Financial Monkey Blog

AT&T’s Q4 2024 Performance: Strong Growth with Key Challenges

AT&T Inc. (NYSE: T) reported continued growth in 5G and fiber while maintaining stable financials, meeting all 2024 guidance. However, challenges in Business Wireline and a Q4 free cash flow decline highlight areas of concern amid overall revenue expansion.

Key Highlights of AT&T’s Q4 2024 Performance

Financial Metrics

• Revenue: $32.3 billion (+0.9% YoY), driven by wireless and broadband gains, offset by Business Wireline declines.
• Diluted EPS: $0.56 (up from $0.30 YoY); Adjusted EPS: $0.54 (flat YoY).
• Net Income: $4.4 billion, reflecting stable profitability.
• Operating Income: $5.3 billion (unchanged YoY), demonstrating operational stability despite rising expenses.
• Free Cash Flow: $4.8 billion, down $1.5 billion YoY, despite full-year free cash flow rising $0.9 billion to $17.6 billion.
• Cash from Operations: $11.9 billion (+0.5 billion YoY), supported by higher cash distributions from DIRECTV and working capital improvements.
• Capital Investment: $7.1 billion, focused on 5G expansion and fiber network enhancements.

AT&T’s CEO, John Stankey, credited this performance to a cost-transformation strategy, network modernization, and disciplined capital investments. However, the company acknowledged declining Business Wireline revenue as an ongoing challenge.

Wireless and Fiber Growth Drives Revenue Expansion

Mobility Segment Performance

• Postpaid Phone Net Adds: 482,000, maintaining postpaid phone churn at 0.85%.
• Mobility Service Revenue: $16.6 billion (+3.3% YoY), fueled by higher 5G adoption and premium data plans.
• Mobility EBITDA: $8.9 billion (+6.1% YoY), demonstrating operational efficiency.
• Mobility Operating Income: Declined by 1.4% YoY, primarily due to higher depreciation expenses and storm-related costs, though AT&T has not indicated if these costs will persist.

AT&T’s wireless growth was supported by expanding enterprise services and improved customer retention, contributing to overall revenue gains.

AT&T Fiber Expansion

• Fiber Net Adds: 307,000 (20 consecutive quarters with at least 200,000 net adds).
• Consumer Broadband Revenue: $2.9 billion (+7.8% YoY), reflecting increased demand for high-speed internet.
• Total Fiber Locations Passed: 28.9 million, showcasing AT&T’s network expansion efforts.
• Broadband ARPU: $69.69, benefiting from customers upgrading to higher-speed fiber plans.

Full-Year 2024 Performance

Consolidated Financials

• Annual Revenue: $122.3 billion (down 0.1% YoY), reflecting Business Wireline weakness.
• Adjusted EPS: $2.26, maintaining earnings consistency.
• Net Income: $12.3 billion, supported by disciplined cost management.
• Free Cash Flow: $17.6 billion (+0.9 billion YoY), enabling capital investments and potential share repurchases.
• Capital Investment: $22.1 billion, supporting fiber and wireless expansion.

Key Subscriber Metrics

• Postpaid Phone Net Adds: 1.7 million, reinforcing customer preference for AT&T’s network.
• AT&T Fiber Net Adds: 1.0 million (7th consecutive year exceeding 1 million net adds).

Despite strong subscriber growth, Business Wireline revenue declined 10% YoY, reflecting ongoing reductions in legacy services.

2025 Outlook: Growth with Financial Discipline

For 2025, AT&T expects:

• Service Revenue Growth: Low-single-digit range.
• Mobility Revenue Growth: 2%-3%, supported by 5G adoption.
• Fiber Broadband Growth: Mid-teens percentage, benefiting from rising demand for high-speed internet.
• Adjusted EBITDA Growth: 3% or better.
• Free Cash Flow: $16 billion+, supporting capital investment and debt reduction.

AT&T also announced plans to initiate share repurchases in the second half of 2025, signaling confidence in financial stability. However, the company also acknowledged continued challenges in Business Wireline and the expected sale of its 70% stake in DIRECTV to TPG in mid-2025.

Challenges and Risks to Monitor in 2025

While AT&T’s growth in 5G and fiber remains strong, the company faces several risks:

• Business Wireline Revenue Decline (-10% YoY): Ongoing reductions in legacy services impact overall revenue.
• Flat Operating Income: AT&T’s operating income remained at $5.3 billion, indicating potential margin pressures.
• Free Cash Flow Decline in Q4: Q4 free cash flow dropped $1.5 billion YoY, despite full-year free cash flow rising.
• Debt Considerations: AT&T’s net debt stood at $120.1 billion at year-end 2024, requiring disciplined capital allocation.

Conclusion: Long-Term Strategy and Outlook

AT&T’s Q4 2024 earnings reflect both resilience and financial discipline in a competitive telecom landscape. The company’s focus on fiber and 5G expansion, alongside cost transformation, positions it for growth. However, sustaining long-term success will require balancing network expansion with financial discipline to manage debt and cash flow efficiently.

Investors should watch AT&T’s ability to adapt to industry challenges while maintaining profitability. With a track record of steady growth and strategic investments, the company’s outlook remains optimistic yet tempered by financial constraints and market competition.

For more details, visit AT&T Investor Relations.

financialmonkeyblog