AT&T Inc.

Good morning and welcome to AT&T's second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Should you need assistance during the call, please press star, then zero, and an operator will assist you offline. Following the presentation, the call will be open for questions. If you would like to ask a question, please press star, then one, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing star then 2. As a reminder, this conference is being recorded. I would now like to turn the conference call over to our host, Brett Feldman, Treasurer and Head of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to our second quarter call. I'm Brett Feldman, treasurer and head of investor relations for AT&T. Joining me on the call today are John Stankey, our chairman and CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially. Additional information as well as our earnings materials are available on the investor relations website. With that, I'll turn things over to John. Thanks, Brett.

And good morning, everyone. I do appreciate you joining us today. Earlier this year, we provided an outlook for accelerated growth and execution of our strategy. And that's exactly what we delivered in the second quarter. We gained more than 1 million advanced connectivity subscribers from fiber, fixed wireless and postpaid phones. With all three product categories posting higher net additions year over year. This was our best ever second quarter for AT&T fiber net ads and a record quarter for combined fiber and fixed wireless net ads. We also continued to grow our base of converged customers. At the end of the second quarter, 42.5% of our advanced home internet customers also have a postpaid wireless account with AT&T. This convergence rate reached 45% when excluding customers within our acquired footprint from Lumen. These are high lifetime value subscribers and our strong customer growth is a key driver of our accelerated financial growth during the second quarter. At a consolidated level, we reported faster year-over-year growth in service revenue, adjusted EBITDA, and adjusted EPS compared to our growth in the first quarter. We also achieved our highest consolidated adjusted EBITDA margin since we refocused our business on advanced connectivity at the beginning of this decade. This was driven by our improved operating leverage as we gained scale in 5G and fiber, Reduce legacy costs as we shrink our footprint and through continued implementation of our cost transformation initiatives across the company. And we're driving growth in our advanced connectivity segment across both consumer and business channels. During the second quarter, we achieved year-over-year growth in advanced connectivity business service revenues. This reflects our success at repositioning the business around fiber and 5G, just as we did in consumer, and expanding our reach through a more balanced direct, indirect, and digital distribution model. The result is growth in converged relationships and new logos, and you're seeing that momentum in our improved financial performance. It's taken a lot of work to get here and we continue to expect advanced connectivity business service revenues will grow at a low single-digit CAGR through 2028. The strength of our performance comes from the structural advantages we've established after years of consistent and targeted investment. This will be our largest year ever for fiber expansion with plans to reach 8 million new locations, including over 4 million locations acquired from Lumen. As I've said in the past, where we have fiber, we win. With fiber and wireless. And I expect that as we expand our funnel of new fiber locations, we'll drive strong growth in our converged customer base and financial results. In the dense urban and suburban areas where we build fiber at scale, we believe that our competitors cannot and will not match our network performance or our operating scale and proficiency. This includes the AT&T Fiber brand, widely recognized among the best home internet products in the market, local teams of technicians and in-home experts, Capable technical support infrastructure, extensive owned and partner distribution, sophisticated device logistics, and the ability to harness our national advertising and brand campaigns to rapidly drive penetration as we reach new geographies with our fiber and converged services. Simply put, we believe that we are in the best position to serve customers the way they want to be from one trusted connectivity provider. When customers consolidate their internet access with us, we see lower churn, outstanding brand affinity, higher lifetime values, and we carry the vast majority of their internet traffic over our advanced infrastructure. And for those limited circumstances, when the AT&T network is not available to one of our converged customers, we expect to be in a position to solve many of these corner cases as we move into 2027. Consistent with our ability to extend our scale and operating proficiency, I'd like to give you a brief update on our progress integrating our recently acquired Lumen footprint into our operations. We spent the past six months standing up operations to support a faster pace of growth and network deployment in customers as we accelerate the branded rollout of AT&T Fiber. But we're already utilizing our existing distribution and converged offers to tap into pent-up demand in these under-penetrated areas, which is translating into improved growth. We're not just adding fiber customers. Our June converged gross ads in these territories were up 45% compared to February. Our convergence playbook is taking hold here, just as it has in our traditional footprint, creating a clear runway to deepen customer relationships and accelerate growth in converged accounts as we complete our integration activities and scale the pace of fiber expansion. While the benefits of our investment-led strategy are evident today in our improved operating momentum, we continue to build a business that is best positioned to meet the future advanced networking demands of AI-driven connectivity. The rise of agentic AI is fundamentally reshaping network traffic, not just in volume, but in shape, symmetry, and criticality. The proliferation of agentic and autonomous AI workloads will require networks to sense, decide, and act in near real-time. Emerging use cases, including drones, autonomous driving, robotics, and AR glasses, will all require ubiquitous high-performing uplink-optimized connectivity. Today, industry research shows AI agents generate up to 450% more total traffic per task than a human performing the same work. Nagentic adoption is projected to drive approximately 9x growth in enterprise traffic and approximately 7x growth in consumer traffic by 2035. Distribution of AI inference to the edge necessitates low latency and high bandwidth connectivity to access endpoints. This is why we believe fiber-enabled network convergence at the edge will create a true competitive advantage. Additionally, we're already seeing rapid increases in large-scale data traffic, which demands high-capacity metro and inner-city fiber infrastructure. As AI fundamentally changes how consumers and businesses connect, it will drive a fundamental change in their expectations for connectivity. We believe AT&T is the only provider building and investing in this infrastructure at the scale necessary today to support the demands a decade from now. We aren't missing any critical elements necessary to execute our strategy. We have the necessary building blocks in place, the technology, agreements, and assets for our strategic path forward. The enabling connectivity of the future is in our hands today, and by the end of this decade, we expect to operate the most advanced and technologically open communications network in the U.S., built on a foundation of dense, interconnected metro fiber and deep nationwide spectrum. This is exactly the asset base we want as AI begins to shape the next era of connectivity, and I wouldn't trade our assets for anyone else's. While we position for the future of connectivity, our shareholders are benefiting from our growth today. This is supporting our improved capital returns and provides us with the flexibility to further increase our pace of planned share repurchases this year by up to 25% to approximately $10 billion to capture what we see as a disparity between our operating fundamentals and the valuation of our stock. Well, Venom also picked up this quarter in our work to exit inefficient copper-based services accelerated by positive actions by the FCC. We appreciate the leadership of FCC Chairman Carr and the Commission for recognizing the urgency to modernize the nation's communications infrastructure and upgrade customers to more reliable service. Last month, the FCC gave us permission to discontinue legacy copper voice service at about 60% of our wire centers in California so we can upgrade our customers to AT&T phone advanced, fiber, and wireless. Looking more broadly at our efforts to discontinue copper network services and operations nationwide, we continue to make great progress on our exit plans. We have approval to discontinue legacy services in over 30% of our wire centers, which will be effective by late 2026. By the end of the year, we expect a couple hundred wire centers to have zero customers. This is an important step, providing a path to unlock access to descaling parts of our cost structure and to further streamline our operations. Nearly two years ago, we told you we would establish a path to effect an orderly turndown of legacy copper services by the end of the decade. In my view, we've now reached the tipping point and that goal is firmly in sight. Finally, before I turn the call over, I'd like to comment on last month's announcement that Pascal has decided to retire at the end of the year. He's been a great partner and I'll no doubt have much more to say about his contribution when his work is finished. Until that time, we're executing a deliberate and carefully planned transition, and AT&T is fortunate to welcome back Jennifer Byrie. There's no doubt that Pascal's a tough act to follow, but we have the person to do just that in Jennifer, and we'll do so without missing a beat. She knows many on our team, she understands the business, her views on how we should run the company are aligned with how Pascal and I see the world, and she returns with a broader and deeper understanding of the fundamentals of running a software-driven enterprise. This is something that will be very important to AT&T as we move forward. That said, we still have some important things to accomplish between now and year-end, and we all intend to make good use of the time. With that, Pascal, over to you.