AT&T Posts Solid Q2 Earnings, Issues Robust Q3 Outlook, Expects 70-73M Global HBO Max Subs By Year End

AT&T Inc T reported second-quarter FY21 revenue growth of 7.6% year-on-year to $44 billion, beating the analyst consensus of $42.64 billion. Adjusted EPS of $0.89 beat the analyst consensus of $0.79.

AT&T saw good subscriber growth across wireless, fiber, and HBO Max, CEO John Stankey said. Mobility delivered substantial service revenue, EBITDA, and postpaid phone growth. The fiber business grew subscribers and penetration. HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform.

Financials: Communications segment revenue grew 6.1% Y/Y to $28.1 billion due to increases in Mobility and Consumer Wireline more than offsetting a decline in Business Wireline. The operating margin was 26.1%.

Mobility revenue rose 10.4% Y/Y to $18.9 billion due to higher equipment and service revenues. The operating margin was 31.7%.

Total net adds were 5.5 million including 1,156,000 postpaid net adds, 789,000 postpaid phone net adds and 174,000 prepaid phone net adds. The postpaid phone churn of 0.69% was the lowest churn ever.

Business Wireline revenue declined 4% Y/Y to $6.1 billion with an operating margin of 17.3%. Consumer Wireline revenue increased 2.9% Y/Y to $3.1 billion from broadband gains. The operating margin was 9.2%.

It noted 246,000 AT&T Fiber net adds with a penetration of over 36%. ARPU grew 6.1% Y/Y.

WarnerMedia revenue increased 30.7% Y/Y to $8.8 billion, reflecting partial pandemic recovery, higher content and other subscription, and advertising revenues. The operating margin was 19.2%.

There were 47.0 million domestic HBO Max and HBO subscribers, up 10.7 million Y/Y. Domestic subscriber ARPU was $11.90.

Latin American revenue rose 16.6% Y/Y to $1.4 billion due to growth in Mexico.

The total operating margin was 31.7%. The EBITDA service margin was 55.9%.

It generated $10.9 billion in operating cash flow and $7 billion in free cash flow and held $11.9 billion in cash and equivalents.

Outlook: AT&T raised FY21 revenue growth guidance from 1% earlier to 2%-3%. AT&T's revenue guidance of $175.2 billion-$176.9 billion is above the analyst consensus of $174.4 billion.

It expects the Adjusted EPS to grow in the low- to mid-single digits. It raised the global HBO Max year-end forecast to 70 million - 73 million subscribers.

AT&T expects $7.8 billion in proceeds and over $1 billion annual cash distribution from minority stake sale of DIRECTV to TPG.

Additionally, Grupo Werthein has reached an agreement to acquire AT&T's Vrio Corp. business unit.

Price action: AT&T shares traded higher by 1.68% at $28.37 in the premarket session on the last check Thursday.