AT&T Earnings: Another Steady Performance Provides Support for a Solid 2025 Outlook

Key Morningstar Metrics for AT&T

• Fair Value Estimate: $26.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of AT&T Earnings

AT&T T posted year-over-year quarterly revenue growth for the first time since 2023, with sales up 0.9% in the fourth quarter on stabilizing phone upgrade rates and higher phone prices. Wireless services and consumer broadband growth remain solid. Consolidated EBITDA increased 2.2% versus last year.

Why it matters: Another quarter of steady results should boost confidence in AT&T. The firm generated $17.6 billion of free cash flow in 2024. Even with the absence of $2.3 billion of inflows from DirecTV, management expects a 2025 free cash flow of more than $16 billion.

• AT&T added 482,000 net postpaid wireless phone customers during the quarter, down from 526,000 last year on slightly higher churn. Adjusted for methodology differences, AT&T outperformed Verizon for the fifth consecutive holiday season.
• Net fiber broadband customer additions were the strongest in two years at 307,000, reflecting pent-up demand following a work stoppage last quarter. Average revenue per broadband customer remains exceptionally strong, increasing more than 6% year over year during the quarter.

The bottom line: We have increased our fair value estimate slightly to $26 from $25. With AT&T shares nearing our fair value estimate, we believe Verizon trades at a more attractive valuation.

• Our narrow moat rating for AT&T largely reflects a favorable US wireless industry structure. We expect the firm to gradually gain market share as it rationally competes against Verizon Communications VZ and T-Mobile TMUS.
• We expect AT&T will continue generating consistent results as its fiber network expands. The firm claims 40% of its fiber broadband customers now subscribe to its wireless service, up from 39% a year ago and 35% at the end of 2021. Bundling should make customers stickier.

Between the lines: The fixed-line enterprise services business remains weak, with revenue down 10% year over year and segment operating losses widening. Management expects continued sharp declines in 2025.