Sustained Profit Growth Ahead: AT&T’s Bold Strategy Pays Off
AT&T Inc. is poised for a remarkable turnaround, with predictions of sustained profit growth over the next three years, including double-digit gains in 2027. This milestone is a direct result of the company’s strategic investments in mobile-phone and fiber-optic networks.
A New Era of Growth
In a statement released ahead of a meeting with Wall Street analysts, Dallas-based AT&T forecasted earnings of $1.97 to $2.07 a share for 2025, excluding certain items. Moreover, the company expects profit growth to accelerate to double-digit percentage growth by 2027. This optimistic outlook excludes AT&T’s ownership of DirecTV, which is set to be sold in the first half of 2025.
Returning to Roots
The sale of DirecTV marks a significant shift for AT&T, as it returns to its roots as a telecom provider after years of restructuring and debt reduction. This transformation will enable the company to deliver more cash to shareholders, with plans to maintain its $1.11 a share annual cash dividend and authorize $20 billion in share repurchases by the end of 2027.
Shareholder Value
Over the next three years, AT&T aims to return more than $40 billion to stockholders through dividends and share repurchases. This commitment to shareholder value is a testament to the company’s confidence in its growth strategy.
Debt Reduction
Under the leadership of Chief Executive Officer John Stankey, AT&T has made significant progress in reducing its net debt. The company expects to reach its goal of 2.5 times adjusted earnings by the first half of 2025, a ratio it aims to maintain through 2027.
Transforming the Business
Since taking the helm in 2020, Stankey has successfully unwound AT&T’s media business, spinning off its Warner Bros. unit and offloading its stake in DirecTV. This bold strategy has allowed the company to focus on its core wireless 5G and fiber connectivity business, strengthening its balance sheet in the process.
Capital Spending and Fiber Expansion
AT&T plans to invest $22 billion annually over the next three years, with a goal of reaching more than 50 million locations with its fiber-optic service by 2029. As of last quarter, the company had built out fiber to over 28 million locations.
Free Cash Flow and Earnings
Free cash flow is expected to total $16 billion in 2025, rising by $1 billion annually over the following two years. For 2024, AT&T is predicting adjusted profit of $2.20 to $2.25 a share, including a 30-cent contribution from DirecTV.
A Strong Quarter
The company’s upbeat third-quarter results, which saw the signing up of 403,000 new monthly wireless service customers, have set the stage for this promising growth outlook. Despite revenue falling short of analyst expectations, profit of 60 cents a share exceeded Wall Street forecasts.
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