AT&T Beats Profit Estimates as Cost-Cutting Efforts Pay Off

AT&T (T), America’s biggest telecom company by revenue, reported robust second-quarter earnings as its cost-cutting plan paid off, amid an ongoing 5G rollout and stronger than expected subscriber gains.

Subscriber Gains, 5G Rollout Propel Earnings

AT&T reported 6.2 million net new wireless subscriptions in the second quarter, including 326,000 postpaid phone subscribers. While it marked a slowdown from last year, when net additions were almost 60% higher, the figures came in above expectations of a 300,000 gain.

The rollout of AT&T’s 5G network, which now serves more than 175 million people, continued at a brisk pace. It’s on track to reach 200 million customers by the end of the year. Subscriptions to FirstNet, the company’s communications network designed for first responders and essential services, topped five million for the first time.

Meanwhile, the carrier’s consumer fiber network, which is the biggest in the country, now encompasses more than 20 million consumer locations—including three million businesses—and is expected to reach 30 million by the end of 2025.

These additions helped propel a 29.3% surge in operating income, which rose to $6.4 billion from $5.0 billion in the year-ago quarter. Total revenues rose 0.9% to $29.9 billion.

“The direction we set three years ago is sound, and we’re on the right trajectory. Compared to last year, Mobility service and broadband revenues are up, adjusted EBITDA is up, free cash flow is up, Mobility and Consumer Wireline margins are up and customer lifetime values are up,” said AT&T CEO John Stankey.

Cost-Cutting Efforts Pay Off

AT&T’s robust earnings were partly driven by a successful cost-cutting effort that helped reduce operating expenses by $1 billion and drove free cash flow (FCF) 31% higher to $4.2 billion.

AT&T executives said the company hit its $6 billion target in annual cost savings six months ahead of schedule, and increased that target by an additional $2 billion.

The savings plan “reflects our continued march to operating the company in a more focused and streamlined fashion,” Stankey said.

The company is also using artificial intelligence (AI) to help it become more efficient, partnering with Microsoft (MSFT) to launch a customer-built generative AI tool called “Ask AT&T.”

Shares of AT&T were down about 1.5% in early trading Wednesday. They’ve fallen roughly 20% so far this year, especially after a Wall Street Journal report about a legacy network of toxic lead cables.