirmed its 2026 guidance, projecting adjusted earnings of $2.25 to $2.35 per share and free cash flow of at least $18 billion.
