AT&T lifts EPS outlook on Mexico sale, shares drop

AT&T (T) shares declined 6.4% on October 21, 2026, following the company's report of fiscal third-quarter results. The drop occurred even as the S&P 500 rose 0.6% during the same session. Management raised its full-year adjusted earnings per share outlook to the $2.40 range, up from a previous projection of $2.25 to $2.35. The company attributed this increase primarily to lower depreciation expenses resulting from held-for-sale accounting for AT&T Mexico, a business it has agreed to sell. This accounting adjustment, rather than growth in customer numbers or sales, drove the higher profit forecast.

The quarter's financial performance met or exceeded market expectations. Adjusted earnings per share came in at $0.65, surpassing the consensus estimate of $0.61. Total revenue matched forecasts at $32.3 billion. Despite these results, AT&T's stock underperformed its competitors. Verizon shares fell 2.2% and T-Mobile shares dropped 2.5% on the same day.

Management maintained its fiscal 2026 forecast for adjusted EBITDA growth at 3% to 4%, though it now expects to reach the upper portion of that range. The full-year free cash flow forecast remained unchanged at $18 billion. Service revenue grew 3.8% year over year, a pace management described as its best performance in more than four years. Adjusted EBITDA increased by more than 5% for the second consecutive quarter.

The fourth quarter presents different challenges. Management expects adjusted EBITDA growth to face headwinds from higher year-over-year marketing and customer acquisition costs. These increased expenses are linked to an extended device launch cycle and a broader effort to sell fiber services.

Fiber pricing trends remain a point of focus. Average revenue per fiber customer fell 4% year over year in the third quarter. Management cited introductory pricing for new customers, discounts for subscribers who also hold AT&T wireless service, and growth among lower-paying Quantum brand customers in territories acquired from Lumen as factors behind the decline. The company anticipates a similar year-over-year drop in average revenue per fiber customer in the fourth quarter.

AT&T is utilizing lower prices to attract households where it can subsequently cross-sell wireless service. By the end of the third quarter, nearly 43% of its advanced home internet customers, a segment that includes both fiber and Internet Air subscribers, also held a postpaid wireless account with the company. When discussing fiber prices in established markets, management emphasized service revenue and customer growth over individual price points.

Investors will watch the average revenue per fiber customer metric when AT&T reports its fiscal fourth-quarter results, which are expected in January 2027.