AT&T Q3 2021 Earnings Report: Revenue Decline but Postpaid Subscribers Surge - Key Insights

AT&T delivered mixed Q3 2021 financial results, surpassing earnings expectations but falling short on revenue targets.

Highlights

• Postpaid phone subscriber additions nearly doubled analyst forecasts, marking the strongest growth in almost a decade.
• A positive net gain in postpaid phone subscribers indicates AT&T is expanding its customer base despite market challenges.
• Full-year adjusted EPS is projected to reach the upper range of low- to mid-single-digit growth.

Source: Analyst consensus data from Visible Alpha

In-Depth Financial Analysis of AT&T Q3 2021

For the third quarter of fiscal year 2021, AT&T Inc. (T) reported adjusted earnings per share (EPS) that increased by 14.5%, exceeding consensus estimates significantly. However, total revenue declined by 5.7% year-over-year, missing analyst predictions. This revenue decrease primarily reflects the July divestiture of AT&T's U.S. video business and other assets, partially offset by growth in Mobility and WarnerMedia segments. The contribution from WarnerMedia helped cushion overall revenue losses but highlights potential challenges ahead as the company plans to spin off WarnerMedia by mid-2022.

Postpaid Phone Subscriber Growth Exceeds Expectations

AT&T outperformed analyst estimates by adding 928,000 postpaid phone subscribers, compared to the predicted 521,100. CEO John Stankey noted this as the best quarterly result in over ten years. This metric, representing net additions after accounting for terminations, is crucial for understanding AT&T’s wireless business momentum. A positive figure indicates sustained subscriber growth, reinforcing AT&T's focus on its core wireless and broadband services amid ongoing divestitures.

Notably, AT&T’s strategic divestment of WarnerMedia, announced in May 2021, involves a merger with Discovery, Inc. (DISCA), potentially valued at $43 billion pending regulatory approval.

Outlook and Market Performance

Looking ahead, AT&T expects full-year adjusted EPS growth at the higher end of its low- to mid-single-digit target range and aims to achieve approximately $26 billion in free cash flow. The company also targets reaching 70 to 73 million global HBO Max/HBO subscribers by year-end.

Following the earnings announcement, AT&T shares rose about 1.5% in pre-market trading. Despite this, the stock has underperformed compared to the broader market, delivering a 4.0% total return over the past year versus 31.8% for the S&P 500.

AT&T's next earnings update for Q4 FY 2021 is anticipated on January 25, 2022.

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