AT&T(T.US) reported better-than-expected earnings and growth in wireless users in the second quarter, delivering a strong performance despite competition from SpaceX casting a shadow.

In the widespread anxiety of investors about the potential competitive threat from SpaceX (SPCX.US), AT&T (T.US) turned in a report card that exceeded expectations. For the second quarter ending on June 30th, the Dallas-based telecommunications operator added 432,000 new wireless phone users, significantly higher than the Wall Street's previous forecast of 325,000. After the financial report was released, as of the time of writing, AT&T's stock price rose by about 4% in pre-market trading, but still accumulated a decline of about 10% year-to-date. Key data: Wireless users exceeded expectations, profit indicators met expectations In the three months ending on June 30th, net additions of wireless phone users were 432,000, far exceeding analysts' previous forecast of 325,000. Revenue: $31.6 billion, a year-on-year increase of 2.3%, slightly lower than the market's expectation range of $31.8 billion to $32 billion. Adjusted EBITDA: $12.3 billion, slightly higher than expected, a key indicator of financial condition. Adjusted earnings per share: $0.65, higher than the market's expected $0.59. Full year guidance: Reaffirming the target of adjusted earnings per share of $2.25 to $2.35 for the 2026 fiscal year, with free cash flow of over $18 billion. AT&T's CFO Pascal Desroches previously stated at an investor conference that the year-on-year growth rate of wireless service revenue in the second quarter had further improved from the first quarter. Business highlights: Successful bundle model, continued expansion of fiber broadband In the increasingly competitive price war in the mobile user market, AT&T has launched a series of proactive discounts and incentives over the past year. Among them, the "wireless + fiber" bundle model has become the core engine driving growth. Data shows that 42.5% of households purchasing AT&T's home broadband services also purchase the company's mobile phone services. The success of this "convergence model" has enabled AT&T to establish a differentiated competitive barrier among the three major carriers. AT&T announced a new all-inclusive pricing structure for broadband and wireless services in March. Analysts expect an increase of approximately 287,000 users in broadband this quarter, which is roughly in line with the number of new wireless users, reflecting the growth feature of "dual-drive." Shareholder return: $45 billion return plan provides a safety cushion Against the backdrop of uncertain competition, AT&T's shareholder return commitment has provided important support for the stock price. The company has reaffirmed its long-term financial guidance through 2028, planning to return $45 billion to shareholders through dividends and stock buybacks during this period. For the full year of 2026, the company expects to repurchase approximately $8 billion worth of common stock. AT&T's current annualized cash dividend remains at $1.11 per share, with a dividend yield of approximately 5%, still attractive to income-oriented investors in a fluctuating interest rate environment. Competition threat: SpaceX's "Sword of Damocles" Despite the impressive financial data, AT&T's real challenge comes from SpaceX, owned by Elon Musk. Since the beginning of this year, AT&T's stock price has fallen by about 10%, with investors' concerns about Starlink entering the wireless communication market being a core suppressing factor. SpaceX's ambition has evolved from a "satellite broadband supplement" to a "direct challenger in ground mobile networks." In June of this year, there were reports that SpaceX had disclosed plans to investors to directly provide mobile services to American consumers and had been negotiating with Charter Communications to launch consumer mobile services. SpaceX's IPO prospectus has explicitly positioned Starlink Mobile as a direct competitor to Verizon, AT&T, and T-Mobile. In terms of spectrum layout, SpaceX has completed aggressive layout over the past year: in May 2026, the FCC formally approved SpaceX's acquisition of wireless spectrum licenses from EchoStar for approximately $17 billion, while AT&T also acquired 50MHz of spectrum for approximately $23 billion in the same transaction. This means that SpaceX has gained the capability to operate its own mobile direct satellite business on its own spectrum. In terms of defensive measures, in May of this year, AT&T, Verizon, and T-Mobile announced the rare establishment of a joint venture to jointly promote Direct-to-Device (D2D) satellite services. The joint venture aims to integrate spectrum resources and help satellite service providers reach more users through a unified platform, eliminating wireless signal blind spots in the United States, including rural areas. This move has been widely interpreted as the three major carriers' "united defense" strategy against SpaceX. Analysts at Bernstein believe that AT&T has found "a more isolated battlefield" in the price war among telecommunications operators. For the past seven quarters, AT&T has continuously exceeded analysts' earnings per share expectations. TD Cowen analyst Gregory Williams pointed out that it is unlikely for any operator to sign a wholesale network agreement with SpaceX "the wireless industry has already suffered from cable TV MVNOs." However, he also admitted that AT&T, with its strong position in fiber networks, may be the "least affected" among the three major carriers. JPMorgan analyst Sebastiano Petti believes that Starlink is more of a "long-term sword hanging over the U.S. wireless market, rather than a short-term fundamental threat," and predicts that SpaceX will not start building ground networks in the U.S. until 2028 and launch consumer services by 2029 at the earliest. Fiber business: AT&T's "moat" and "Achilles' heel" In the eyes of analysts, AT&T's fiber business is both its biggest competitive advantage and a key variable in its response to the impact from Starlink. Wells Fargo & Company expects the revenue contribution from the fiber business to increase from 8% in 2026 to 14% in 2032, with fiber coverage points increasing from approximately 21 million to 54 million. However, Cahall warned that customers outside of AT&T's fiber coverage areas are still vulnerable to competition from Starlink. The second-quarter data on the fusion model further confirms the strategic value of fiber - 42.5% of broadband users simultaneously purchase mobile services. The company also completed the acquisition of Lumen's fiber customers, closing the deal ahead of schedule, adding approximately 1.1 million fiber customers and over 4 million fiber coverage points. Bernstein believes that it is this fusion advantage that may put AT&T in a relatively favorable position in the game against SpaceX. However, Wells Fargo & Company remains pessimistic, believing that even with the support of the fiber business, AT&T faces the greatest risks in user net additions and market share losses, and as a result of concerns about the Starlink deal, has given AT&T a "underweight" rating and a target price of $18. Outlook: an inevitable "satellite-ground" competition The financial report from AT&T sends a dual message: sound short-term operations and strategic pressure in the long term. The better-than-expected user growth performance shows that AT&T still has strong execution capabilities in the current market competition. However, the threat posed by SpaceX is not a short-term fluctuation, but a structural challenge to the traditional business model of telecommunications operators - satellite internet is redefining the monopoly of coverage, access to marginal users, and pricing rights that were previously dominated by ground networks. The outcome of this war will depend on several key variables: whether SpaceX can successfully acquire ground spectrum and establish its own mobile network during the spectrum auction in 2027; whether the joint satellite venture of the three major carriers can effectively counterbalance SpaceX in competition; and whether AT&T's fiber expansion can cover enough users to offset the erosion from Starlink. As Starlink transitions from a rural broadband provider to a global connectivity platform covering broadband, mobile, and mixed satellite-ground networks, the "price war" between AT&T and its traditional competitors is evolving into a paradigmatic "satellite-ground" war. As Musk's low-orbit satellite constellation redefines the meaning of "connectivity" at extremely low costs, the moat of ground stations is gradually being eroded. SpaceX is now valued at approximately $2 trillion, with around $110 billion in available funds and about 10.3 million global Starlink users. These numbers indicate that AT&T is facing not just a "satellite supplement network," but a potential disruptor with strong capital, complete spectrum, and a massive user base. AT&T chooses to strengthen its moat with the "fusion model," respond to challenges with "united defense," and maintain its bottom line with "shareholder returns." But in the face of this "elephant in the room" called SpaceX, whether these measures will be effective will be the most important investment proposition in the telecommunications sector in the coming quarters.