AT&T has reported a surprising decrease in its third-quarter revenue, which has raised concerns about its business wireline segment's performance. The total revenue fell to $30.21 billion for the three months ended September 30, down from $30.35 billion in the same period last year. This result was also below analysts' expectations, which averaged at $30.45 billion according to Capital IQ. In addition to the revenue decline, AT&T's adjusted earnings per share (EPS) also saw a decrease, sliding to $0.60 from $0.64.
However, it still managed to exceed market expectations, with analysts predicting an EPS of $0.57. Following the announcement, AT&T's stock experienced a positive response, increasing by 2.5% during Wednesday's trading session. The revenue downturn was primarily attributed to weaker performance in the business wireline segment and a reduction in mobility equipment revenue.
Nonetheless, this decline was somewhat mitigated by an increase in revenues from wireless services and fiber. Pascal Desroches, AT&T’s Chief Financial Officer, spoke with analysts, highlighting the challenges and opportunities during a recent conference call. He elaborated on the company's strategy to tackle the downturn and pointed out that despite the revenue drop, there are areas showing growth, particularly in the wireless sector. Notably, AT&T recorded a $4.4 billion noncash goodwill impairment charge associated with its business wireline unit in the third quarter.
Desroches emphasized that this charge was reflective of a broader industry trend, noting 'an industry-wide secular decline of legacy services.' On a brighter note, service revenue saw a slight increase of 0.1%, amounting to $25.13 billion. Conversely, equipment sales faced a 3% decline, totaling $5.08 billion.
The company reported that net additions for postpaid phones dropped about 14% year over year, reaching 403,000 additions, which was slightly better than analysts’ consensus predicting a decline of 393,400. Despite these challenges, AT&T's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 3.4% in the third quarter.
Desroches maintained that the company expects this metric to grow in the range of 3% for the entire year, despite grappling with approximately $115 million in financial impacts due to hurricanes Helene and Milton, which will mostly affect its consumer and business wireline divisions. In reiterating its full-year adjusted EPS guidance, AT&T remains confident, aiming for a range of $2.15 to $2.25, aligning with the consensus estimate of $2.20 per Capital IQ.
The company also anticipates wireless service revenue growth around 3% and broadband revenue growth of at least 7%. The growth in broadband services can, in part, be attributed to the momentum achieved in fiber. Revenues from broadband rose by 6.4% during the third quarter, supported by a significant 17% increase in fiber revenue.
Desroches affirmed that there is a solid uptake in higher-speed fiber tiers, coupled with robust underlying pricing trends, indicating a positive trajectory ahead for AT&T’s broadband segment..