AT&T plans to spend less on its network in 2027 and 2028, but its cash-flow targets haven’t budged. The earnings call explains why: some spending leaves with Mexico, some falls through better efficiency, and other cash demands fill the gap. The savings haven’t exactly been left sitting on the kitchen counter.
In its October 21 results, AT&T raised its 2026 adjusted EPS outlook to the $2.40 range, from $2.25–$2.35, and reduced its capital-investment forecast for 2027 and 2028. Its free-cash-flow targets stayed put. That combination deserves a closer look, especially because the later-year outlook now excludes the Mexico wireless business it has agreed to sell.
The spending change starts next year
AT&T’s July earnings release projected capital investment of $23 billion to $24 billion annually during 2026–2028. The new presentation keeps that range for 2026 but lowers it to $22 billion to $23 billion in each of the following two years.
Both ends of the later-year range are $1 billion lower. That’s a change in management’s forecast, not cash already saved.
The same presentation still targets free cash flow of more than $18 billion this year, more than $19 billion in 2027 and more than $21 billion in 2028. These are company-defined non-GAAP measures, rather than standard accounting line items. Capital investment includes capital expenditures plus cash paid under vendor-financing arrangements.
Here’s the footnote I’d keep beside those numbers: the 2027–2028 outlook excludes the held-for-sale Mexico wireless business. As in the prior outlook, the forecast also excludes discontinued operations associated with Forged Fiber 37, which holds acquired fiber-network assets.
On the earnings call, CFO Pascal Desroches put numbers around that change. Answering a question about 2027–2028, he attributed $300 million to $400 million of the roughly $1 billion annual reduction to Mexico, with the remainder coming from efficiencies. Those include scale, established partner contracts and faster, cheaper network construction.
He also said losing Mexico would reduce annual cash flow by approximately $400 million to $500 million. Higher upfront device spending, collected back from customers over time, and interest costs add further demands. Management expects to redirect capital primarily toward customer-acquisition working capital and higher interest payments.
That explains why a smaller investment budget doesn’t automatically produce a larger cash-flow forecast. Some efficiencies are real management expectations, but so are the offsets. Neither is cash already delivered.
The current cash results tell a different, useful story
The financial schedules show third-quarter operating cash flow from continuing operations of $10.519 billion. Subtract $5.061 billion of capital expenditures and $505 million of vendor-financing payments, and AT&T’s free cash flow comes to $4.953 billion.
The release notes that operating cash flow also reflects working-capital payment timing and voluntary pension contributions in the year-earlier quarter.
Quarterly free cash flow was about 1.8% above the year-earlier $4.865 billion. Capital investment actually increased to $5.566 billion from $5.287 billion. So the current quarter wasn’t a demonstration of spending less to produce more cash.
Zoom out to nine months and company-defined free cash flow declined to $12.129 billion from $12.405 billion. The year-earlier calculation also adjusts for DIRECTV-related distributions and taxes. Keeping the company’s reconciliation beside the comparison helps avoid mixing different definitions.
Our free cash flow valuation guide explains why the spending definition matters. Management expects approximately $6 billion of fourth-quarter free cash flow, versus $4.2 billion a year earlier. That forecast, rather than the third quarter alone, is important to reaching the full-year target.
More internet customers, but mind the earnings labels
The operating progress is worth noticing. AT&T’s third-quarter release reports 769,000 internet net additions: 442,000 fiber and 327,000 fixed wireless. Revenue rose 5.3% to $32.3 billion, including contributions from acquired Lumen fiber customer relationships. That isn’t an organic-growth figure. Postpaid phone net additions, meanwhile, fell to 379,000 from 405,000 a year earlier.
Adjusted EPS rose to $0.65 from $0.54. GAAP diluted EPS from continuing operations fell to $0.13 from $1.29. This quarter includes a $2.6 billion noncash Mexico impairment and employee-separation charges; the year-earlier quarter benefited from the DIRECTV investment sale. Both sides of that comparison need their labels.
There’s another accounting detail behind the raised full-year EPS forecast: Desroches said it primarily reflects lower depreciation under Mexico’s held-for-sale accounting. The upgrade isn’t simply a signal of stronger underlying operations. The roughly $800 million employee-separation charge will also affect cash mainly in 2027, according to the call. Our guide to reading an earnings report walks through these distinctions.
What I’d keep on the next-report checklist
AT&T’s presentation also shows net debt rising by roughly $23 billion sequentially, driven by the EchoStar spectrum purchase. That puts another claim on future cash alongside network investment and shareholder distributions.
My next check would be whether internet growth translates into cash generation while the company works through its changing asset mix. I’d compare the same business scope, separate actual spending from forecasts, and keep debt in view. The lower investment outlook is interesting. Understanding what sits inside it is where this report becomes useful.