AT&T reported 25Q1 GAAP EPS of $0.61, compared with $0.41 in the prior year period. Non-GAAP EPS of $0.51 was up from $0.48. I had projected GAAP EPS of $0.39 and non-GAAP EPS of $0.49.
Revenues increased 2.0% YOY to $30.6 billion, in line with my estimate of $30.7 billion. Net cost of revenues was flat, so gross profit rose 2.9%, with gross margin up 50 bp to 60.7%. Other costs increased 5.0% to $12.8 billion, mostly due to higher asset impairment charges. As a result, operating income declined 1.6% to $5.75 billion, with operating margin dropping 70 bp to $18.8%. Interest expense eased slightly and cash distributions from DIRECTV (in accordance with its exit plan), jumped from $0.3 billion to $1.44 billion. Thus, pretax income rose 23.1% to $6.0 billion and net income attributable to AT&T’s common stock jumped 29.5% to $4.4 billion.
Management was pleased with the solid start to the year. It believes that its converged offerings of wireless and fiber are a key value driver for customers and also a key competitive advantage. The company has accelerated its roll out of fiber, expecting to pass over 30 million customer locations earlier than planned this year, on its way to 50 million homes passed by the end of the decade. AT&T also continues to press forward with its plan to retire its legacy copper network. With its strategy and plans for 2025 on track, the company reaffirmed its full year 2025 guidance and now expects $3 billion in share repurchases (from its $10 billion authorization) by year-end.
My 2025 projections of $2.27 in GAAP EPS and $2.16 for non-GAAP EPS are consistent with guidance and unchanged from my previous report. On a non-GAAP basis, my projections anticipate $0.15 per share in earnings (including a gain on sale) from DIRECTV, or $2.01 excluding DIRECTV. I have increased my 2026 projections by about $0.04 per share and now show 2026 GAAP EPS of $2.19 and non-GAAP EPS of $2.22. The implied non-GAAP growth rate of 10.5%, excluding DIRECTV, is above the company’s annual EPS growth target of 8%.
Despite the higher earnings outlook for 2026, I am maintaining my price target of $29. The price target is based upon a lower multiple of 13.0 times projected 2026 non-GAAP EPS (vs. 13.5 in my previous report), but it is still above the current one year forward non-GAAP EPS multiple of 12.4. The potential total return is 11.5%. AT&T’s stock has been a safe haven this year with a total return YTD of 21.9% compared with the S&P 500’s 1.2 loss. Since my last report on March 24, however, the stock has delivered a negative total return of -3.1%, underperforming the S&P’s 4.9% gain. Although its relative performance has been weak lately, today’s market surge on China tariff optimism could signal a near term top. Consequently, I am raising my performance rating on AT&T from “3” (Neutral) to “2” (Outperform).
This is a summary of Lark Research’s recent report on AT&T, Inc. (T). To obtain a copy of the report, please reach out to Steve Percoco using the contact information provided below.
June 20, 2025 (Report published on May 12, 2025.)
Stephen P. Percoco
Lark Research
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© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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