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AT&T (T) dropped its fourth-quarter earnings on Jan. 27, propelling its stock to new 52-week highs. Shares climbed 6.25% in the day’s trading session after the company exceeded Wall Street expectations and announced plans for substantial investments in artificial intelligence (AI). Investors welcomed the performance and encouraging guidance, further fueling optimism about the company’s future.
AT&T stock has delivered 41% returns over the past 52 weeks, pacing the S&P 500 Index ($SPX) gain of 24% by a wide margin. With strong financials, AI-driven growth plans, and shareholder-friendly initiatives, the company is steadily securing a place in investors’ portfolios.
Investors Cheer Over Q4 Results
Investors were overwhelmed by AT&T’s strong Q4 performance and encouraging guidance reported on Jan. 27. For the fourth quarter of 2024, the company reported adjusted earnings per share (EPS) of $0.54, surpassing analyst expectations of $0.48. Revenue grew modestly by 0.9% year-over-year to $32 billion, exceeding forecasts.
The company’s Mobility Services division remained a key growth driver, posting a 3.3% revenue increase to $16.6 billion. Consumer broadband revenue surged 7.8% to $2.9 billion, fueled by 307,000 fiber net additions. AT&T also reported 482,000 net postpaid phone connections, with total postpaid phone net additions reaching 1.7 million, reinforcing its 14th industry-leading postpaid phone churn result in 16 quarters.
The broadband segment also continued to thrive, adding over 1 million fiber subscribers for the seventh consecutive year. AT&T maintained its status as America’s fastest internet provider, according to Ookla, marking six straight quarters of positive broadband net additions.
However, challenges persist in the Business Wireline segment, where revenue declined 10% and EBITDA fell 22%. The ongoing decline in legacy services remains a headwind, though AT&T’s strategic focus on fiber and mobility positions it for long-term resilience.
On the liquidity side, AT&T’s financial position remained strong, with free cash flow reaching $4.8 billion in Q4, enabling the company to reduce net debt by $8.8 billion.
What Lies Ahead for AT&T’s Growth?
During the earnings call, management announced it is doubling down on AI investments, aiming to enhance service efficiency and slash operating costs over the next three years. The telecom giant sees AI as a key driver in improving network performance, optimizing customer interactions, and ultimately boosting profit margins. Investors have responded positively, as the company’s strategic AI push aligns with its broader goal of maximizing shareholder returns. AT&T plans to return $40 billion to investors through dividends and stock buybacks, reinforcing confidence in its long-term financial health.
Looking forward, AT&T’s 2025 guidance projects low-single-digit service revenue growth, with mobility services expected to rise 2%-3% and fiber consumer broadband revenue climbing at a mid-teens rate. However, for the full year, the company anticipates a decline in adjusted EPS, forecasting $1.97 to $2.07, down from $2.26 last year, alongside free cash flow of $16 billion, a drop from $17.6 billion.
Despite these cautious projections, AT&T remains committed to $22 billion in capital investments, supporting 5G expansion, fiber rollouts, and AI-driven cost savings.
Valuation and Dividend Policy
AT&T offers a healthy dividend policy for income-focused investors. Currently yielding an impressive 4.56%, the company pays an annual dividend of $1.11 per share while maintaining a payout ratio of 49.8%, reflecting a balanced approach between rewarding shareholders and retaining capital for future growth.
From a valuation perspective, AT&T is trading at a discounted price, with a forward earnings ratio of 11.2x, which is quite cheap compared to the sector median of 20.4x. However, the company is still trading above its own historical average of 10.4x, indicating that it has yet to return to its long-term valuation norms.
What Do Analysts Expect for AT&T Stock?
Analysts have a consensus rating of “Moderate Buy” for the stock. The mean price target for AT&T is $26.48, implying expected upside of approximately 8.5% from the Jan. 28 closing price.
AT&T is positioning itself for long-term growth through strategic investments, solid financials, and shareholder returns, making it a compelling yet cautiously valued stock for 2025.
