What Happened?

Shares of telecommunications conglomerate AT&T (NYSE:T) jumped 5.4% in the morning session after the company provided a long-term financial plan that revealed promising growth and profit expectations over the next three years, sweetened by details on how management intends to return some of the value created to shareholders. 

From 2025 to 2027, management projects low single-digit consolidated service revenue growth, fueled by a balanced mix of 2–3% annual increases in Mobility Service Revenue and mid-teens percentage growth in Consumer Fiber Revenue. 

This revenue growth is expected to drive annual EBITDA growth exceeding 3%, primarily led by Consumer Wireline EBITDA, which is anticipated to achieve double-digit compound annual growth (CAGR). The improved profit forecasts are expected to help the company pocket $16 billion in free cash flow in 2025, expanding to $18 billion+ by 2027. 

Moving to the icing on the cake, management plans to return $40 billion+ to shareholders over three years (2025-2027) through dividends and share repurchases. Now, to understand how the business will achieve these lofty goals, management laid out a concise plan: 1) Expand its fiber broadband network to cover 50 million+ locations by the end of 2029, reaffirming its leadership as the largest fiber broadband provider in America. 2) Modernize its 5G wireless network to deliver faster speed and wider coverage for 300 million+ people by 2026. 3) Streamline its operations by selling its 70% stake in DIRECTV to TPG by mid-2025, resulting in $5.4 billion in after-tax cash payments. 

The company already runs highly profitable operations, delivering mid-teens FCF margin over the past two years, resulting in roughly $20 billion in cash flows over the trailing twelve months. Therefore, the stock's move suggests that the market finds the outlined goals both realistic and achievable relative to the company's financial position and management's execution capabilities.

After the initial pop the shares cooled down to $23.66, up 4.3% from previous close.

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What The Market Is Telling Us

AT&T’s shares are not very volatile and have only had 1 move greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

AT&T is up 37.1% since the beginning of the year, and at $23.66 per share, has set a new 52-week high. Investors who bought $1,000 worth of AT&T’s shares 5 years ago would now be looking at an investment worth $629.96.

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