AT&T (T) 25Q3 Update

AT&T reported 25Q3 GAAP EPS of $1.29, compared with a loss of $0.03 in the prior year period.  Non-GAAP EPS of $0.54 was down from $0.60.  I had projected GAAP EPS of $0.86 and non-GAAP EPS of $0.65.

Revenues increased 1.6% YOY to $30.7 billion, below my estimate of $31.2 billion.  Net cost of revenues rose 1.7%, as a 10.8% increase in equipment costs was partially offset by a 5.2% drop in other costs.  Gross profit rose 1.7%, with gross margin flat at 61.5%.  Other operating costs fell 22.4% to $12.8 billion, due to the non-repeat of 24Q3’s $4.4 billion of impairment charges.  Thus, operating income nearly tripled to $6.12 billion with operating margin rising from 7.0% to 19.9%.  Other income surged from $717 million to $6.25 billion, due to a $5.5 billion gain recorded on the sale of DIRECTV.  Pretax income likewise surged from $1.4 billion to $10.7 billion.  Yet, income tax expense fell 24% due to the non-deductibility of the impairment charges.  Net income attributable to shareholders therefore rebounded from a loss of $226 million to 25.9% to $9.28 billion.

In August, AT&T agreed to purchase for $23 billion in cash Echostar Corporation’s licenses in the 600 MHz band and the 3.45 GHz band.  The transaction is subject to regulatory approval and other customary closing conditions and is expected to close in early 2026.  Also pending is AT&T’s planned $5.75 billion acquisition of Lumen Technologies’ mass markets fiber-to-the-premises network assets, which is expected to close in the first half of 2026.

Management left its 2025 full year guidance mostly unchanged.  It anticipates consolidated service revenues to rise by a low single-digit percentage, adjusted EPS at the higher end of its $1.97-$2.07 range and free cash flow in the low- to mid- $16 billion range.

My 2025 projections are consistent with guidance.  I anticipate GAAP EPS of $3.01, up from $2.48 previously, due to the higher-than-expected gain on the sale of DIRECTV.  My non-GAAP EPS estimate of $2.05 is unchanged.  For 2026, I project GAAP EPS of $2.18, down from $2.22, and non-GAAP EPS of $2.21, down from $2.25, mostly due to the impact of the Echostar spectrum license purchase.

Since my last report, the stock’s total return is -10.0% compared to the S&P 500’s +7.4%.  The stock appears to be in a bottoming process, but with last week’s decline, it is not yet clear that a bottom is in.

As a result of the fall in AT&T’s share price, I have lowered my price target from $29 to $27.  The price target equates to an assumed forward multiple of 12.1 times projected 2026 non-GAAP EPS of $2.21.  The potential total return, with its 4.5% dividend yield, is 14.4%.  Thus, I am raising my performance rating from “3” (Neutral) to  “2” (Outperform).

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.

December 17, 2025 (Report published on December 13, 2025.)

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
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