AT&T Q3 2026 Earnings: The $891M Quarter That Exited Mexico

On October 21, 2026, AT&T reported third-quarter revenue of $32.3 billion, up 5.3% and ahead of the roughly $31.7 billion consensus — alongside net income attributable to AT&T of just $891 million, down 90.4% from a year ago. Both numbers are real, and neither means what it seems to: the revenue beat is the fiber-and-wireless machine compounding, while the profit collapse is two ghosts meeting in one quarter — a $2.6 billion write-down on the Mexico wireless business AT&T just agreed to sell, lapping a $5.5 billion DIRECTV sale gain that flattered the year-ago quarter. Strip both and the quarter is the strongest operating print of the post-spin era.

The Headline Numbers​

AT&T's fiscal year is the calendar year; Q3 2026 ended September 30, 2026. Every figure below comes from the Form 8-K, its earnings release (Exhibit 99.1) and the selected financial statements (Exhibit 99.2), which carry a full unaudited income statement and balance sheet — no Form 10-Q for the quarter had been filed as of October 21, so the 8-K exhibits are the primary source.

Net income here is attributable to AT&T, the number the release headlines; consolidated net income was $1,269 million after the $378 million noncontrolling-interest deduction. Read the table in two halves and the quarter resolves itself. Above the operating line, the business accelerated: service revenue up 3.8% to $26.3 billion — the release calls it AT&T's best consolidated service-revenue growth in more than four years — and equipment revenue up 12.1% on wireless device sales. Below the operating line, two one-offs annihilated the comparison: the $3,372 million impairments-and-restructuring line (zero a year ago) and other income of $590 million against $6,254 million a year ago, when the DIRECTV sale gain landed. Adjusted EPS, which removes both, grew 20.4% to $0.65 and beat the roughly $0.60 consensus. This is a quarter where GAAP and the business went in opposite directions, and the filings say exactly why.

Revenue Deep Dive​

AT&T resegmented effective Q1 2026 around its converged strategy, so the units have new names: Advanced Connectivity (essentially everything that grows), Legacy (the copper being decommissioned), and Latin America (Mexico, now held for sale).

Advanced Connectivity is the company now — 91% of revenue — and every growing product lives inside it. Wireless service revenue rose 5.0% to $17,764 million on retail subscriber growth in underpenetrated categories plus, in the release's words, "pricing actions that were partially offset by promotional discounts on wireless subscriber additions" — price up, promo-funded adds filling the funnel. Advanced home internet surged 23.4% to $2,975 million, helped by the Lumen mass-markets fiber acquisition that closed February 2, and business fiber grew 8.7%. Segment operating income jumped 18.9% with margin up 260 basis points to 25.9%, because expenses grew only 3.6%: transformation savings and fully depreciated legacy assets more than absorbed higher equipment costs, advertising, and bad debt from subscriber growth. EBITDA margin held flat at 41.8% — the growth is profitable, not bought.

Legacy is managed decline working as designed: revenue down 24.5% as copper decommissions, but direct costs fell 23.5% in lockstep, preserving a 32.8% margin on the runoff. Management guides the unit to be immaterial by end of 2029 with EBITDA turning negative after 2027 until the copper fixed costs are fully out — a refreshingly honest glide path.

Latin America grew revenue 13.2% on foreign-exchange tailwinds and postpaid adds, earning $45 million of operating income. It is also already gone strategically: classified held-for-sale at quarter-end after the October 13 agreement to sell it to Grupo Televisa and Fintech Holdings for $2 billion in cash, with closing expected in Q1 2027.

On the management-signal scan, this release talks product and convergence, not cycles. There is no "demand exceeds supply," no upcycle language, no tight-supply wording anywhere — for a carrier, that absence is neutral rather than bearish; AT&T sells subscriptions, not constrained units. What management chose to say is subscriber momentum: "more than 1 million Advanced Connectivity customers" added for a second straight quarter, a record 769,000 internet net adds (442,000 fiber, 327,000 fixed wireless), 379,000 postpaid phone adds at 0.92% churn, and CEO John Stankey's framing that "more homes and businesses choose AT&T for all their advanced connectivity needs." The ledger line that confirms it is advanced billings and the receivables growth tracking subscriber growth — and the 42.8% of advanced-home-internet households that also take AT&T wireless, the converged base churns less.

The Margin Story​

AT&T reports no gross-profit line — it is a service business — so the margin story runs through operating and net margins across the post-spin years:

The five-year pattern is one-offs whipsawing a stable mid-teens-to-20% operating franchise. FY2022's negative margins are the $27.5 billion goodwill-impairment year; FY2024's dip to 15.6% is the $4.4 billion Business Wireline goodwill write-off; FY2025's 17.5% net margin is flattered by the tax-free DIRECTV gain. Q3's 12.7% operating margin is the same movie in miniature: $3,372 million of impairments inside $28,227 million of expenses. Remove it and the operating margin is 23.1% — above any full year on record — which is exactly what the adjusted operating margin of 23.5% says after its smaller adds.

Net margin's collapse to 2.8% is mechanical twice over: the impairment hit pre-tax income, and other income fell $5.7 billion year over year as the DIRECTV gain lapped. Note the tax line working in reverse this time: income tax expense rose 42.4% to $1,390 million even as pre-tax income fell 75%, because last year's quarter carried tax benefits and this year's impairment is largely non-deductible. When AT&T's net margin deviates from its operating margin by this much, always look below the operating line first — the answer is there both this year and last.

The One Big Question: Did AT&T Really Earn $0.13?​

The quarter's defining issue is the gap between GAAP diluted EPS of $0.13 and adjusted EPS of $0.65 — the widest clean-versus-reported spread in the post-spin era, and this time both sides deserve scrutiny. The GAAP-to-adjusted bridge, from the 8-K's own reconciliation:

Start with last year, because it explains the -90%: of the year-ago $1.29, $0.79 — over 60% — was the $5,479 million DIRECTV sale gain. The "real" comparable base was $0.54, against which this quarter's $0.65 is 20% growth. Then this year: $0.50 of the add-back is the Mexico impairment ($0.41) plus employee separation charges ($0.09). The Mexico charge is genuinely non-recurring — you can only exit a country once — and the sale terms explain it: AT&T is selling a business it paid over $4 billion assembling (Iusacell and Nextel Mexico in 2014–15) for $2 billion, so a $2.6 billion write to fair value less cost to sell is the receipt for a decade of subpar returns, taken all at once at Corporate and Other, outside segment results.

The bull interpretation is that both adjustments are honest: adjusted EPS strips a real exit cost this year and a real exit gain last year, and the underlying $0.65-versus-$0.54 comparison shows a growing connectivity franchise. The bear interpretation is that AT&T's adjustments always seem to flatter — $3.5 billion of operating-expense add-backs this quarter, and a history of multibillion impairments every other year (2022, 2024, now 2026) that raises the question of what "non-recurring" means at this company. Our read: the bridge arithmetic is clean and the cash backs it — free cash flow of $4,953 million covered the dividend nearly 2.5 times over. But a third multibillion write-down in five years means the bear's question about capital allocation is the right one to keep asking.

What Wall Street Thinks​

Expectations coming in called for roughly $31.7 billion of revenue and $0.60–0.61 of EPS, per MarketBeat and Zacks previews — AT&T beat both on the numbers that recur ($32.3 billion revenue, $0.65 adjusted EPS) while GAAP EPS printed far below on the one-offs. Morningstar's October 14 note on the Mexico deal framed it as minimal impact to AT&T with the upside accruing to Televisa, which matches the ledger: Latin America is under 4% of revenue and the $2 billion proceeds are a fortnight of operating cash flow. The stock-relevant debate is not the quarter — it is whether the 2027–2028 outlook, which excludes Mexico and promises 5%-plus EBITDA growth with the leverage ratio back to 2.5x in 2029, survives contact with the EchoStar spectrum debt now on the balance sheet.

Tracking a $126B Company in Plain Text​

A carrier's accounts are where conglomerate complexity goes to hide — seventy reporting units, spectrum auctions, vendor financing, pension mark-to-markets — and double-entry bookkeeping forces every dollar of it to reconcile. That is why this ledger exists, and how we model every company documents the conventions. The ledger covers FY2021 through FY2026Q3; history starts at FY2021 because that is the earliest year any filing restates onto the post-spin basis, with WarnerMedia in discontinued operations.

Here is the quarter's income statement exactly as the ledger records it — income negative, expenses positive, summing to zero:

; FY2026Q3 Income Statement — three months ended September 30, 2026
; Check: −32,322 + 6,098 + 6,344 + 7,435 + 3,372 + 4,978 + 1,979 − 590 + 10 + 1,390 + 37 + 378 + 891 = 0 ✓
 
2026-09-30 * "AT&T Inc." "FY2026Q3 Income Statement"
  Income:Revenue                         -32322 MUSD  ; total operating revenues: service 26,301 + equipment 6,021
  Expenses:CostOfRevenue                   6098 MUSD  ; equipment cost of revenues
  Expenses:CostOfRevenue                   6344 MUSD  ; other cost of revenues
  Expenses:SellingGeneralAdministrative    7435 MUSD  ; selling, general and administrative
  Expenses:ImpairmentsAndRestructuring     3372 MUSD  ; asset impairments and abandonments and restructuring: $2.6B Mexico wireless held-for-sale impairment + employee separation charges
  Expenses:DepreciationAndAmortization     4978 MUSD  ; depreciation and amortization
  Expenses:Interest                        1979 MUSD  ; interest expense
  Income:OtherNet                           -590 MUSD  ; other income (expense) — net (prior-year quarter held the $5,479 DIRECTV sale gain)
  Expenses:OtherNet                           10 MUSD  ; equity in net loss of affiliates
  Expenses:IncomeTax                        1390 MUSD  ; income tax expense on continuing operations
  Expenses:DiscontinuedOperations             37 MUSD  ; loss from discontinued operations, net of tax (Forged Fiber 37)
  Expenses:OtherNet                          378 MUSD  ; net income attributable to noncontrolling interests, deducted as the filing does
  Equity:Adjustments                         891 MUSD  ; net income attributable to AT&T offset (RE set by balance assertion; preferred dividends 36 are a distribution, not an expense)

The balance-sheet number that tells the quarter's story is spectrum: licenses jumped from $128,148 million to $149,357 million in nine months on the closed EchoStar transaction, funded by long-term debt rising to $150,144 million — the two moves that lifted net debt to $149.8 billion and the leverage ratio to 3.13x. That is the trade AT&T made this year: permanent spectrum for temporary leverage, with deleveraging back to 2.5x promised for 2029.

The Multi-Year Arc​

Five-plus years of the connectivity company, on the post-spin comparable basis:

The arc is a company shrinking to grow: revenue fell from $134 billion to a $120–126 billion plateau as WarnerMedia, DIRECTV, Vrio and now Mexico exited, while the remaining franchise stabilized around 19% operating margins and resumed growing — FY2025 revenue up 2.7%, Q3 service revenue at a four-year best. Meanwhile the balance sheet tells the capital story in two lines: licenses up $35 billion since FY2021 (C-band, 3.45 GHz, now EchoStar) while long-term debt round-tripped from $151 billion down to $118 billion and back to $150 billion to pay for it. Treasury stock nearly doubled in nine months to $25.3 billion as buybacks ran at a $10 billion annual pace — AT&T is simultaneously levering for spectrum and returning $45 billion-plus to shareholders through 2028. That dual mandate is the whole investment case in one sentence: the fiber-wireless flywheel has to fund both the airwaves and the buyback.

The Verdict: Bull vs. Bear​

Bull Case

• Advanced Connectivity — 91% of revenue — grew 7.2% with operating income up 18.9% and margin expanding 260bp; the growth engine is accelerating, not maturing.
• Adjusted EPS up 20.4% and free cash flow of $4,953 million covering the dividend 2.5x over; the cash machine funds the $45B-plus 2026–2028 shareholder-return plan with room to spare.
• Fiber momentum is tangible: record 769,000 internet adds, 39M-plus locations passed, 60M targeted by 2030, and 42.8% convergence locking in wireless churn at 0.92%.
• The Mexico exit and DIRECTV sale complete the decade-long portfolio purge — every dollar of capex from 2027 goes to U.S. fiber and 5G, the two highest-return assets.
• Raised 2026 adjusted EPS guidance (~$2.40) with lowered long-term capital intensity points to operating leverage finally arriving after the fiber build peaks.

Bear Case

• Three multibillion-dollar write-downs in five years ($27.5B, $4.4B, $3.4B) is a capital-allocation record, not bad luck — and the Mexico sale crystallizes a >50% loss on a decade-long investment.
• Net debt of $149.8 billion at 3.13x EBITDA is the highest leverage since the spin; the 2.5x-by-2029 promise assumes no recession, no price war, and no more spectrum bills.
• $150 billion of long-term debt at rising rates means interest expense up 16.4% this quarter to $1,979 million — a growing fixed claim ahead of equity holders.
• Legacy's $498 million quarterly EBITDA goes negative after 2027 while copper fixed costs linger — a guided earnings headwind with regulatory delay risk past 2029.
• Equipment revenue (+12.1%) outgrowing service revenue (+3.8%) with bad debt rising on subscriber growth hints at promotion-led adds; watch churn and receivables, not gross adds.

Our Take: Buy the operations, underwrite the leverage. The $0.13 GAAP print is noise — a real but one-time exit charge lapping a real but one-time exit gain — and the $0.65 underneath grew 20% on record subscriber momentum with the dividend covered 2.5 times by cash. But this is now a leveraged bet twice over: $150 billion of debt funding both irreplaceable spectrum and $10-billion-a-year buybacks, with the deleveraging path back-loaded to 2029. If fiber penetration keeps compounding and wireless pricing holds, the leverage melts into the flywheel. If either slips, the fixed claims do not. That is a bull case with a visible tripwire — the best kind to own with eyes open.