AT&T Beats Third-Quarter Forecasts and Raises Its Profit Outlook, but a $2.6 Billion Mexico Charge Cuts Reported Earnings to 13 Cents

AT&T's third quarter was two prints in one release — a connectivity business adding customers at a record pace, and a reported profit line still carrying the cost of leaving Mexico.

AT&T reported third-quarter results on Wednesday, Oct. 21, with revenue of $32.3 billion, up 5.3% from a year earlier, and adjusted earnings of $0.65 a share. The earnings figure beat the consensus estimate of $0.60 a share, and revenue came in ahead of forecasts of $31.69 billion, according to the FactSet consensus reported by the Wall Street Journal. The company called it its best consolidated service revenue growth in more than four years, and it raised its full-year adjusted earnings outlook to about $2.40 a share, above the $2.34 consensus and up from prior guidance of $2.25 to $2.35.

The reported number needs its footnote

The gap between the adjusted beat and the reported result is the quarter's second story. Diluted earnings from continuing operations were $0.13 a share, down from $1.29 a year earlier, because the quarter absorbed a $2.6 billion non-cash impairment charge on the Mexico wireless business the company now holds for sale, along with employee separation charges — while the year-ago figure included a gain on the sale of the DirecTV stake. Operating expenses rose to $28.2 billion from $24.6 billion, operating income fell to $4.1 billion from $6.1 billion, and income from continuing operations was $1.3 billion, against $9.7 billion a year earlier. On the adjusted basis the company asks investors to judge it by, operating income rose to $7.6 billion from $6.6 billion and adjusted earnings rose 20% from $0.54 — a cleaner read, but one that only holds if the Mexico exit actually closes and the charges stop recurring.

Record internet adds carried the quarter

The customer numbers are the strongest part of the print. AT&T added 769,000 total consumer and business internet customers in the quarter, a record, including 442,000 fiber additions and 327,000 fixed wireless additions, and it passed 1 million total Advanced Connectivity customer additions for a second consecutive quarter. Postpaid phone net adds were 379,000 with postpaid phone churn of 0.92% — essentially matching the analyst estimate of about 379,300 — and 42.8% of households with AT&T's advanced home internet services also chose AT&T wireless, the converged relationships the company is building its strategy around. Fiber now reaches more than 39 million consumer and business locations, on track for more than 40 million by the end of 2026 and more than 60 million by the end of 2030. "We are growing valuable customer relationships as more homes and businesses choose AT&T for all their advanced connectivity needs across both internet and on-the-go wireless," Chairman and Chief Executive John Stankey said, adding that the company's fiber position leaves it well placed for the artificial intelligence era.

The core segment did the earning

By segment, the business AT&T is becoming did the work, and the businesses it is leaving shrank on schedule. Advanced Connectivity revenue rose 7.2% to $29.48 billion, with service revenue up 6.1% to $23.90 billion and wireless service revenue up 5.0%, and segment operating income rose 18.9% to $7.6 billion. Legacy revenue fell 24.5% to $1.52 billion as copper demand fades, with operating income of $498 million. Latin America revenue rose 13.2% on favorable currency effects and postpaid growth, with operating income of $45 million — but that segment is the Mexico wireless business itself: on Oct. 13 the company agreed to sell it, applied held-for-sale accounting as of Sept. 30, and took the $2.6 billion impairment at the corporate level, outside segment results. The Journal reported the buyers as Grupo Televisa and Fintech Holdings, with AT&T to receive $2 billion in cash at closing.

Cash held up while the outlook moved

Cash generation stayed ordinary in a good way. Free cash flow was $5.0 billion, up from $4.9 billion a year earlier, on cash from operating activities of $10.5 billion and capital expenditures of $5.1 billion, with total capital investment of $5.6 billion. Total debt rose to $159.6 billion after the EchoStar spectrum transaction closed. The guidance is where the quarter changes the story: alongside the adjusted earnings raise to the $2.40 range, AT&T backed capital investment of $23 billion to $24 billion for 2026 but guided it down to $22 billion to $23 billion annually in 2027 and 2028, held free cash flow at $18 billion or more in 2026 rising to $21 billion or more in 2028, and kept the annualized dividend at $1.11 a share with more than $24 billion of buybacks planned, including about $10 billion during 2026. Service revenue is still guided to low-single-digit growth annually, with Advanced Connectivity service revenue growing at a mid-single-digit pace.

What to watch from here

Three tests decide whether this print compounds. First, whether the Mexico sale closes on the agreed terms, so the impairment stays a one-time exit cost rather than the start of a series. Second, whether record internet additions and the 42.8% convergence rate hold churn down as promotional competition around new phones intensifies — the postpaid phone line merely matched expectations this quarter. Third, whether the promised step-down in capital investment after 2026 arrives without slowing the fiber build that produced these adds. Management discusses the results and outlook on its conference call today at 8:30 a.m. Eastern.