There are turnaround stories in the capital markets that happen all at once, and there are those that stretch over years while no one notices until they look back. AT&T (NYSE: T) belongs to the second kind. For years it was considered one of Wall Street's biggest disappointments: a communications giant that bought DirecTV and Time Warner, burned tens of billions, was forced to sell both at a loss, and cut its sacred dividend. A stock income investors held out of necessity, not enthusiasm.
This morning it published its second-quarter report, and the picture is entirely different. But the numbers are only the small part of the story - beneath them run three strategic moves that change the company from the ground up, and one of them takes place 700 kilometers above the ground.
What Was Published This Morning
Adjusted EPS of $0.65, versus $0.54 in the comparable quarter - a beat of forecasts. Revenue rose 2.3% to $31.6 billion, slightly below the market estimate. Operating profit totaled $7.0 billion, and adjusted EBITDA rose 5.2% to $12.3 billion.
And the figure that matters more than profit at a communications company - free cash flow - reached $4.7 billion versus $4.4 billion a year ago. This is the number from which the dividend and the debt are paid, and therefore it is the real measure of health.
Operations were the truly strong part: 432 thousand net postpaid phone subscribers, 367 thousand fiber subscribers, and 279 thousand in fixed wireless - together more than a million additions in a single quarter. The mobile churn rate stood at just 0.86%, a figure that indicates stability in the customer base. CEO John Stankey announced an acceleration of buybacks to about $10 billion this year, and reaffirmed all the multi-year forecasts.
The Business Engine: What AT&T Really Sells Today
To understand the company you have to see that it is split into two businesses moving in opposite directions - and that is the whole thesis.
"Advanced connectivity" - the business that grows. Mobile, optical fiber and fixed wireless. Service revenue in this division reached $23.5 billion, up 5.1%, and its operating profit jumped 20.3%. This is the core, and this is where the company invests everything.
"Legacy" - the business being closed on purpose. The old copper lines. Revenue there plunged 25% to $1.63 billion, and that is exactly according to plan: AT&T explicitly declares that it intends to shut down most of its copper network by the end of 2029. Note the point that is easy to miss: this is not a collapsing division - it is a division being deliberately dismantled. The company even notes that legacy profitability is expected to turn negative after 2027, until the dismantling of the old network's costs is complete.
And here lies the logic: a copper customer costs a lot and brings in little; a fiber customer costs less and brings in more. Every year of dismantling brings the cost structure closer to the future.
The Convergence Strategy - the Secret Weapon
And here is a figure that in my view is the most interesting in the entire report: 42.5% of households that buy advanced internet from AT&T also buy mobile from it.
This is called convergence, and it is a model every communications company in the world chases. The idea: a customer who buys two services from the same company leaves with dramatically lower probability - because leaving means replacing both the internet and the mobile, and dealing with installation, numbers and contracts. The cost of acquiring the second customer is almost zero (they are already a customer), and the revenue from them is full.
This also explains why AT&T completed in February the acquisition of Lumen's consumer fiber business: every home connected to its fiber is a potential customer for two services. The fiber infrastructure reached 38.6 million households, targeting over 40 million by the end of 2026 and over 60 million by 2030. In a market where the physical network is the moat, whoever lays fiber into a home locks in an advantage for decades.
The Second Move: $23 Billion of Spectrum
In mobile communications there is one resource that cannot be manufactured: spectrum - the radio frequencies through which data travels. The quantity is physically limited, the state allocates it, and whoever holds more can move more data faster. This, simply put, is the real estate of the communications world.
AT&T announced an agreement to acquire spectrum licenses from EchoStar in a scope of about $23 billion - frequencies in the 600 MHz and 3.45 GHz bands, covering hundreds of markets in the U.S. The combination is smart: the low frequency excels at penetration over distances and into buildings, and the mid frequency carries high capacity. In this morning's report the company explicitly addresses the deal, and states that the net-debt-to-EBITDA ratio will return to a target of about 2.5 within about three years of its closing.
The financial rationale is clear, but the other side must be said too: this is an enormous expenditure at a company already carrying heavy debt, and AT&T's history with giant acquisitions is not reassuring. The essential difference this time: this time it is buying infrastructure at the core of the business, not Hollywood studios.
The Third Move: The Satellite That Talks Directly to the Phone
And here comes the most intriguing part. AT&T has a commercial agreement with AST SpaceMobile (NASDAQ: ASTS) - a company developing satellites with giant antennas, capable of communicating directly with a regular mobile phone, without special equipment. The idea: the satellite functions as a floating cellular antenna, using the operator's terrestrial spectrum.
The business meaning is deep: a mobile operator will never cover deserts, seas and mountainous regions with towers - it is simply not economical. Direct satellite communication eliminates the physical coverage limit entirely. According to reports, the partnership is progressing toward a beta service for select users and for the FirstNet emergency network, and in April the American regulator significantly expanded the deployment permit for the constellation - a step received in the industry as a milestone.
Those who read us already know the name: we wrote about AST SpaceMobile in the sentiment-flip piece, when it completed a raise of over a billion dollars in low-rate convertible bonds - a sign that the capital market is still open to growth stories. From AT&T's standpoint, this is a relatively cheap option on a competitive advantage that has no terrestrial substitute.
What's Good, What's Bad, and What's Reasonable
The good: returning growth in the core with operating profit that jumped 20.3%; over a million additions in the quarter and low churn; convergence that locks in customers; growing free cash flow; buybacks accelerated to about $10 billion - a confidence signal from management; and three strategic moves all at the core of the business and not outside it.
The bad: net debt of about $126 billion is a real burden that limits flexibility; revenue was slightly below estimate; the quarter absorbed a one-time asset-abandonment charge following a change in spectrum strategy, alongside a rise in advertising expenses and bad debts; the EchoStar deal has not yet closed and will add leverage; and competition against Verizon, T-Mobile and cable pressures prices without pause.
And the reasonable: AT&T is not a growth stock and will not be. It is a mature cash asset in the middle of a real structural renovation - from copper to fiber, from content back to infrastructure. Whoever buys it buys cash flow, dividend and an option on convergence; whoever expects surges will be disappointed. The central question is not whether the strategy is correct - it is whether the debt will allow it to be financed to the end.
The debate in one line
The bulls say: a core back to growth, a million additions in the quarter, convergence that locks in customers, spectrum and a satellite that buy an advantage for a decade - at the price of a value stock. The bears say: $126 billion of debt, a saturated market where every subscriber is taken from a competitor at a price, and a history of giant acquisitions that ended badly. This report leaned to the bulls' side - but the EchoStar deal will decide.
What I Take From This
The thing that struck me most in this report is not a number but a behavior. A company that decides to deliberately shut down an entire network bringing in billions, in order to build infrastructure that will return the investment only years later, behaves like a company managing a decade - not a quarter. This is exactly the opposite of the culture that led it to buy movie studios.
And alongside that, the combination of fiber in the ground and spectrum and a satellite in the air tells one story: in the world of communications, the moat is physical. An algorithm can be replicated; fiber laid into a home, a frequency allocated by the state and a satellite already in orbit - far less. This is the same pattern we saw in the power scarcity piece: whoever holds the rare physical infrastructure sits on the right side of the equation.
And yet, let us end with restraint. A company with $126 billion of debt cannot err twice. AT&T made several correct moves this year - and that does not yet make it a success story. It makes it a company worth following in the coming quarters, and above all following one number: free cash flow.
Sources: AT&T's official results report for the second quarter of 2026 as filed with the SEC (Form 8-K, July 22, 2026), the company's announcements about the spectrum deal with EchoStar and about the acquisition of Lumen's fiber business, and joint announcements from AT&T and AST SpaceMobile - accurate as of the time of writing. The chart is shown in real time via TradingView.