After Earnings, Is AT&T Stock a Buy, a Sell, or Fairly Valued?

AT&T released its first-quarter earnings report on April 22. Here’s Morningstar’s take on AT&T’s earnings and stock.

Key Morningstar Metrics for AT&T

• Fair Value Estimate
  : $27.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Medium

What We Thought of AT&T’s Q1 Earnings

AT&T’s revenue grew 2.9% in the first quarter, as wireless phone sales again jumped and the acquired Lumen business made a small contribution. Margins and cash flow were weaker than a year ago due to seasonal and one-time items. Management maintained expectations for the year.

Why it matters: We’ll get a clearer picture of the US wireless industry as other carriers report, but AT&T’s results indicate that competitive intensity remains elevated. Postpaid phone customer disconnects (churn) increased 9% year over year and 29% from the first quarter of 2024.

• Wireless services revenue growth of 1.7% was the slowest in five years, as average revenue per postpaid phone customer was flat with a year ago. Management expects growth to accelerate to 2%-3% for the full year, primarily on customer additions, with some benefit from recent price changes.
• AT&T expects revenue per customer to remain under pressure as it targets lower-end segments and offers bundle discounts with broadband. We believe AT&T and Verizon have had to limit price increases and offer generous promotions to counter T-Mobile and the cable companies.

The bottom line: We don’t expect a significant change to our $27 fair value estimate. AT&T’s convergence strategy should drive consistent customer growth, but with very heavy capital spending demands. We would look for a larger margin of safety before investing, given the industry’s uncertainties.

• We believe returns on invested capital will increase as fiber customer penetration grows and costs come down, especially with the shutdown of legacy phone networks. However, this view and our Narrow Morningstar Economic Moat Rating are largely based on efficient scale driving rational competition among carriers.
• While competition in the wireless business is moving against our thesis, we expect the environment to improve over the next year. Each carrier is discussing the need to sell service based on network attributes rather than on aggressive phone discounts.

Fair Value Estimate for AT&T

With its 3-star rating, we believe AT&T’s stock is fairly valued compared with our long-term fair value estimate of $27. Our $27 fair value estimate assumes that AT&T will deliver modest revenue growth and gradually expand margins over the next several years. The firm should benefit as its wireless and fiber network investments pay off, including efforts to retire its legacy copper phone network. Our fair value estimate implies an enterprise value of 7.0 times our 2026 EBITDA estimate and a free cash flow yield of about 8% based on 2025 results, after deducting payments to minority interests.

Read more about AT&T’s fair value estimate.

Economic Moat Rating

We assign AT&T a narrow moat. Wireless is AT&T’s most important business, but returns on capital in wireless have eroded somewhat in recent years as the company has spent heavily on wireless spectrum and put that spectrum to use. With the acquisition of spectrum from EchoStar, the wireless invested capital base will again expand by about 10% in 2026, diluting the segment return on capital by about 1 percentage point, absent any increase in profitability.

With three sizable players (AT&T, Verizon, and T-Mobile), we don’t believe the carriers have an incentive to aggressively poach each other’s customers, given how slowly market share shifts occur. Each of the three major carriers has pledged substantial capital returns to shareholders. AT&T’s consumer fixed-line services business doesn’t possess a moat, in our view, but is moving in the right direction.

Read more about AT&T’s economic moat.

Financial Strength

Net debt stood at $118 billion at the end of 2025, putting net leverage at about 2.5 times EBITDA. This load is far higher than the company has historically operated under. AT&T typically carried leverage of around 1.5 times EBITDA before 2012, when it instituted a large share buyback. Lower leverage would provide ample capacity to acquire additional wireless spectrum without necessitating years of debt-reduction efforts. With the acquisition of spectrum from EchoStar and the Lumen fiber transaction, AT&T expects net debt leverage to tick back up to 3.0 times EBITDA at the end of 2026, requiring up to three years to return to its target level.

Read more about AT&T’s financial strength.

Risk and Uncertainty

Our Medium Uncertainty Rating reflects the level of competitive intensity, regulation, and technological change facing AT&T. We expect the major US telecom firms to approach competition rationally, but predicting behavior amid market pressure is difficult. If AT&T’s services are deemed insufficient or overpriced, regulators or politicians could act to improve consumer welfare. The cost to deploy wireless networks could come down to the point where numerous new firms can enter the market; while unlikely, in our view, wireless technology could also remove the need for AT&T’s fixed-line networks, killing returns on its fiber investments.

Regulators also control the flow of wireless spectrum into the industry, which has created scarcity in the past, pushing carriers to pay high prices for licenses. Recent legislation has directed the Federal Communications Commission to make large blocks of spectrum available in the coming years.

AT&T’s balance sheet is in better shape today than a couple of years ago, but it still carries a large debt load. The firm has also sold sizable minority stakes in assets or businesses that require quarterly payments. This position could limit strategic flexibility, especially given the company’s commitment to its dividend, or amplify the impact of a downturn on shareholders.

Read more about AT&T’s risk and uncertainty.

T Bulls Say

• Following a period of investment, AT&T will hold a nationwide 5G wireless network with deep spectrum behind it and a fiber network capable of reaching around half of the US population. No other carrier can match these assets.
• AT&T has the scale to remain a strong wireless competitor over the long term. With three dominant carriers, industry pricing should be rational over the long term.
• Combining wireless and fixed-line networks with new technologies and deep expertise makes AT&T a force in enterprise services, where new use cases around AI are primed to emerge.

T Bears Say

• The cost of maintaining dominance in the wireless industry by controlling spectrum has been costly. AT&T has spent more than $60 billion since 2020 for licenses with few prospects for incremental revenue.
• Advancing technologies like satellite will eventually swamp AT&T’s business, enabling a host of firms to enter the market, further commoditizing wireless and broadband service.
• AT&T’s debt load will catch up with it. The firm carries far higher leverage than it has historically, and its dividend payout remains high. Prematurely buying back shares will further hamper the balance sheet.

This article was compiled by Jillian Moore.