AT&T Inc. shares slipped after the company reiterated a profit forecast for the year that fell short of analysts’ estimates. 

The company said it continues to expect adjusted earnings of US$1.97 to US$2.07 a share, while the market had forecast US$2.09 on average. The miss overshadowed a significant jump in wireless phone subscribers in the second quarter.

Wall Street seemed disappointed after bigger rival Verizon Communications Inc. used the opportunity from U.S. President Donald Trump’s favourable tax and spending bill to boost some full-year guidance metrics when it reported results on Monday, including adjusted earnings before interest, tax, depreciation and amortization (EBITDA) and free cash flow. Its shares gained four per cent on the day.

Meanwhile, AT&T shares were down 2.2 per cent to US$26.81 Wednesday morning in New York. The stock was up 20 per cent so far this year through Tuesday’s close, outpacing gains in the S&P 500 index as well as its telecom rivals.

Dallas-based AT&T added 401,000 mobile-phone customers in the second quarter, it said in a statement Wednesday. That beat analysts’ estimates for a gain of 301,000 and contrasts with Verizon, which reported loss of subscribers.

The smallest of the big-three U.S. carriers, AT&T has gained ground on its larger rival with a new “customer guarantee” introduced in January, promising better network reliability and customer service, and pledging to offer the best smartphone deals at a time when consumers are particularly attuned to inflation.

The company is spending heavily to advance its fibre optic network across the country and said it will use cash savings from the president’s tax and spending bill to accelerate those plans.

AT&T expects to realize US$6.5 billion to US$8 billion of cash tax savings through 2027 as a result of the bill. The company intends to invest US$3.5 billion of these savings into building out its fibre internet network to a pace of 4 million locations per year by the end of 2026. AT&T is in the process of acquiring Lumen Technologies Inc.’s consumer fibre unit, further expanding its wired footprint.

The company had previously set a goal of 60 million U.S. households passed by fibre by 2030, a number that could rise to 70 million after that.

Chief financial officer Pascal Desroches said the company is on track with its spending and level of calculated investments.

“Overall, we feel really good about the strength and management of our balance sheet based on current operating trends and our outlook for the business,” he said on a call with investors. “When you take out growth-related expenses, promotions, and our guarantee advertising campaign, our expenses are down.”

The company has also been building up its home internet service. Its “Internet Air” fixed-wireless offering, which uses its 5G mobile network to provide on-premises internet service, picked up 203,000 new customers, topping the market’s expectation for 169,000. The company added 243,000 fibre-optic subscribers.

Earnings for the quarter rose to 54 cents a share, excluding some items, beating Wall Street estimates of 52 cents. Revenue grew 3.4 per cent to US$30.8 billion, compared with projections of US$30.4 billion. The company reported free cash flow of US$4.4 billion.

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AT&T also updated the full-year guidance it issued in April, boosting the outlook for mobile-service revenue and profit, along with capital spending, while narrowing the forecast for fibre revenue growth. The company plans stock repurchases of US$4 billion this year and has completed US$1.3 billion to date.

AT&T is the second of the three major U.S. telecom companies to report second-quarter results.

Bloomberg.com