AT&T (NYSE: T) posted a strong second quarter, growing adjusted earnings per share to $0.65, up from $0.54 in the same period last year.
That represents roughly 20% year-over-year growth on the bottom line, even as the top line moved at a much slower pace.
Second-quarter revenue rose 2.3% year over year to $31.6 billion, a modest figure that the market has come to expect from the telecom giant.
What caught investor attention was management’s decision to lift its 2026 share repurchase plan to approximately $10 billion, up from a previous target of $8 billion.
The stock closed at $24.13 following a 5.1% single-session gain, though it remains roughly 19% below its 52-week high of $29.79.
At that price, shares yield 4.6% and trade at approximately eight times earnings, making the valuation case straightforward for income-focused investors.
Free cash flow came in at $4.7 billion for the quarter, up from $4.4 billion a year earlier, providing the fuel behind both the dividend and the expanded buyback program.
AT&T added 432,000 postpaid phone subscribers and 646,000 internet customers during the quarter, including 367,000 fiber and 279,000 fixed wireless additions.
Fiber now passes 38.6 million locations, an increase of roughly one million in just three months, underscoring the pace of network expansion.
Adjusted EBITDA margin expanded 110 basis points to 39.1%, reflecting the shift toward higher-margin fiber and postpaid phone customers within the business mix.
Management guided for full-year 2026 free cash flow of at least $18 billion, growing to above $19 billion in 2027 and above $21 billion in 2028.
The company has committed to returning more than $45 billion to shareholders across those three years, against an expected $58 billion in cumulative free cash flow.
That runway implies some capacity to chip away at net debt, which stood at $126.4 billion at quarter’s end, representing 2.68 times adjusted EBITDA.
Management flagged that the leverage ratio will rise to approximately 3.2 times once its transaction with EchoStar closes, before working back toward 2.5 times over about three years.
CEO John Stankey said the accelerated repurchase program reflects a gap between the company’s operating fundamentals and how the market currently values its shares.
The annual dividend stands at $1.11 per share across roughly 6.9 billion shares, amounting to approximately $7.6 billion in total dividend payments each year.
Combined with the $10 billion buyback, AT&T plans to return close to $18 billion to shareholders this year, essentially matching its entire free cash flow guidance.
Management guided for adjusted earnings per share of $2.25 to $2.35 for the full year 2026, which puts shares at closer to 10 times earnings on that basis.
For income investors, the quarter delivered a covered dividend, meaningful margin expansion, and a buyback program that signals management confidence in the stock’s value.
The revenue growth rate of 2.3% remains a valid concern, sitting close enough to flat that any operational stumble could push it into negative territory.
