Why did AT&T's EPS decline year over year if operating performance improved?

The decline is driven by non-operating items. Q1 2025 included $1.44 billion of equity income from DIRECTV ($0.15 per share), which was absent in Q1 2026, and equity in affiliates was a $41 million loss this quarter. Interest expense also rose 9.3% to $1.8 billion. Operating income itself grew 15.7%, so the shift is mainly below the operating line.

What is driving growth in the Advanced Connectivity segment?

Growth came from advanced home internet (up 27.3%), fiber revenue (up 21.2%, including the acquired Lumen mass markets fiber customers), and AT&T Internet Air, whose revenue more than doubled. Equipment revenue also rose 9.3% on higher device sales volumes, though wireless service revenue grew only 1.7%.

Are there concerns about wireless customer trends?

Yes. Postpaid phone churn rose 6 basis points to 0.89%, and retail wireless net adds fell 38% to 158,000. Management attributed the higher churn to competitive dynamics. Investors will likely watch whether promotional activity and converged bundles can stabilize subscriber growth.

How did the Lumen acquisition and Forged Fiber held-for-sale classification affect the financials?

AT&T closed the Lumen mass markets fiber acquisition on February 2, 2026, paying about $1.7 billion for business acquisitions in the quarter. The fiber assets placed in Forged Fiber are reported as discontinued operations, with a $38 million loss from discontinued operations and $4.2 billion of investing outflows from discontinued operations. AT&T plans to sell a controlling interest to an equity partner, which would bring in outside capital and affect future presentation.

What is the state of AT&T's balance sheet and capital allocation?

Debt increased to roughly $138 billion including current maturities, cash fell from $18.2 billion to $12.0 billion, and the debt ratio rose to 52.0%. Free cash flow was constrained by $4.9 billion of capex and the acquisition spending. AT&T still returned $2.3 billion through buybacks and about $2.0 billion in dividends, with $13.5 billion of repurchase authorization remaining.

AT&T INC. 8-K SEC Disclosure

01—Abstract

Summary

Summary of the 8-K filed April 22, 2026. Cited figures are marked; the original filing is the authoritative source.

AT&T reported first-quarter 2026 income from continuing operations of $4.2 billion^a, or $0.54 per diluted share, down from $4.7 billion ($0.61) a year earlier.

The decline is largely explained by the absence of the prior-year $0.15^b equity income from DIRECTV, which was not repeated, and by higher interest expense ($1.8 billion, up 9.3%) and a $41 million equity loss from affiliates versus $1.44 billion of equity income last year. Excluding significant items, the core operating picture was stronger: operating revenues rose 2.9% to $31.5 billion, operating income climbed 15.7% to $6.7 billion, and operating margin expanded to 21.1% from 18.8%, helped by lower depreciation on fully depreciated legacy assets and cost reductions. Growth is concentrated in the Advanced Connectivity segment, where revenues rose 4.7% to $28.5 billion and segment operating margin reached 24.1%.

Advanced home internet revenue grew 27.3%^c, driven by fiber and AT&T Internet Air, and the company added 584,000 internet connections, including 292,000 fiber and 292,000 fixed wireless net adds. Wireless performance was more mixed: postpaid phone churn rose to 0.89% from 0.83%, and retail wireless net adds slowed to 158,000 from 256,000. The Legacy copper business continues to shrink as AT&T decommissions the network, with revenue down 25.3%.

Latin America (Mexico) revenue rose 20.8%, but its operating margin fell to 1.7%, and the segment lost 895,000 prepaid subscribers following a new mobile line identification law. Balance sheet and capital return items warrant attention. Long-term debt increased to $131.6 billion^d from $127.1 billion, and the debt ratio rose 110 basis points to 52.0%.

Cash fell to $12.0 billion from $18.2 billion, reflecting $2.7 billion of acquisitions, largely the Lumen mass markets fiber business closed February 2, 2026. AT&T repurchased $2.3 billion of stock during the quarter and has $13.5 billion remaining under authorizations, while dividends remain at $0.2775 per share. The Forged Fiber subsidiary holding the acquired fiber assets is classified as held for sale, with a planned sale of a controlling interest to an equity partner, which may affect future reported results.

02—Key points

Key Highlights

Q1 2026 income from continuing operations was $4.2 billion ($0.54 per diluted share), down 10.1% from $4.7 billion ($0.61) in Q1 2025, mainly because prior-year DIRECTV equity income of $1.44 billion did not recur.
Operating income rose 15.7% to $6.7 billion and operating margin expanded to 21.1% from 18.8%, with total operating revenues up 2.9% to $31.5 billion.
Advanced Connectivity revenue grew 4.7% to $28.5 billion, and segment operating margin improved to 24.1% from 22.0%; advanced home internet revenue rose 27.3%.
Internet connections reached 14.8 million (up 29.6% year over year), with 584,000 net adds split evenly between fiber and fixed wireless (AT&T Internet Air).
Postpaid phone churn increased to 0.89% from 0.83% and retail wireless net adds fell to 158,000 from 256,000, reflecting heightened competitive dynamics.
Total debt rose meaningfully, with long-term debt at $131.6 billion and the debt ratio up 110 basis points to 52.0%, while cash declined to $12.0 billion after $2.7 billion of acquisitions.
Capital returns continued with $2.3 billion of buybacks in the quarter, $13.5 billion remaining under authorization, and an unchanged $0.2775 quarterly dividend per share.

03—Questions

Frequently Asked Questions

Why did AT&T's EPS decline year over year if operating performance improved?
The decline is driven by non-operating items. Q1 2025 included $1.44 billion of equity income from DIRECTV ($0.15 per share), which was absent in Q1 2026, and equity in affiliates was a $41 million loss this quarter. Interest expense also rose 9.3% to $1.8 billion. Operating income itself grew 15.7%, so the shift is mainly below the operating line.
What is driving growth in the Advanced Connectivity segment?
Growth came from advanced home internet (up 27.3%), fiber revenue (up 21.2%, including the acquired Lumen mass markets fiber customers), and AT&T Internet Air, whose revenue more than doubled. Equipment revenue also rose 9.3% on higher device sales volumes, though wireless service revenue grew only 1.7%.
Are there concerns about wireless customer trends?
Yes. Postpaid phone churn rose 6 basis points to 0.89%, and retail wireless net adds fell 38% to 158,000. Management attributed the higher churn to competitive dynamics. Investors will likely watch whether promotional activity and converged bundles can stabilize subscriber growth.
How did the Lumen acquisition and Forged Fiber held-for-sale classification affect the financials?
AT&T closed the Lumen mass markets fiber acquisition on February 2, 2026, paying about $1.7 billion for business acquisitions in the quarter. The fiber assets placed in Forged Fiber are reported as discontinued operations, with a $38 million loss from discontinued operations and $4.2 billion of investing outflows from discontinued operations. AT&T plans to sell a controlling interest to an equity partner, which would bring in outside capital and affect future presentation.
What is the state of AT&T's balance sheet and capital allocation?
Debt increased to roughly $138 billion including current maturities, cash fell from $18.2 billion to $12.0 billion, and the debt ratio rose to 52.0%. Free cash flow was constrained by $4.9 billion of capex and the acquisition spending. AT&T still returned $2.3 billion through buybacks and about $2.0 billion in dividends, with $13.5 billion of repurchase authorization remaining.

04—Continue

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