Hey there, bargain hunter.
AT&T is reporting Q2 earnings this morning, and the stock has been through the wringer. Not because the business broke. Because a rocket company scared the entire telecom sector into a selloff nobody was ready for.
Here is where we are. AT&T shares have fallen about 17% this year and recently touched a 52-week low of $21.29. The stock now trades at roughly 7x trailing earnings with a dividend yield above 5%. For a company that generated $31.5 billion in revenue last quarter and has more than 109 million mobile subscribers, that is a striking discount.
The fear is real. In late June, SpaceX President Gwynne Shotwell told IPO roadshow investors the company intends to launch a Starlink-branded retail mobile service for U.S. consumers — potentially building its own terrestrial wireless network. That disclosure sent AT&T shares down nearly 5% in a single session and reframed SpaceX from a carrier partner into a potential direct competitor.
Slight tangent, but it matters: SpaceX has not confirmed a launch timeline or pricing for any consumer Starlink mobile service. The threat could take years to materialize, if it materializes at all. Bernstein has already argued that AT&T is targeting a different audience than most of the competitive pressure — price-sensitive single-line customers who need network coverage without a device bundle. That is a somewhat isolated battleground.
What Actually Happened Last Quarter
Q1 2026 was actually fine. Revenue grew roughly 3% year over year to $31.5 billion, beating estimates. AT&T’s newly created Advanced Connectivity segment — the 5G and fiber business — delivered approximately 5% revenue growth. The company added 584,000 total fiber and fixed wireless advanced internet customers in Q1, including 294,000 postpaid phone net adds. CEO John Stankey called it the company’s best-ever first quarter for Advanced Connectivity internet growth.
AT&T also closed its Lumen transaction in Q1, adding more than 4 million fiber locations. Management now expects fiber reach to grow by about 8 million locations in 2026 total, and the long-term goal is more than 60 million locations by end of decade. The company has already reached more than 37 million fiber locations, among the largest footprints in America.
The Only Number Today
Q2 2026 free cash flow. Management guided $4.0 billion to $4.5 billion for Q2 and reaffirmed that range in early June. First quarter free cash flow came in at $2.5 billion, down from $3.1 billion a year ago. That left at least $15.5 billion needed over the remaining three quarters to hit the $18 billion annual floor.
Update for July 22, 2026: AT&T reported $4.7 billion of free cash flow in Q2 2026.
A Q2 free cash flow number at or above $4.0 billion tells you the Starlink panic is running ahead of the fundamentals. A number below $4.0 billion hands the bears their evidence and reopens the leverage conversation. AT&T carries roughly $126 billion in net debt. That is the number the bulls need to not get worse.
Wall Street consensus calls for $32.04 billion in revenue and $0.59 EPS for Q2 — that is about 9% EPS growth year over year. AT&T has beaten earnings estimates in three of the past four quarters with an average surprise of about 5%. A beat on its own is not enough to move this stock. What matters is the cash, the fiber add count, and whether management directly addresses the Starlink retail-mobile threat on the call.
The Business in Plain Numbers
- Q1 2026 revenue: $31.5B (+2.9% YoY)
- Advanced Connectivity revenue growth: ~4.7% YoY in Q1
- Fiber locations reached: 37M+
- Q1 internet net adds: 584,000 (record Q1)
- Full-year FCF guidance: $18B+
- Full-year adjusted EPS guidance: $2.25–$2.35
- Net debt: ~$126.4B as of March 2026
- Current P/E: ~7x trailing earnings
- Dividend yield: ~5.3%–5.4%
Bull Case vs. Bear Case
Bull: The Starlink threat is years away from meaningful subscriber impact. AT&T’s converged fiber-plus-wireless bundle is a real product advantage — roughly 42–45% of advanced home internet customers also take AT&T wireless. The stock is historically cheap, the cash machine is intact, and sentiment is so bad it takes very little to surprise the upside. A clean Q2 beat with in-line free cash flow could snap the stock back meaningfully.
Bear: The Lumen integration adds capex and complexity. AT&T is spending $23–24 billion in capex this year. The wireless market is saturated. And the free cash flow target of $18 billion assumes consistent Q2–Q4 execution. If FCF disappoints again, the leverage story deteriorates. Net debt at $126 billion with a ~7x multiple is fine unless growth stalls. And Starlink retail, even if years away, changes how the market assigns a multiple to a slow-growing telecom.
Cheap Investor Scorecard
- Q2 FCF: Did it hit $4.0B+?
- Fiber broadband net adds: Street expects ~312,000
- Postpaid phone net adds: strength or weakness?
- Advanced Connectivity revenue growth: sustaining 5%+?
- Full-year FCF guidance: reiterated or revised?
- Starlink: did management address the threat directly?
- Leverage direction: net debt stable or rising?
The valuation says the fear may be overdone. Today is when AT&T gets to prove it — or confirm it.
