T-Mobile US (NASDAQ:TMUS) saw its stock price tumble more than 6% shortly after the opening bell on Thursday, a sharper decline than the roughly 1% drop suggested by U.S. index futures. The sell-off came despite the company reporting solid pricing strength in its second-quarter results, though the robust revenue growth failed to translate into equivalent cash flow gains.
Revenue Growth Outpaces Cash Flow
Service revenue for the quarter climbed 8.9% to $18.98 billion, while core adjusted EBITDA advanced 11.7% to $9.54 billion. However, adjusted free cash flow—a non-GAAP metric closely watched by investors—rose only 4.4% to $4.80 billion. The adjusted free-cash-flow margin contracted by 110 basis points to 25.3%, underscoring the disconnect between top-line performance and cash generation.
Cash capital expenditures increased by 12.8% to $2.70 billion, contributing to the conversion gap. The company’s figures indicate that higher spending on network investments weighed on cash flow conversion.
| Metric | Q2 2025 | Q2 2026 | Change |
|---|---|---|---|
| Service revenue | $17.44 bln | $18.98 bln | +8.9% |
| Core adjusted EBITDA | $8.54 bln | $9.54 bln | +11.7% |
| Cash capital spending | $2.40 bln | $2.70 bln | +12.8% |
| Adjusted free cash flow | $4.60 bln | $4.80 bln | +4.4% |
| Adjusted free-cash-flow margin | 26.4% | 25.3% | -110 bps |
| Postpaid net account additions | 318,000 | 277,000 | -12.9% |
| Postpaid ARPA | $149.87 | $152.91 | +2.0% |
Guidance and Earnings Highlights
T-Mobile raised the midpoint of its annual cash-flow guidance by $200 million, or 1.1%, to $18.6 billion. The company left its outlook for EBITDA, capital spending, and account additions unchanged. Revenue for the quarter came in at $22.79 billion, falling roughly 0.7% short of the consensus estimate of $22.95 billion. Earnings per share, however, exceeded expectations at $2.99, beating the $2.59 forecast by 15%.
Postpaid net account additions of 277,000 surpassed the 259,000 forecast by analysts, though they declined 13% year-over-year. Account churn rose to 0.99% from 0.92% in the prior-year period. Average postpaid revenue per account increased 2% to $152.91, driven by a shift toward premium plans. Chief Operating Officer Jon Freier noted that approximately 60% of new customers opted for the company's most premium offerings, indicating that pricing power rather than volume drove revenue growth.
Cash Flow Drivers and Market Context
Chief Financial Officer Peter Osvaldik attributed the increase in cash flow to “continued efficiencies,” including reduced cash taxes and working-capital improvements from advanced artificial-intelligence tools. The distinction is significant: the majority of the cash flow upgrade stemmed from operational efficiency rather than higher subscriber forecasts.
T-Mobile anticipates around 250,000 postpaid net account additions in the third quarter. Executives project a short-term rise in churn due to changes in rate plans. For the full year, ARPA growth is expected to approach the upper end of its forecast range at 3%.
Peer Comparisons and Outlook
AT&T (NYSE:T) reported 432,000 net postpaid phone subscriber gains and generated $4.7 billion in free cash flow, though its phone-addition metric does not align directly with T-Mobile’s billing-account measurement. Verizon Communications (NYSE:VZ) is set to announce second-quarter earnings on Friday, July 24, which will provide a key peer comparison on churn and cash flow trends.
T-Mobile relies on cash conversion to fund capital returns. In the quarter, the company allocated $2.2 billion for share repurchases and distributed $1.1 billion in dividends, representing roughly 69% of its adjusted free cash flow.
Risks and the Path Forward
Risks remain. Adjustments to rate plans may increase churn, and accelerated network investments could continue to weigh on cash conversion. The upcoming test is clear: T-Mobile must maintain pricing improvements while stabilizing account growth and cash margins. Investors will be watching closely to see if the company can close the gap between revenue expansion and cash flow generation.
