AT&T Q2 FY2022 Earnings Preview: Key Insights and What to Expect

Keep an eye on AT&T's mobile postpaid net additions as a crucial performance indicator.

Main Highlights

• Analysts forecast adjusted EPS of $0.61, down from $0.85 in Q2 FY2021.
• Mobile postpaid net additions are projected to decline sharply both year-over-year and sequentially.
• Revenue is anticipated to fall for the fourth consecutive quarter.

Recently, AT&T Inc. (T) has undergone significant transformation, refocusing on its core telecommunications operations. Early in Q2, AT&T completed the spin-off of WarnerMedia, which merged with Discovery Inc. to create Warner Bros. Discovery Inc. (WBD). This strategic move allows AT&T to concentrate on expanding its fiber network, 5G capabilities, and other telecom services.

Investors will closely monitor the performance of this streamlined AT&T when it reports Q2 FY2022 earnings on July 21, 2022. Expectations are for adjusted earnings per share (EPS) to decline for the second quarter in a row, alongside a continued drop in revenue for the fourth straight quarter.

Another critical metric under scrutiny is AT&T’s mobile postpaid net additions, which measure the net growth of postpaid mobile subscribers after accounting for cancellations. As AT&T sharpens its focus on telecom, subscriber growth remains vital. However, forecasts suggest a notable year-over-year decrease in net additions for Q2.

AT&T's stock has experienced volatility over the past year. After a sharp decline in late 2021 reaching a low in December, shares rebounded strongly in January but fell again following the Q4 FY2021 earnings release. The stock regained momentum in April and May 2022, outperforming the broader market since then. As of July 20, AT&T’s one-year total return stands at 4.6%, significantly outperforming the S&P 500’s negative 8.9% return.

AT&T’s Earnings Performance Overview

AT&T’s quarterly adjusted EPS has shown volatility in recent years. Before the pandemic, FY2019 saw mostly positive year-over-year growth ranging from 0.8% to 4.1% in three quarters, except for a 2.7% decline in Q2. FY2020 was marked by consistent EPS declines each quarter due to pandemic impacts. However, FY2021 brought recovery with four consecutive quarters of EPS growth. This momentum may be challenged in the short term following the WarnerMedia spinoff. Q1 FY2022 saw a 9.5% EPS drop, with analysts projecting a sharper 28.2% decline in Q2 FY2022 — the steepest in nearly four years.

Revenue trends have been similarly challenging. AT&T posted year-over-year revenue declines in nine of the last 13 quarters. From Q3 FY2019 to Q4 FY2020, revenue dropped for six straight quarters, exacerbated by the pandemic. Slight revenue gains in Q1 and Q2 FY2021 briefly interrupted this trend, but the last three quarters have seen accelerating declines. In Q1 FY2022, revenue fell 13.3% year-over-year, and Q2 is expected to show a significant 32.8% drop, heavily influenced by the WarnerMedia spinoff.

Source: Visible Alpha

Critical Focus: Mobile Postpaid Net Additions

Investors are paying special attention to AT&T’s mobile postpaid net additions, a vital metric representing the net increase in postpaid mobile subscribers after cancellations. Unlike prepaid plans, postpaid customers pay after usage, making this metric key to understanding subscriber loyalty and growth. With the WarnerMedia spinoff complete, boosting and retaining mobile subscribers is now a top priority for AT&T.

During Q2 FY2020, AT&T experienced a decline in mobile postpaid subscribers due to the pandemic onset. However, the company rebounded with strong net additions in most quarters since, adding over 1 million net postpaid subscribers in five of the last seven quarters. Exceptions include Q1 FY2021 and Q1 FY2022, where growth slowed. In Q1 FY2022, net additions were 965,000—a year-over-year increase but a steep sequential decline. For Q2 FY2022, analysts predict a 29.3% year-over-year decrease to approximately 816,900 net additions.

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