Over the past year, while most investors have been glued to the developments of artificial intelligence, AT&T has quietly emerged as an unexpected stock market winner. The telecom behemoth’s shares have surged by over a third in the last 12 months. This growth received an additional push following its impressive fourth-quarter results, coupled with an announcement of a substantial share buyback program.
Let’s delve deeper into AT&T’s Q4 performance to determine if the stock still makes a compelling purchase.
### Robust Subscriber Growth and Buyback Plans
AT&T is witnessing robust subscriber traction in its wireless and broadband sectors, buoyed by its effective bundling approach. In the fourth quarter, the company welcomed 839,000 retail postpaid subscribers, with 482,000 of these being retail postpaid phone additions. However, the end of the Affordable Connectivity Program (ACP) affected its prepaid segment, resulting in a loss of 119,000 prepaid subscribers.
The mobility segment overall saw revenue climb 3.3% to reach $23.1 billion, with mobility service revenue and equipment sales also experiencing a 3.3% uptick, reaching $16.6 billion and $6.6 billion, respectively. Additionally, the average revenue per subscriber (ARPS) for postpaid phones increased by 0.9% to $56.72.
In the broadband arena, AT&T gained 307,000 fiber subscribers and 158,000 internet air subscribers, although it lost 184,000 non-fiber subscribers who opted for faster alternatives. Broadband ARPS soared by 6.2% to $69.69, while fiber ARPS went up by 4.7% to $71.71. As a result, total consumer broadband revenue rose 3.4% to $3.5 billion, and fiber revenue increased 7.8% to $2.9 billion for the quarter.
On a somewhat less positive note, AT&T’s business wireline segment saw a 10% drop in revenue to $4.6 billion. This segment shifted from an operating profit of $165 million in the previous Q4 to a $211 million loss this year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for this segment also declined by 22% to $1.2 billion.
Total revenue managed a slight increase of 0.9% to hit $32.3 billion, and adjusted earnings per share (EPS) held steady at $0.54. These results surpassed analyst predictions compiled by LSEG, which anticipated an EPS of $0.50 on $32 billion in revenue.
For the year, AT&T generated $18.5 billion in free cash flow for the quarter and distributed $8.2 billion in dividends. The stock currently offers a forward dividend yield of approximately 4.7%, maintaining its quarterly dividend at roughly $0.28 since May 2022.
AT&T plans to allocate around $40 billion towards dividends and share buybacks over the coming three years—$20 billion earmarked for each. The company has hinted at possibly raising its dividend, noting an additional $10 billion that could bolster dividends, stock buybacks, or further investments. Share buybacks are scheduled to commence in the latter half of 2025.
Looking ahead to 2025, AT&T anticipates low single-digit growth in full-year revenue, with mobility service revenue projected to grow by 2% to 3% and broadband revenue expected to expand in the mid-teens range. The company forecasts a 3% increase in adjusted EBITDA and adjusted EPS of between $1.97 and $2.07, a slight decrease from $2.26 in 2024. Free cash flow is expected to top $16 billion.
AT&T is setting aside approximately $22 billion to upgrade its wireless network and broaden its fiber offerings. It plans to retire its copper network by 2029 and aims to cut $3 billion annually in costs by the end of 2027.
### Is AT&T Stock Still A Buy?
While both AT&T and Verizon Communications have been reporting similar outcomes, AT&T’s stock has outperformed significantly. The company’s investments in 5G and fiber are yielding results, evident in the increasing numbers of wireless and broadband subscribers. The ongoing expansion of its fiber network into more homes is a key driver for this growth.
Yet, much like Verizon, AT&T is encountering challenges within its business wireline segment and with prepaid subscribers, although it remains a robust generator of free cash flow. AT&T appears poised to channel most of this surplus cash into buying back its shares, whereas Verizon is currently undertaking a significant acquisition of Frontier Communications.
Due to AT&T’s stellar stock performance, its valuation has surpassed Verizon’s, resulting in a forward price-to-earnings (P/E) ratio of approximately 11.4 based on 2025 earnings estimates, compared to Verizon’s forward P/E of 8.5—a reversal of their historical positions.
Even though AT&T is performing admirably, the valuation gap prompts a slight preference for Verizon for now. Despite the similarities in their operational results lately, investors seem to favor AT&T’s approach to capital allocation over Verizon’s.
Overall, both companies appear to be stable long-term investment options, with reliable business models generating substantial free cash flow.
