Morningstar

AT&T Earnings: Trimming Fair Value Estimate on Higher Assumed Spectrum Costs

Management cut capital spending plans for 2027 and 2028.

The AT&T logo and signage is displayed on a building.
© 2025 AT&T Intellectual Property
Securities in This Article
AT&T Inc
(T)

Key Morningstar Metrics for AT&T

  • Fair Value Estimate
    : $26.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

What We Thought of AT&T’s Earnings

AT&T’s T third-quarter service revenue growth accelerated to 3.8%, or about 3.0% excluding the Lumen fiber acquisition. Service revenue growth had been bounded between 0%-2% over the past three years. Net debt ticked up sharply on spectrum purchases.

Why it matters: The quarter was solid operationally. Postpaid wireless customer additions slowed as customer defections remain elevated, stemming from price increases, but broadband customer gains were impressive.

  • Revenue per postpaid phone customer jumped 4% from a year ago, and revenue per fiber broadband customer dropped 4%. We don’t believe this divergence is meaningful, given the emphasis on service bundles, and we estimate total revenue per customer relationship is growing at an accelerating rate.
  • Net debt hit 3.1 times EBITDA, back to levels after the prior round of spectrum purchases five years ago. With another series of spectrum auctions on the horizon, we’d prefer AT&T scale back share repurchases, which ramped up during the quarter.

The bottom line: We trim our fair value estimate to $26 per share from $27, reflecting higher assumed spectrum costs in the coming years. AT&T claims it doesn’t need spectrum nationwide given its network position, but we still expect it to bid aggressively in future auctions to prevent SpaceX from winning licenses on the cheap.

Long view: Management cut capital spending plans for 2027 and 2028 by about $1 billion annually—about one-third results from the sale of its Mexican business, with the remainder tied to “efficiencies” in the fiber buildout.

  • We suspect AT&T is planning to slow its internal fiber network expansion. The firm noted that upstart fiber builders have slowed construction, which reduces its need to build preemptively. Management also acknowledged that it would be interested in a distressed fiber builder at the right price.
  • AT&T’s pricing decisions and approach to fiber construction remain rational, in our view, supporting our narrow Morningstar Economic Moat Rating.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center