AT&T (T) Stock Falls 5% on Q3 2026 Debt Concerns

AT&T (T) shares fell about 5% after a Q3 2026 earnings beat and higher EPS outlook, as weak phone adds and $23 billion of EchoStar-related debt weighed.

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Why Did AT&T Stock Fall After an Earnings Beat?

AT&T stock fell because the market prioritized balance-sheet leverage and subscriber momentum over the headline beat. Postpaid phone net additions were 379,000, below the consensus estimate of about 387,410. Churn held steady at 0.92%.

The debt increase was the larger concern. Net debt rose to $149.8 billion from $126.4 billion at the end of the second quarter, driven mainly by the EchoStar spectrum purchase that closed in July. That lifted the ratio of net debt to adjusted EBITDA to 3.13 times, above the 2.5 times range the company treats as its target.

How Strong Was the Underlying Quarter?

The underlying quarter was the strongest in several years on revenue growth. Service revenue grew 3.8%, the fastest pace in more than four years. Adjusted EBITDA rose 5.4%, and the adjusted EBITDA margin reached 38.7%, a record for a third quarter since the company refocused on connectivity.

Home broadband produced a record quarter. AT&T added 696,000 advanced home internet customers, made up of 416,000 fiber and 280,000 Internet Air fixed wireless connections. Including phones, the company added more than 1 million net connections. Free cash flow was $5.0 billion, up 1.8% from a year earlier.

CEO John Stankey said competitors "cannot and will not match" AT&T's operating proficiency, network performance and converged value proposition in dense urban and suburban markets. This is the fiber-plus-wireless bundle strategy the company has built its growth case around.

What Does the EchoStar Debt Mean for AT&T's Balance Sheet?

The EchoStar spectrum purchase raised leverage by roughly 0.4 turns of EBITDA, and management expects to return to the 2.5 times range during 2029. The plan relies on EBITDA growth and proceeds from planned divestitures rather than reduced shareholder returns.

That timeline is the core of the investor debate. The spectrum adds network capacity for fixed wireless and mobile services, but it also lengthens the period in which interest costs and leverage constrain flexibility. Telecom is a capital-intensive sector with long asset lives, and credit markets typically reward steady deleveraging more than fast subscriber growth.

Capital Returns and Guidance

AT&T raised its full-year 2026 adjusted EPS outlook to the $2.40 range from $2.25-$2.35. It kept its free cash flow outlook above $18 billion and its plan to return more than $45 billion to shareholders from 2026 through 2028.

In the third quarter, the company returned $4.8 billion to shareholders, including $2.8 billion in share repurchases. It still targets about $10 billion in buybacks in 2026. The annual dividend per share stays at $1.11, which equates to a yield of roughly 5% at the post-earnings share price.

What Comes Next for AT&T Shares?

The next catalysts are evidence that postpaid phone growth can recover, and progress on divestitures that fund deleveraging. A rebound in phone additions in the fourth quarter would address the weakest part of the report. Asset sale proceeds would narrow the leverage gap sooner than EBITDA growth alone.

If phone additions stay below expectations while debt remains elevated, the discount to the strong earnings and cash flow figures is likely to persist. If leverage falls on schedule, the current reaction will look like a repricing of near-term balance-sheet risk rather than a verdict on the business.

Outlook

AT&T entered the final quarter of 2026 with accelerating service revenue, record broadband additions and a higher EPS outlook. The market's response shows that attention has shifted to subscriber growth and the path back to 2.5 times leverage by 2029.