AT&T Stock’s Margin Hit A Multi-Year Best As Its Copper Network Winds Down
The satellite scare has defined the telecom debate, but the profit line moved on operating leverage and the legacy costs coming out with the copper.
AT&T (T) stock has lagged the market for a year, and the worry doing the damage is satellite: the push toward direct-to-consumer mobile has reframed how the market prices telecom. The number that answers back is not a subscriber count but the consolidated adjusted EBITDA margin, up 110 basis points to 39.1% in the second quarter of 2026.
110 Basis Points Of Margin On 2.3% More Revenue
Total revenue rose 2.3% year over year in that quarter, and adjusted EBITDA rose 5.2%, more than twice as fast; the full-year guide for adjusted EBITDA growth is slower, at 3% to 4%. Management puts the consolidated margin at its highest since AT&T refocused on Advanced Connectivity at the start of the decade, driven by operating leverage in 5G and fiber, lower legacy costs as its footprint shrinks, and its cost transformation program. Margin strength like that, earned in AT&T’s largest year of fiber expansion, is one thing the Trefis High Quality Portfolio favors.
What The Copper Exit Opens Up In AT&T’s Cost Base
AT&T has approval to discontinue legacy services in over 30% of its wire centers, effective by late 2026, and the FCC has cleared legacy copper voice shutdowns at about 60% of those in California. Management says those shutdowns open a path to taking cost out of its cost structure. Legacy service revenue fell 26% year over year and legacy EBITDA about 46%, while Advanced Connectivity service revenue grew 5.1% and that segment’s EBITDA grew 8%. Advanced Connectivity already carries over 90% of service revenue and nearly all of adjusted EBITDA, so the legacy decline subtracts from a small base, and shrinking that base is one of the three margin drivers management named. The consolidated cost-savings target is $4 billion a year by the end of 2028, on $127.2 billion of trailing revenue.
What Converged Accounts Cost In Fiber ARPU
The sharper bear case is not satellite: AT&T is buying growth by giving up price. Fiber ARPU fell 1.3% year over year, and excluding the lower-ARPU customers acquired from Lumen it was approximately flat; management expects convergence to keep some pressure on fiber ARPU near term. What that buys is accounts. 42.5% of its advanced home internet customers also hold an AT&T postpaid wireless account, and it added 147,000 consumer postpaid wireless accounts in the second quarter, its best in more than three years. The margin is evidence the trade has been working, not that it always will.
Eight Times Earnings, With The EchoStar Leverage Attached
The stock trades at 8.2 times trailing earnings and is down 6.8% over the past year, while the S&P 500 gained 20.5%. Management raised the 2026 buyback from $8 billion to roughly $10 billion, citing a disparity between its operating fundamentals and its valuation. Buybacks and dividends come to roughly $18 billion in 2026, essentially all of its free-cash-flow outlook. The bill is leverage: net debt was 2.68 times adjusted EBITDA at the end of the second quarter. Management expected the EchoStar spectrum purchase to close by the end of July and guided the ratio to the 3.2 times range afterward, returning toward 2.5 times within roughly three years of that close. Whether a discount opened by a competitive scare has been worth buying is the question that separates a dip from a value trap.
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