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AT&T Inc (T.N) 2Q25 Performance and Outlook Summary

Core Content and Key Insights

Citi Research has released an early preview of AT&T's 2Q25 performance, indicating that the company is expected to deliver solid results balanced between volume and financial performance. The analysis highlights AT&T's strategic approach to the competitive wireless environment, including active promotions, and its ability to absorb costs from these initiatives.

Main Points

• 2Q25 Financial Performance:

  • AT&T is expected to report solid results with postpaid phone net adds of at least 315k, slightly below the consensus of 316k.
  • The company is anticipated to show a growth in Mobility service revenue and EBITDA of 3.0% and 3.3% respectively, against the Visible Alpha consensus of 3.2% and 3.5%.
  • Broadband is expected to have a strong quarter seasonally adjusted.
  • Adjusted EBITDA is forecasted at $11.6B, with Free Cash Flow (FCF) at $4.0B, which is consistent with prior indications but below the consensus of $4.3B.

• Cost Management:

  • Promotional costs are expected to be offset by a reduction in rebranding costs from 1Q, allowing for better financial performance.
  • Citi notes that the pull-back in rebranding costs should help absorb some of the promotional expenses in 2Q.

• Competitive Landscape:

  • T-Mobile is still active with its switcher promotions, while AT&T and Verizon have expired theirs.
  • AT&T is not seeing a significant shift in customer plans/mix, indicating a positive trend in customer retention.

• Strategic Positioning:

  • AT&T is well positioned to improve its share of wallet with an expanding fiber presence and FWA service.
  • The company is expected to leverage its expanding footprint for converged mobile + broadband services.

Valuation and Investment View

• Current Valuation Metrics:

  • Price: US$27.97
  • Target Price: US$32.00
  • Expected share price return: 14.4%
  • Expected dividend yield: 4.0%
  • Expected total return: 18.4%
  • Market Cap: US$201,261M

• Valuation Ratios:

  • PE (x): 13.8 (2025E)
  • PB (x): 1.8 (2025E)
  • EV/EBITDA (x): 7.4 (2025E)
  • FCF yield (%): 7.3 (2025E)

• Investment Recommendation:

  • Citi recommends a Buy rating for AT&T, citing its solid performance and potential for early buybacks to support additional upside for shares.

Financial Projections and Performance Metrics

Revenue and EBITDA Growth

EBITDA Margin

Free Cash Flow (FCF)

Key Takeaways

• Mobility Growth:

  • AT&T has shown solid upwardly revised postpaid phone net adds of 315k.
  • Mobility EBITDA is expected to grow by 3.3%, while the consensus is 3.5%.
  • The company is managing churn effectively, with no significant shift in customer plans/mix.

• Broadband Growth:

  • Broadband is expected to have another strong quarter, with total broadband net adds of 95k, slightly above the consensus of 89k.
  • Fiber net adds are expected to remain at 241k, while FWA is expected to reach 180k.

• Investor Relations:

  • AT&T has improved its visibility on financial performance, with some indications on FCF during the 1Q earnings call.
  • The company has not employed free line promotions recently, attributing much of the market activity to Cable and T-Mobile.

Strategic and Operational Outlook

• Cost Management:

  • Promotional costs are expected to face upward pressure, but the company should save some dollars sequentially after investing in the branding campaign during 1Q.

• Future Growth:

  • AT&T is expected to leverage its expanding footprint for converged mobile + broadband services.
  • The company is well positioned to improve its share of wallet through its expanding fiber and FWA services.

• Market Position:

  • Citi believes AT&T may end up as the relative winner in the quarter due to its balanced performance between volume and financials.

Summary of Citi Estimates vs Consensus

Citi's analysis underscores AT&T's solid financial position and strategic initiatives, supporting a Buy recommendation and highlighting potential for further upside through buybacks and improved financial performance.