At its Investor Day held on Dec. 3, AT&T outlined its vision for the next stage of its evolution. It aims to drive growth in its consumer broadband business by expanding its fiber optic footprint, increasing the number of fiber locations from 29 million in 2024 to 50 million in 2029. With faster data speeds, fiber trumps cable in service quality; so the company is targeting a penetration rate of 50% of fiber locations over time. It also seeks to convince the 60% of its fiber subscribers who are not AT&T Mobility customers to sign up through converged offers. With this strategy, AT&T seeks double-digit growth in consumer broadband revenues over the next several years.
Cost cutting is another key component of AT&T’s strategy. The company aims to reduce annual operating costs by $3 billion, inclusive of the remaining savings under its $2 billion cost cutting program previously expected to end in 2026. This $3 billion savings will be achieved over the next three years in large part by retiring its legacy copper infrastructure and selling much of the associated real estate owned by AT&T in valuable downtown locations.
In 2025, AT&T will be resetting its earnings base as it completes the sale of its 70% stake in DIRECTV to TPG. In 2024, AT&T achieved GAAP EPS of $1.49 and non-GAAP EPS of $2.26. Included in those figures is approximately $0.30 of earnings from DIRECTV. Its 2024 non-GAAP EPS base excluding DIRECTV is therefore $1.96. For 2025, management anticipates non-GAAP EPS of $1.97-$2.07, excluding DTV.
My 2025 projections of $2.27 in GAAP EPS and $2.16 for non-GAAP EPS are consistent with that guidance. On a non-GAAP basis, my projections anticipate $0.15 per share in earnings from DIRECTV, or $2.01 excluding DIRECTV. For 2026, my projections show GAAP EPS of $2.15 and non-GAAP EPS of $2.17. Thus, while my overall estimates imply that non-GAAP EPS will be flat, in fact, they foresee an increase from $2.01, excluding DIRECTV, to $2.17, which equates to earnings growth for the core business of 8%. This is also consistent with the trajectory of the company’s 2025-2027 earnings growth rate guidance to a double-digit percentage in 2027.
Based upon my 2026 earnings projections and the stock’s recent strong relative performance, I am raising my price target on AT&T’s stock from $24 to $29. The revised target equates to 13.5 times projected 2026 GAAP and non-GAAP EPS, which is equivalent to its current one-year forward P/E multiple. The revised price target represents a potential total return of 11.4%, including the stock’s 4.1% dividend yield. Consequently, I am maintaining my performance rating of “3” (Neutral). Despite the neutral rating, the dividend yield is attractive and unless the economic outlook changes suddenly for the worse, the stock can continue to be a safe haven during this period of market volatility. One key risk is potentially lower margins as it fights to win broadband market share.
This is a summary of my recent update report on AT&T Inc. (T). To obtain a copy of the report, please reach out to me using the contact information provided below.
March 25, 2025 (Report published on March 24, 2025.)
Stephen P. Percoco
Lark Research
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