AT&T INC.

Previous wording

AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document. AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc., and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes).

Current wording

AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document. AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc., and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes). Percentage increases and decreases that are not considered meaningful are denoted with a dash.

Previous wording

Consolidated Results Our financial results are summarized in the discussions that follow. Additional analysis is discussed in our “Segment Results” section.

Current wording

Consolidated Results Our financial results from continuing operations are summarized in the discussions that follow. Additional analysis is discussed in our “Segment Results” section.

Previous wording

Depreciation expense increased in the third quarter and for the first nine months of 2025, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion, which we expect to continue through the remainder of 2025.

Current wording

Depreciation and amortization expense decreased in the first quarter of 2026, primarily due to lower depreciation from fully depreciated legacy assets, partially offset by ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Previous wording

Operating income increased in the third quarter and for the first nine months of 2025. Our operating income margin in the third quarter increased from 7.0% in 2024 to 19.9% in 2025 and for the first nine months increased from 15.2% in 2024 to 19.9% in 2025.

Current wording

Operating income increased in the first quarter of 2026. Our operating income margin in the first quarter increased from 18.8% in 2025 to 21.1% in 2026.

Previous wording

Equity in net income (loss) of affiliates decreased in the third quarter and increased for the first nine months of 2025. The decrease for the quarter is primarily due to the sale of our interest in DIRECTV to TPG Capital on July 2, 2025. The increase for the first nine months is attributable to the cash distributions received by AT&T in excess of the carrying amount of our investment in DIRECTV prior to disposition (see Note 9).

Current wording

Equity in net income (loss) of affiliates decreased in the first quarter of 2026, primarily due to the sale of our interest in DIRECTV Entertainment Holdings, LLC to TPG Capital on July 2, 2025.

Previous wording

Our effective tax rate was 9.2% in the third quarter and 15.4% for the first nine months of 2025, versus 89.9% and 31.1% in the comparable periods in the prior year, reflecting the nonrecognition of income taxes on the DIRECTV gain and larger discrete state tax benefits in 2025, and the goodwill impairment in 2024, which was not deductible for tax purposes.

Current wording

Income tax expense decreased in the first quarter of 2026. The decrease was primarily due to lower income from continuing operations before income tax. Our effective tax rate was 21.8% in the first quarter of 2026, versus 21.7% in the comparable period in the prior year, reflecting larger discrete state tax benefits in 2025.

Previous wording

Segment Results Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin. See “Discussion and Reconciliation of Non-GAAP Measures” for a reconciliation of EBITDA and EBITDA margin to the most comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP).

Current wording

Our segment results presented in Note 4 and discussed below follow our internal management reporting. We evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin. See “Discussion and Reconciliation of Non-GAAP Measures” for a reconciliation of EBITDA and EBITDA margin to the most comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP). We have three reportable segments: Advanced Connectivity, Legacy and Latin America.

Previous wording

•Mobility provides nationwide wireless service and equipment.

Current wording

The Advanced Connectivity segment provides domestic 5G and fiber-based wireless, internet and other advanced connectivity services to consumer and business customers. We also provide supplemental information on our advanced consumer and business customer relationships as the product lifecycles in these customer categories influence the growth trajectories of Advanced Connectivity segment results. The Legacy segment provides domestic legacy voice and data services to consumer and business customers over our copper-based network. Legacy segment results include revenues derived from copper-based services and direct operating costs. The Latin America segment provides wireless service and equipment in Mexico.

Previous wording

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-only churn were higher in the third quarter and for the first nine months of 2025, partially driven by an increase in our customer base that reached the end of device financing periods, which normalized as we exited the quarter. The increase in churn in the quarter was primarily driven by increased competition.

Current wording

Wireless service revenue increased in the first quarter of 2026 driven by growth in retail wireless subscribers in underpenetrated categories and converged accounts, partially offset by promotional activity. The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Phone churn was slightly higher in the first quarter of 2026, driven by the competitive dynamics of the industry.

Previous wording

Fiber and advanced connectivity services revenues increased in the third quarter and for the first nine months of 2025, driven by higher fiber and fixed wireless revenues.

Current wording

Business fiber and advanced connectivity revenues increased in the first quarter of 2026 driven by higher fiber and fixed wireless revenues.

Previous wording

Other service and equipment revenues decreased in the third quarter and for the first nine months of 2025, reflecting the continued decline in the number of VoIP customers.

Current wording

Other service revenues decreased in the first quarter of 2026, reflecting the continued decline in the number of consumer VoIP customers.

Previous wording

Equipment revenue increased in the third quarter and for the first nine months of 2025, primarily driven by higher wireless device sales volumes.

Current wording

Equipment revenue increased in the first quarter of 2026, primarily due to higher wireless device sales volumes.

Previous wording

Service revenues increased in the third quarter and decreased for the first nine months of 2025. The increase in the quarter was primarily due to growth in subscribers and favorable foreign exchange impacts. The decrease for the first nine months reflects unfavorable foreign exchange impacts in the first half of 2025, partially offset by growth in subscribers and ARPU.

Current wording

Service revenues increased in the first quarter of 2026, primarily due to favorable foreign exchange impacts and growth in subscribers.

Previous wording

Equipment revenues increased in the third quarter and decreased for the first nine months of 2025. The increase in the quarter was primarily due to higher equipment sales and favorable foreign exchange impacts. The decrease for the first nine months reflects unfavorable foreign exchange impacts in the first half of 2025, partially offset by higher equipment sales.

Current wording

Equipment revenues increased in the first quarter of 2026, primarily due to favorable foreign exchange impacts and higher equipment sales.

Previous wording

Overview AT&T subsidiaries operating within the United States are subject to federal and state regulations. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulations in the markets where service is provided. Complying with these regulations may affect our results of operations and cash flow, and compliance may be very costly.

Current wording

Overview AT&T subsidiaries operating within the United States are subject to federal and state regulations. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulations in the markets where service is provided. Complying with these regulations may affect our results of operations and cash flow, and compliance may be very costly. For a discussion of these regulations, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Regulatory Landscape” in our Annual Report on Form 10-K for the year-ended December 31, 2025.

Previous wording

We had $20,272 in cash and cash equivalents available at September 30, 2025, increasing $16,974 since December 31, 2024. Cash and cash equivalents included cash of $4,359 and money market funds and other cash equivalents of $15,913. Approximately $1,497 of our cash and cash equivalents were held in accounts outside of the U.S. and may be subject to restrictions on repatriation. Our cash and cash equivalents at September 30, 2025 was elevated in anticipation of the consummation of announced transactions (see Note 11).

Current wording

We had $11,964 in cash and cash equivalents available at March 31, 2026, decreasing $6,270 since December 31, 2025. Cash and cash equivalents included cash of $3,490 and money market funds and other cash equivalents of $8,474. Approximately $1,077 of our cash and cash equivalents were held in accounts outside of the U.S. and may be subject to restrictions on repatriation.

Previous wording

For the first nine months of 2025, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, and distributions from DIRECTV. These inflows exceeded cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, including higher device payments from higher sales volumes. The cash generated from operating activities was primarily used to fund capital improvements, make dividend payments to stockholders, repurchase preferred and common stock, and repay long-term debt. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

Current wording

For the first three months of 2026, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties. These inflows were exceeded by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, including higher device payments from higher sales volumes. The cash generated from operating activities was primarily used to repay long-term debt, fund capital improvements and business acquisitions, repurchase common stock, and make dividend payments to stockholders. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

Previous wording

Cash Provided by Operating Activities

Current wording

Cash Provided by Operating Activities from Continuing Operations

Previous wording

We actively manage the timing of our supplier payments for operating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost (referred to as supplier financing program). In addition, for payments to suppliers of handset inventory, as part of our working capital initiatives, we have arrangements that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (referred to as direct supplier financing). The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities approximately $2,430 and $3,648 for the nine months ended September 30, 2025 and 2024, respectively. All supplier financing payments are due within one year. (See Note 10)

Current wording

We actively manage the timing of our supplier payments for operating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost (referred to as supplier financing program). In addition, for payments to suppliers of handset inventory, as part of our working capital initiatives, we have arrangements that allow us to extend the stated payment terms by up to approximately 120 days, with an average of 85 days outstanding, at an additional cost to us (referred to as direct supplier financing). The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities approximately $1,136 and $2,042 for the three months ended March 31, 2026 and 2025, respectively. All supplier financing payments are due within one year. (See Note 10)

Previous wording

Cash Used in Investing Activities

Current wording

Cash Used in Investing Activities from Continuing Operations

Previous wording

We enter into multi-year software licensing arrangements, which are typically paid over the license terms of two to five years and referred to as vendor financing. Additionally, for capital improvements, we have negotiated favorable vendor payment terms of 120 days or more with some of our vendors, which are also referred to as vendor financing. Vendor financing is excluded from capital expenditures and reported as financing activities. For the first nine months of 2025, vendor financing payments were $823, compared to $1,571 for the first nine months of 2024. Capital expenditures for the first nine months of 2025 were $14,061, and when including $823 cash paid for vendor financing, capital investment was $14,884 ($107 lower than the prior-year comparable period).

Current wording

We enter into multi-year software licensing arrangements, which are typically paid over the license terms of two to five years and referred to as vendor financing. Additionally, for capital improvements, we have negotiated favorable vendor payment terms of 120 days or more with some of our vendors, which are also referred to as vendor financing. Vendor financing is excluded from capital expenditures and reported as financing activities. For the first three months of 2026, vendor financing payments were $212, compared to $203 for the first three months of 2025. Capital expenditures for the first three months of 2026 were $4,877, and when including $212 cash paid for vendor financing, capital investment was $5,089 ($609 higher than the prior-year comparable period).

Previous wording

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first nine months of 2025, we placed $1,014 of productive assets in service under vendor financing arrangements (compared to $581 in the prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Current wording

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first three months of 2026, we placed $732 of productive assets in service under vendor financing arrangements (compared to $378 in the prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Previous wording

On August 25, 2025, we agreed to purchase FCC licenses in the 600 MHz and 3.45 GHz bands from EchoStar Corporation for approximately $23,000, subject to certain adjustments. The transaction is expected to close in the first half of 2026 and is subject to regulatory approval and other closing conditions. The FCC licenses will be used to expand our 5G network, meet future capacity demands and support future wireless communications services. We signed a short-term spectrum manager lease on the 3.45 GHz spectrum. We expect these licenses will be deployed in cell sites covering nearly two-thirds of the U.S. population by mid-November 2025.

Current wording

On August 25, 2025, we agreed to purchase Federal Communications Commission (FCC) licenses in the 600 MHz and 3.45 GHz bands from EchoStar Corporation for approximately $23,000, subject to certain adjustments. The transaction is subject to regulatory approval and other closing conditions. The FCC licenses will be used to expand our 5G network, meet future capacity demands and support future wireless communications services. We signed a short-term spectrum manager lease on the 3.45 GHz spectrum, which was deployed in cell sites covering nearly two-thirds of the U.S. population.

Previous wording

Cash Provided by or Used in Financing Activities

Current wording

Cash Provided by or Used in Financing Activities from Continuing Operations

Previous wording

For the first nine months of 2025, cash provided by financing activities totaled $2,391 and was primarily comprised of issuances of long-term debt and preferred interests, offset by dividend payments, preferred and common stock repurchases, debt repayments and vendor financing payments.

Current wording

For the first three months of 2026, cash used in financing activities totaled $2,097 and was comprised of debt repayments, common stock repurchases, dividend payments, and vendor financing payments, partially offset by issuances of long-term debt.

Previous wording

A tabular summary of our debt activities for the nine months ended September 30, 2025 is as follows:

Current wording

A tabular summary of our debt activities for the three months ended March 31, 2026 is as follows:

Previous wording

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of September 30, 2025 and as of December 31, 2024. We had $138,090 of total notes and debentures outstanding at September 30, 2025. This also included Euro, British pound sterling, Canadian dollar, Swiss franc and Australian dollar denominated debt that totaled approximately $38,496.

Current wording

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.3% as of March 31, 2026 and 4.2% as of December 31, 2025. We had $137,017 of total notes and debentures outstanding at March 31, 2026. This also included Euro, British pound sterling, Canadian dollar, Australian dollar, and Swiss franc denominated debt that totaled approximately $34,994.

Previous wording

At September 30, 2025, we had $11,378 of long-term debt maturing within one year. We had no outstanding commercial paper or other short-term borrowings on September 30, 2025.

Current wording

At March 31, 2026, we had $6,818 of long-term debt maturing within one year. We had no outstanding commercial paper or other short-term borrowings on March 31, 2026.

Previous wording

For the first nine months of 2025, we paid $823 of cash under our vendor financing program, compared to $1,571 in the prior-year comparable period. Total vendor financing payables included in our September 30, 2025 consolidated balance sheet were $1,674, with $908 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

Current wording

For the first three months of 2026, we paid $212 of cash under our vendor financing program, compared to $203 in the prior-year comparable period. Total vendor financing payables included in our March 31, 2026 consolidated balance sheet were $2,437, with $1,474 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

Previous wording

During the first nine months of 2025, we repurchased approximately 87 million shares totaling $2,444 under our $10,000 common stock repurchase authorization approved by the Board of Directors in December 2024, excluding brokerage fees and the one percent excise tax imposed by the Inflation Reduction Act of 2022. At September 30, 2025, we had approximately $7,556 remaining under this repurchase authorization.

Current wording

During the first three months of 2026, we repurchased approximately 88 million shares totaling $2,279 under our $10,000 common stock repurchase authorization approved by the Board of Directors in December 2024 (the “2024 Authorization”), excluding brokerage fees and the one percent excise tax imposed by the Inflation Reduction Act of 2022. On January 27, 2026, the Board approved an authorization to repurchase an additional $10,000 of common stock (the “2026 Authorization”). At March 31, 2026, we had approximately $3,452 remaining under the 2024 Authorization, and $10,000 remaining under the 2026 Authorization.

Previous wording

We paid dividends on common and preferred shares of $6,168 during the first nine months of 2025, compared with $6,171 for the first nine months of 2024.

Current wording

We paid dividends on common and preferred shares of $1,997 during the first three months of 2026, compared with $2,091 for the first three months of 2025.

Previous wording

Dividends on common stock declared by our Board of Directors totaled $0.8325 per share in the first nine months of 2025 and 2024. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities.

Current wording

Dividends on common stock declared by our Board of Directors totaled $0.2775 per share in the first three months of 2026 and 2025. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities.

Previous wording

Our Revolving Credit Agreement contains covenants that are customary for an issuer with investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1. As of September 30, 2025, we were in compliance with the covenants for our credit facilities.

Current wording

The Revolving Credit Agreement and the Term Loan contain covenants that are customary for an issuer with investment grade senior debt credit ratings, including a net debt-to-EBITDA financial ratio covenant requiring us to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1. As of March 31, 2026, we were in compliance with the covenants for our credit facilities.

Previous wording

Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover the majority of our approximate $39,142 derivative portfolio, counterparties are still required to post collateral. During the first nine months of 2025, we received $218 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)

Current wording

Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover the majority of our approximate $36,069 derivative portfolio, counterparties are still required to post collateral. During the first three months of 2026, we received $354 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)

Previous wording

Our total capital consists of debt (long-term debt and debt maturing within one year), redeemable noncontrolling interest and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At September 30, 2025, our debt ratio was 52.0%, compared to 52.2% at September 30, 2024 and 50.7% at December 31, 2024. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests.

Current wording

Our total capital consists of debt (long-term debt and debt maturing within one year), redeemable noncontrolling interest and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At March 31, 2026, our debt ratio was 52.0%, compared to 50.9% at March 31, 2025 and 51.4% at December 31, 2025. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests.

Previous wording

We also evaluate segment and business unit performance based on EBITDA, which is defined as operating income excluding depreciation and amortization, and/or EBITDA margin, which is defined as EBITDA divided by total revenue. EBITDA is used as part of our management reporting, and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

Current wording

We also evaluate segment performance based on EBITDA, which is defined as operating income excluding depreciation and amortization, and/or EBITDA margin, which is defined as EBITDA divided by total revenue. EBITDA is used as part of our management reporting, and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our operations. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.