AT&T INC. 10-Q

Item 1. Financial Statements AT&T INC. CONSOLIDATED STATEMENTS OF INCOME Dollars in millions except per share amounts (Unaudited) Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Operating Revenues Service $ 25,006 $ 24,850 $ 49,848 $ 49,467 Equipment 4,791 5,067 9,977 10,589 Total operating revenues 29,797 29,917 59,825 60,056 Operating Expenses Cost of revenues Equipment 4,815 5,056 9,958 10,714 Other cost of revenues (exclusive of depreciation and amortization shown separately below) 6,627 6,771 13,438 13,444 Selling, general and administrative 7,043 7,009 14,064 14,184 Asset impairments and abandonments and restructuring 480 — 639 — Depreciation and amortization 5,072 4,675 10,119 9,306 Total operating expenses 24,037 23,511 48,218 47,648 Operating Income 5,760 6,406 11,607 12,408 Other Income (Expense) Interest expense ( 1,699 ) ( 1,608 ) ( 3,423 ) ( 3,316 ) Equity in net income of affiliates 348 380 643 918 Other income (expense) — net 682 987 1,133 1,922 Total other income (expense) ( 669 ) ( 241 ) ( 1,647 ) ( 476 ) Income Before Income Taxes 5,091 6,165 9,960 11,932 Income tax expense 1,142 1,403 2,260 2,717 Net Income 3,949 4,762 7,700 9,215 Less: Net Income Attributable to Noncontrolling Interest ( 352 ) ( 273 ) ( 658 ) ( 498 ) Net Income Attributable to AT&T $ 3,597 $ 4,489 $ 7,042 $ 8,717 Less: Preferred Stock Dividends ( 51 ) ( 52 ) ( 101 ) ( 104 ) Net Income Attributable to Common Stock $ 3,546 $ 4,437 $ 6,941 $ 8,613 Basic Earnings Per Share Attributable to Common Stock $ 0.49 $ 0.61 $ 0.96 $ 1.19 Diluted Earnings Per Share Attributable to Common Stock $ 0.49 $ 0.61 $ 0.96 $ 1.19 Weighted Average Number of Common Shares Outstanding — Basic (in millions) 7,196 7,180 7,194 7,174 Weighted Average Number of Common Shares Outstanding — with Dilution (in millions) 7,198 7,180 7,195 7,327 See Notes to Consolidated Financial Statements. 3 AT&T INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Dollars in millions (Unaudited) Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Net income $ 3,949 $ 4,762 $ 7,700 $ 9,215 Other comprehensive income (loss), net of tax: Foreign currency: Translation adjustment, net of taxes of $( 69 ), $ 88 , $( 61 ) and $ 140 ( 221 ) 264 ( 192 ) 457 Reclassification adjustment included in net income, net of taxes of $( 14 ), $ 0 , $( 14 ) and $ 0 127 — 127 — Securities: Net unrealized gains (losses), net of taxes of $ 1 , $( 4 ), $( 1 ) and $ 4 ( 7 ) ( 11 ) ( 17 ) 12 Reclassification adjustment included in net income, net of taxes of $ 1 , $ 1 , $ 3 and $ 2 4 2 10 5 Derivative instruments: Net unrealized gains (losses), net of taxes of $( 65 ), $ 45 , $( 16 ) and $ 2 ( 260 ) 176 ( 49 ) 24 Reclassification adjustment included in net income, net of taxes of $ 4 , $ 3 , $ 7 and $ 6 10 11 22 23 Defined benefit postretirement plans: Amortization of net prior service credit included in net income, net of taxes of $( 123 ), $( 161 ),$( 246 ) and $( 321 ) ( 380 ) ( 491 ) ( 761 ) ( 982 ) Other comprehensive income (loss) ( 727 ) ( 49 ) ( 860 ) ( 461 ) Total comprehensive income 3,222 4,713 6,840 8,754 Less: Total comprehensive income attributable to noncontrolling interest ( 352 ) ( 273 ) ( 658 ) ( 498 ) Total Comprehensive Income Attributable to AT&T $ 2,870 $ 4,440 $ 6,182 $ 8,256 See Notes to Consolidated Financial Statements. 4 AT&T INC. CONSOLIDATED BALANCE SHEETS Dollars in millions except per share amounts June 30, December 31, 2024 2023 Assets (Unaudited) Current Assets Cash and cash equivalents $ 3,093 $ 6,722 Accounts receivable – net of related allowances for credit loss of $ 443 and $ 499 9,686 10,289 Inventories 1,816 2,177 Prepaid and other current assets 15,273 17,270 Total current assets 29,868 36,458 Property, plant and equipment 342,607 339,891 Less: accumulated depreciation and amortization ( 214,835 ) ( 211,402 ) Property, Plant and Equipment – Net 127,772 128,489 Goodwill – Net 67,854 67,854 Licenses – Net 127,279 127,219 Other Intangible Assets – Net 5,277 5,283 Investments in and Advances to Equity Affiliates 584 1,251 Operating Lease Right-Of-Use Assets 20,582 20,905 Other Assets 18,810 19,601 Total Assets $ 398,026 $ 407,060 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 5,249 $ 9,477 Accounts payable and accrued liabilities 31,173 35,852 Advanced billings and customer deposits 3,981 3,778 Dividends payable 2,026 2,020 Total current liabilities 42,429 51,127 Long-Term Debt 125,355 127,854 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 58,918 58,666 Postemployment benefit obligation 8,744 8,734 Operating lease liabilities 17,174 17,568 Other noncurrent liabilities 24,082 23,696 Total deferred credits and other noncurrent liabilities 108,918 108,664 Redeemable Noncontrolling Interest 1,977 1,973 Stockholders’ Equity Preferred stock ($ 1 par value, 10,000,000 authorized at June 30, 2024 and December 31, 2023): Series A ( 48,000 issued and outstanding at June 30, 2024 and December 31, 2023) — — Series B ( 20,000 issued and outstanding at June 30, 2024 and December 31, 2023) — — Series C ( 70,000 issued and outstanding at June 30, 2024 and December 31, 2023) — — Common stock ($ 1 par value, 14,000,000,000 authorized at June 30, 2024 and December 31, 2023: issued 7,620,748,598 at June 30, 2024 and December 31, 2023) 7,621 7,621 Additional paid-in capital 111,515 114,519 Retained earnings (deficit) 2 ( 5,015 ) Treasury stock ( 450,513,074 at June 30, 2024 and 470,685,237 at December 31, 2023, at cost) ( 15,268 ) ( 16,128 ) Accumulated other comprehensive income 1,440 2,300 Noncontrolling interest 14,037 14,145 Total stockholders’ equity 119,347 117,442 Total Liabilities and Stockholders’ Equity $ 398,026 $ 407,060 See Notes to Consolidated Financial Statements. 5 AT&T INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in millions (Unaudited) Six months ended June 30, 2024 2023 Operating Activities Net Income $ 7,700 $ 9,215 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,119 9,306 Provision for uncollectible accounts 942 929 Deferred income tax expense 1,203 1,836 Net (gain) loss on investments, net of impairments 185 ( 160 ) Pension and postretirement benefit expense (credit) ( 941 ) ( 1,341 ) Actuarial and settlement (gain) loss on pension and postretirement benefits - net — ( 74 ) Asset impairments and abandonments and restructuring 639 — Changes in operating assets and liabilities: Receivables 130 1,342 Other current assets 1,149 1,106 Accounts payable and other accrued liabilities ( 4,831 ) ( 5,769 ) Equipment installment receivables and related sales ( 320 ) ( 302 ) Deferred customer contract acquisition and fulfillment costs 294 34 Postretirement claims and contributions ( 93 ) ( 556 ) Other - net 464 1,034 Total adjustments 8,940 7,385 Net Cash Provided by Operating Activities 16,640 16,600 Investing Activities Capital expenditures ( 8,118 ) ( 8,605 ) Acquisitions, net of cash acquired ( 270 ) ( 515 ) Dispositions 14 16 Distributions from DIRECTV in excess of cumulative equity in earnings 586 974 (Purchases), sales and settlements of securities and investments - net 1,147 ( 1,056 ) Other - net ( 336 ) ( 55 ) Net Cash Used in Investing Activities ( 6,977 ) ( 9,241 ) Financing Activities Net change in short-term borrowings with original maturities of three months or less 2,686 ( 914 ) Issuance of other short-term borrowings 491 5,406 Repayment of other short-term borrowings ( 2,487 ) ( 867 ) Issuance of long-term debt 2 9,633 Repayment of long-term debt ( 6,910 ) ( 7,609 ) Repayment of note payable to DIRECTV — ( 130 ) Payment of vendor financing ( 1,391 ) ( 3,756 ) Purchase of treasury stock ( 159 ) ( 189 ) Issuance of treasury stock — 3 Issuance of preferred interests in subsidiary — 7,151 Redemption of preferred interests in subsidiary — ( 5,333 ) Dividends paid ( 4,133 ) ( 4,097 ) Other - net ( 1,392 ) ( 828 ) Net Cash Used in Financing Activities ( 13,293 ) ( 1,530 ) Net increase (decrease) in cash and cash equivalents and restricted cash $ ( 3,630 ) $ 5,829 Cash and cash equivalents and restricted cash beginning of year 6,833 3,793 Cash and Cash Equivalents and Restricted Cash End of Period $ 3,203 $ 9,622 See Notes to Consolidated Financial Statements. 6 AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Dollars and shares in millions except per share amounts (Unaudited) Three months ended Six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Shares Amount Shares Amount Shares Amount Shares Amount Preferred Stock - Series A Balance at beginning of period — $ — — $ — — $ — — $ — Balance at end of period — $ — — $ — — $ — — $ — Preferred Stock - Series B Balance at beginning of period — $ — — $ — — $ — — $ — Balance at end of period — $ — — $ — — $ — — $ — Preferred Stock - Series C Balance at beginning of period — $ — — $ — — $ — — $ — Balance at end of period — $ — — $ — — $ — — $ — Common Stock Balance at beginning of period 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 Balance at end of period 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 Additional Paid-In Capital Balance at beginning of period $ 111,599 $ 120,774 $ 114,519 $ 123,610 Preferred stock dividends — ( 36 ) ( 98 ) ( 134 ) Common stock dividends ($ 0.2775 , $ 0.2775 , $ 0.5550 and $ 0.5550 per share) ( 12 ) ( 1,999 ) ( 2,015 ) ( 4,001 ) Issuance of treasury stock ( 3 ) ( 3 ) ( 416 ) ( 368 ) Share-based payments 83 97 ( 183 ) ( 274 ) Redemption or reclassification of interest held by noncontrolling owners ( 152 ) — ( 292 ) — Balance at end of period $ 111,515 $ 118,833 $ 111,515 $ 118,833 Retained Earnings (Deficit) Balance at beginning of period $ ( 1,570 ) $ ( 15,187 ) $ ( 5,015 ) $ ( 19,415 ) Net income attributable to AT&T 3,597 4,489 7,042 8,717 Preferred stock dividends ( 36 ) — ( 36 ) — Common stock dividends ($ 0.2775 , $ 0.0000 , $ 0.2775 and $ 0.0000 per share) ( 1,989 ) — ( 1,989 ) — Balance at end of period $ 2 $ ( 10,698 ) $ 2 $ ( 10,698 ) See Notes to Consolidated Financial Statements. 7 AT&T INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued Dollars and shares in millions except per share amounts (Unaudited) Three months ended Six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Shares Amount Shares Amount Shares Amount Shares Amount Treasury Stock Balance at beginning of period ( 451 ) $ ( 15,277 ) ( 472 ) $ ( 16,166 ) ( 471 ) $ ( 16,128 ) ( 493 ) $ ( 17,082 ) Repurchase and acquisition of common stock — ( 2 ) — ( 1 ) ( 9 ) ( 159 ) ( 10 ) ( 189 ) Reissuance of treasury stock — 11 1 9 29 1,019 32 1,113 Balance at end of period ( 451 ) $ ( 15,268 ) ( 471 ) $ ( 16,158 ) ( 451 ) $ ( 15,268 ) ( 471 ) $ ( 16,158 ) Accumulated Other Comprehensive Income Attributable to AT&T, net of tax Balance at beginning of period $ 2,167 $ 2,354 $ 2,300 $ 2,766 Other comprehensive income (loss) attributable to AT&T ( 727 ) ( 49 ) ( 860 ) ( 461 ) Balance at end of period $ 1,440 $ 2,305 $ 1,440 $ 2,305 Noncontrolling Interest 1 Balance at beginning of period $ 14,080 $ 8,950 $ 14,145 $ 8,957 Net income attributable to noncontrolling interest 317 267 587 492 Issuance and acquisition by noncontrolling owners — 5,181 — 5,181 Redemption of noncontrolling interest ( 41 ) — ( 58 ) — Distributions ( 319 ) ( 226 ) ( 637 ) ( 458 ) Balance at end of period $ 14,037 $ 14,172 $ 14,037 $ 14,172 Total Stockholders' Equity at beginning of period $ 118,620 $ 108,346 $ 117,442 $ 106,457 Total Stockholders' Equity at end of period $ 119,347 $ 116,075 $ 119,347 $ 116,075 1 Excludes redeemable noncontrolling interest See Notes to Consolidated Financial Statements. 8 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Dollars in millions except per share amounts NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS Basis of Presentation Throughout this document, AT&T Inc. is referred to as “we,” “AT&T” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The results for the interim periods are not necessarily indicative of those for the full year. These consolidated financial statements include all adjustments that are necessary to present fairly the results for the presented interim periods, consisting of normal recurring accruals and other items. All significant intercompany transactions are eliminated in the consolidation process. Investments in subsidiaries and partnerships which we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included in our results on a one quarter lag. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including translation adjustments. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions, including estimates of fair value, probable losses and expenses, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 2. EARNINGS PER SHARE A reconciliation of the numerators and denominators of basic and diluted earnings per share is shown in the table below: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Numerators Numerator for basic earnings per share: Net Income Attributable to Common Stock $ 3,546 $ 4,437 $ 6,941 $ 8,613 Dilutive potential common shares: Mobility preferred interests — — — 72 Share-based payment — — — 7 Numerator for diluted earnings per share $ 3,546 $ 4,437 $ 6,941 $ 8,692 Denominators (000,000) Denominator for basic earnings per share: Weighted average number of common shares outstanding 7,196 7,180 7,194 7,174 Dilutive potential common shares: Mobility preferred interests (in shares) — — — 142 Share-based payment (in shares) 2 — 1 11 Denominator for diluted earnings per share 7,198 7,180 7,195 7,327 On April 5, 2023, we repurchased all our Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests). For periods prior to repurchase, under Accounting Standards Update (ASU) No. 2020-06, “Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), the ability to settle the Mobility preferred interests in stock was reflected in our diluted earnings per share calculation. 9 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts NOTE 3. OTHER COMPREHENSIVE INCOME Changes in the balances of each component included in accumulated OCI are presented below. All amounts are net of tax. Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss) Balance as of December 31, 2023 $ ( 1,337 ) $ ( 57 ) $ ( 1,029 ) $ 4,723 $ 2,300 Other comprehensive income (loss) before reclassifications ( 192 ) ( 17 ) ( 49 ) — ( 258 ) Amounts reclassified from accumulated OCI 127 1 10 1 22 2 ( 761 ) 3 ( 602 ) Net other comprehensive income (loss) ( 65 ) ( 7 ) ( 27 ) ( 761 ) ( 860 ) Balance as of June 30, 2024 $ ( 1,402 ) $ ( 64 ) $ ( 1,056 ) $ 3,962 $ 1,440 Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss) Balance as of December 31, 2022 $ ( 1,800 ) $ ( 90 ) $ ( 1,998 ) $ 6,654 $ 2,766 Other comprehensive income (loss) before reclassifications 457 12 24 — 493 Amounts reclassified from accumulated OCI — 1 5 1 23 2 ( 982 ) 3 ( 954 ) Net other comprehensive income (loss) 457 17 47 ( 982 ) ( 461 ) Balance as of June 30, 2023 $ ( 1,343 ) $ ( 73 ) $ ( 1,951 ) $ 5,672 $ 2,305 1 (Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income. 2 (Gains) losses are primarily included in “Interest expense” in the consolidated statements of income (see Note 7). 3 The amortization of prior service credits associated with postretirement benefits are included in “Other income (expense) - net” in the consolidated statements of income (see Note 6). NOTE 4. SEGMENT INFORMATION Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two reportable segments: Communications and Latin America. We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as operating income excluding depreciation and amortization. EBITDA is used as part of our management reporting and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided by total revenue. The Communications segment provides wireless and wireline telecom and broadband services to consumers located in the U.S. and businesses globally. Our business strategies reflect integrated product offerings that cut across product lines and utilize shared assets. This segment contains the following business units: • Mobility provides nationwide wireless service and equipment. • Business Wireline provides advanced ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers. In the first quarter of 2024, we began 10 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts offering our fixed wireless access product that provides internet services delivered over our 5G wireless network where available. • Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services to residential customers in select locations and our fixed wireless access product that provides home internet services delivered over our 5G wireless network where available. Consumer Wireline also provides legacy telephony voice communication services. The Latin America segment provides wireless services and equipment in Mexico. Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes. Corporate includes : • DTV-related retained costs , which are costs previously allocated to the Video business that were retained after the transaction, net of reimbursements from DIRECTV Entertainment Holdings, LLC (DIRECTV) under transition service agreements. • Parent administration support , which includes costs borne by AT&T where the business units do not influence decision making. • Securitization fees associated with our sales of receivables (see Note 8). • Value portfolio , which are businesses no longer integral to our operations or which we no longer actively market. Other items consist of : • Certain significant items , which includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets, employee separation charges associated with voluntary and/or strategic offers, asset impairments and abandonments and restructuring, and other items for which the segments are not being evaluated. “Interest expense” and “Other income (expense) – net” are managed only on a total company basis and are, accordingly, reflected only in consolidated results. For the three months ended June 30, 2024 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 20,480 $ 11,285 $ 9,195 $ 2,476 $ 6,719 Business Wireline 4,755 3,267 1,488 1,386 102 Consumer Wireline 3,347 2,249 1,098 914 184 Total Communications 28,582 16,801 11,781 4,776 7,005 Latin America - Mexico 1,103 925 178 172 6 Segment Total 29,685 17,726 11,959 4,948 7,011 Corporate and Other Corporate: DTV-related retained costs — 116 ( 116 ) 102 ( 218 ) Parent administration support — 443 ( 443 ) 2 ( 445 ) Securitization fees 29 150 ( 121 ) — ( 121 ) Value portfolio 83 25 58 5 53 Total Corporate 112 734 ( 622 ) 109 ( 731 ) Certain significant items — 505 ( 505 ) 15 ( 520 ) Total Corporate and Other 112 1,239 ( 1,127 ) 124 ( 1,251 ) AT&T Inc. $ 29,797 $ 18,965 $ 10,832 $ 5,072 $ 5,760 11 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts For the three months ended June 30, 2023 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 20,315 $ 11,579 $ 8,736 $ 2,123 $ 6,613 Business Wireline 5,279 3,550 1,729 1,333 396 Consumer Wireline 3,251 2,226 1,025 857 168 Total Communications 28,845 17,355 11,490 4,313 7,177 Latin America - Mexico 967 821 146 185 ( 39 ) Segment Total 29,812 18,176 11,636 4,498 7,138 Corporate and Other Corporate: DTV-related retained costs — 178 ( 178 ) 152 ( 330 ) Parent administration support ( 3 ) 332 ( 335 ) 2 ( 337 ) Securitization fees 17 154 ( 137 ) — ( 137 ) Value portfolio 91 24 67 6 61 Total Corporate 105 688 ( 583 ) 160 ( 743 ) Certain significant items — ( 28 ) 28 17 11 Total Corporate and Other 105 660 ( 555 ) 177 ( 732 ) AT&T Inc. $ 29,917 $ 18,836 $ 11,081 $ 4,675 $ 6,406 For the six months ended June 30, 2024 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 41,074 $ 22,924 $ 18,150 $ 4,963 $ 13,187 Business Wireline 9,668 6,754 2,914 2,748 166 Consumer Wireline 6,697 4,505 2,192 1,795 397 Total Communications 57,439 34,183 23,256 9,506 13,750 Latin America - Mexico 2,166 1,808 358 349 9 Segment Total 59,605 35,991 23,614 9,855 13,759 Corporate and Other Corporate: DTV-related retained costs — 250 ( 250 ) 222 ( 472 ) Parent administration support — 835 ( 835 ) 3 ( 838 ) Securitization fees 55 315 ( 260 ) — ( 260 ) Value portfolio 165 51 114 9 105 Total Corporate 220 1,451 ( 1,231 ) 234 ( 1,465 ) Certain significant items — 657 ( 657 ) 30 ( 687 ) Total Corporate and Other 220 2,108 ( 1,888 ) 264 ( 2,152 ) AT&T Inc. $ 59,825 $ 38,099 $ 21,726 $ 10,119 $ 11,607 12 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts For the six months ended June 30, 2023 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 40,897 $ 23,792 $ 17,105 $ 4,221 $ 12,884 Business Wireline 10,610 7,173 3,437 2,663 774 Consumer Wireline 6,490 4,510 1,980 1,718 262 Total Communications 57,997 35,475 22,522 8,602 13,920 Latin America - Mexico 1,850 1,559 291 360 ( 69 ) Segment Total 59,847 37,034 22,813 8,962 13,851 Corporate and Other Corporate: DTV-related retained costs — 347 ( 347 ) 296 ( 643 ) Parent administration support ( 12 ) 706 ( 718 ) 3 ( 721 ) Securitization fees 36 275 ( 239 ) — ( 239 ) Value portfolio 185 52 133 11 122 Total Corporate 209 1,380 ( 1,171 ) 310 ( 1,481 ) Certain significant items — ( 72 ) 72 34 38 Total Corporate and Other 209 1,308 ( 1,099 ) 344 ( 1,443 ) AT&T Inc. $ 60,056 $ 38,342 $ 21,714 $ 9,306 $ 12,408 The following table is a reconciliation of Segment Operating Income to “Income Before Income Taxes” reported in our consolidated statements of income: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Communications $ 7,005 $ 7,177 $ 13,750 $ 13,920 Latin America 6 ( 39 ) 9 ( 69 ) Segment Operating Income 7,011 7,138 13,759 13,851 Reconciling Items: Corporate ( 731 ) ( 743 ) ( 1,465 ) ( 1,481 ) Transaction and other costs ( 35 ) — ( 67 ) — Amortization of intangibles acquired ( 15 ) ( 17 ) ( 30 ) ( 34 ) Asset impairments and abandonments and restructuring ( 480 ) — ( 639 ) — Benefit-related gains (losses) 10 28 49 72 AT&T Operating Income 5,760 6,406 11,607 12,408 Interest expense 1,699 1,608 3,423 3,316 Equity in net income of affiliates 348 380 643 918 Other income (expense) — net 682 987 1,133 1,922 Income Before Income Taxes $ 5,091 $ 6,165 $ 9,960 $ 11,932 13 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts NOTE 5. REVENUE RECOGNITION Revenue Categories The following tables set forth reported revenue by category and by business unit: For the three months ended June 30, 2024 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 16,277 $ — $ — $ 699 $ — $ 16,976 Business service — 4,571 — — — 4,571 Broadband — — 2,741 — — 2,741 Legacy voice and data — — 323 — 62 385 Other — — 283 — 50 333 Total Service 16,277 4,571 3,347 699 112 25,006 Equipment 4,203 184 — 404 — 4,791 Total $ 20,480 $ 4,755 $ 3,347 $ 1,103 $ 112 $ 29,797 For the three months ended June 30, 2023 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 15,745 $ — $ — $ 635 $ — $ 16,380 Business service — 5,114 — — — 5,114 Broadband — — 2,561 — — 2,561 Legacy voice and data — — 383 — 80 463 Other — — 307 — 25 332 Total Service 15,745 5,114 3,251 635 105 24,850 Equipment 4,570 165 — 332 — 5,067 Total $ 20,315 $ 5,279 $ 3,251 $ 967 $ 105 $ 29,917 For the six months ended June 30, 2024 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 32,271 $ — $ — $ 1,389 $ — $ 33,660 Business service — 9,271 — — — 9,271 Broadband — — 5,463 — — 5,463 Legacy voice and data — — 665 — 124 789 Other — — 569 — 96 665 Total Service 32,271 9,271 6,697 1,389 220 49,848 Equipment 8,803 397 — 777 — 9,977 Total $ 41,074 $ 9,668 $ 6,697 $ 2,166 $ 220 $ 59,825 14 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts For the six months ended June 30, 2023 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 31,228 $ — $ — $ 1,226 $ — $ 32,454 Business service — 10,314 — — — 10,314 Broadband — — 5,088 — — 5,088 Legacy voice and data — — 779 — 163 942 Other — — 623 — 46 669 Total Service 31,228 10,314 6,490 1,226 209 49,467 Equipment 9,669 296 — 624 — 10,589 Total $ 40,897 $ 10,610 $ 6,490 $ 1,850 $ 209 $ 60,056 Deferred Customer Contract Acquisition and Fulfillment Costs Costs to acquire and fulfill customer contracts, including commissions on service activations for our Mobility, Business Wireline and Consumer Wireline services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years . The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets: June 30, December 31, Consolidated Balance Sheets 2024 2023 Deferred Acquisition Costs Prepaid and other current assets $ 3,176 $ 3,233 Other Assets 4,087 4,077 Total deferred customer contract acquisition costs $ 7,263 $ 7,310 Deferred Fulfillment Costs Prepaid and other current assets $ 2,213 $ 2,340 Other Assets 3,533 3,843 Total deferred customer contract fulfillment costs $ 5,746 $ 6,183 The following table presents deferred customer contract acquisition and fulfillment cost amortization, which are primarily included in “Selling, general and administrative” and “Other cost of revenues,” respectively, for the six months ended: June 30, June 30, Consolidated Statements of Income 2024 2023 Deferred acquisition cost amortization $ 1,808 $ 1,688 Deferred fulfillment cost amortization 1,294 1,353 Contract Assets and Liabilities A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., trade-in device credits) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term. Our contract assets primarily relate to our wireless businesses. Promotional equipment sales where we offer handset credits, which are allocated between equipment and service in proportion to their standalone selling prices, when customers commit to a 15 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts specified service period result in additional contract assets recognized. These contract assets will amortize over the service contract period, resulting in lower future service revenue. When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Reductions in the contract liability will be recorded as we satisfy the performance obligations. The following table presents contract assets and liabilities on our consolidated balance sheets: June 30, December 31, Consolidated Balance Sheets 2024 2023 Contract asset $ 6,492 $ 6,518 Current portion in “Prepaid and other current assets” 3,661 3,549 Contract liability 4,155 3,994 Current portion in “Advanced billings and customer deposits” 3,857 3,666 Our beginning of period contract liability recorded as customer contract revenue during 2024 was $ 3,142 . Remaining Performance Obligations Remaining performance obligations represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless and residential internet agreements. Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of June 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 38,744 , of which we expect to recognize approximately 72 % by the end of 2025, with the balance recognized thereafter. NOTE 6. PENSION AND POSTRETIREMENT BENEFITS Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in 2024. We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required. 16 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts The following table details qualified pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension (credit) cost is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.” Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Pension cost: Service cost – benefits earned during the period $ 121 $ 122 $ 243 $ 243 Interest cost on projected benefit obligation 397 516 793 1,032 Expected return on assets ( 552 ) ( 715 ) ( 1,105 ) ( 1,429 ) Amortization of prior service credit ( 22 ) ( 34 ) ( 44 ) ( 67 ) Net pension (credit) cost before remeasurement ( 56 ) ( 111 ) ( 113 ) ( 221 ) Actuarial (gain) loss — 289 — 289 Settlement (gain) loss — ( 363 ) — ( 363 ) Net pension (credit) cost $ ( 56 ) $ ( 185 ) $ ( 113 ) $ ( 295 ) Postretirement cost: Service cost – benefits earned during the period $ 6 $ 6 $ 11 $ 12 Interest cost on accumulated postretirement benefit obligation 78 85 155 170 Expected return on assets ( 16 ) ( 33 ) ( 30 ) ( 66 ) Amortization of prior service credit ( 482 ) ( 618 ) ( 964 ) ( 1,236 ) Net postretirement (credit) cost $ ( 414 ) $ ( 560 ) $ ( 828 ) $ ( 1,120 ) Combined net pension and postretirement (credit) cost $ ( 470 ) $ ( 745 ) $ ( 941 ) $ ( 1,415 ) We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental pension benefits costs not included in the table above were $ 16 and $ 18 in the second quarter and $ 33 and $ 37 for the first six months of 2024 and 2023, respectively. NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2023. 17 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts Long-Term Debt and Other Financial Instruments The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments are summarized as follows: June 30, 2024 December 31, 2023 Carrying Fair Carrying Fair Amount Value Amount Value Notes and debentures 1 $ 126,253 $ 117,290 $ 133,402 $ 128,474 Commercial paper 2,693 2,693 2,091 2,091 Investment securities 2 2,972 2,972 2,836 2,836 1 Includes credit agreement borrowings. 2 Excludes investments accounted for under the equity method. The carrying amount of debt with an original maturity of less than one year approximates fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets. Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of June 30, 2024 and December 31, 2023. Derivatives designated as hedging instruments are reflected as “Prepaid and other current assets,” “Other Assets,” “Accounts payable and accrued liabilities,” and “Other noncurrent liabilities” on our consolidated balance sheets. June 30, 2024 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,087 $ — $ — $ 1,087 International equities 285 — — 285 Fixed income equities 208 — — 208 Available-for-Sale Debt Securities — 1,169 — 1,169 Asset Derivatives Cross-currency swaps — 121 — 121 Liability Derivatives Interest rate swaps — ( 1 ) — ( 1 ) Cross-currency swaps — ( 3,794 ) — ( 3,794 ) December 31, 2023 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,002 $ — $ — $ 1,002 International equities 215 — — 215 Fixed income equities 209 — — 209 Available-for-Sale Debt Securities — 1,228 — 1,228 Asset Derivatives Cross-currency swaps — 424 — 424 Liability Derivatives Interest rate swaps — ( 2 ) — ( 2 ) Cross-currency swaps — ( 3,601 ) — ( 3,601 ) 18 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts Investment Securities Our investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The components comprising total gains and losses in the period on equity securities are as follows: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Total gains (losses) recognized on equity securities $ 29 $ 82 $ 126 $ 165 Gains (losses) recognized on equity securities sold ( 5 ) ( 3 ) ( 8 ) 1 Unrealized gains (losses) recognized on equity securities held at end of period $ 34 $ 85 $ 134 $ 164 At June 30, 2024, available-for-sale debt securities totaling $ 1,169 have maturities as follows - less than one year: $ 62 ; one to three years: $ 192 ; three to five years: $ 116 ; five or more years: $ 799 . Our cash equivalents (money market securities), short-term investments (certificate and time deposits) and nonrefundable customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments and nonrefundable customer deposits are recorded in “Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets. Derivative Financial Instruments We enter into derivative transactions to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged. Fair Value Hedging Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount. We also designate most of our cross-currency swaps and foreign exchange contracts as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt. For cross-currency hedges, we have elected to exclude the change in fair value of the swap related to both time value and cross-currency basis spread from the assessment of hedge effectiveness. For foreign exchange contracts, we have elected to exclude the change in fair value of forward points from the assessment of hedge effectiveness. Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of excluded components. In instances where we have elected to exclude components from the assessment of hedge effectiveness related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings over the life of the hedging instrument. Unrealized gains on derivatives designated as fair value hedges are recorded at fair value as assets, and unrealized losses are recorded at fair market value as liabilities. Except for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the six months ended June 30, 2024 and 2023, no ineffectiveness was measured on fair value hedges. 19 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts Cash Flow Hedging We designate some of our cross-currency swaps as cash flow hedges to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk and interest rate risk generated from our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign denominated interest rate to a fixed U.S. dollar denominated interest rate. Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings. Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify $ 59 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks. Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2024, we had posted collateral of $ 680 (a deposit asset) and held collateral of $ 0 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the final collateral exchange in June, we would have been required to post additional collateral of $ 50 . If AT&T’s credit rating had been downgraded three ratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of $ 3,594 . At December 31, 2023, we had posted collateral of $ 670 (a deposit asset) and held collateral of $ 5 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments. Following are the notional amounts of our outstanding derivative positions: June 30, December 31, 2024 2023 Interest rate swaps $ 1,750 $ 1,750 Cross-currency swaps 35,351 38,006 Total $ 37,101 $ 39,756 20 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts Following are the related hedged items affecting our financial position and performance: Effect of Derivatives on the Consolidated Statements of Income Three months ended Six months ended June 30, June 30, Fair Value Hedging Relationships 2024 2023 2024 2023 Interest rate swaps (“Interest expense”): Gain (loss) on interest rate swaps $ ( 1 ) $ ( 14 ) $ ( 1 ) $ ( 7 ) Gain (loss) on long-term debt 1 14 1 7 Cross-currency swaps: Gain (loss) on cross-currency swaps ( 178 ) 389 ( 424 ) 769 Gain (loss) on long-term debt 178 ( 389 ) 424 ( 769 ) Gain (loss) recognized in accumulated OCI ( 325 ) 222 ( 70 ) 40 Foreign exchange contracts: Gain (loss) on foreign exchange contracts — 4 — 11 Gain (loss) on long-term debt — ( 4 ) — ( 11 ) Gain (loss) recognized in accumulated OCI — ( 3 ) — ( 6 ) In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.” The following table presents information for our cash flow hedging relationships: Three months ended Six months ended June 30, June 30, Cash Flow Hedging Relationships 2024 2023 2024 2023 Cross-currency swaps: Gain (loss) recognized in accumulated OCI $ — $ 2 $ 5 $ ( 8 ) Interest rate locks: Interest income (expense) reclassified from accumulated OCI into income ( 14 ) ( 14 ) ( 29 ) ( 29 ) NOTE 8. SALES OF RECEIVABLES We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs are discussed in detail below and generally consist of (1) receivables arising from equipment installment plans, which are sold for cash and beneficial interests, such as deferred purchase price, when applicable, and (2) revolving trade receivables, which are sold for cash. Under the terms of our agreements for these programs, we continue to service the transferred receivables on behalf of the financial institutions. 21 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Net cash received (paid) from equipment installment receivables program 1 $ ( 674 ) $ ( 36 ) $ ( 553 ) $ ( 60 ) Net cash received (paid) from revolving receivables program ( 29 ) 1,000 247 1,000 Net cash received (paid) from other programs — ( 142 ) — ( 256 ) Total net cash impact to cash flows from operating activities 2 $ ( 703 ) $ 822 $ ( 306 ) $ 684 1 Cash from initial sales of $ 2,532 and $ 2,656 for the three months and $ 5,406 and $ 5,185 for the six months ended June 30, 2024 and 2023, respectively. 2 Net of facility fees. The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from operations in our consolidated statements of cash flows. In the event cash is received on the beneficial interests, those receipts are classified as cash flows from investing activities, when applicable. Our equipment installment and revolving receivables programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced: June 30, 2024 December 31, 2023 Equipment Equipment Installment Revolving Installment Revolving Gross receivables: $ 3,194 $ 1,260 $ 3,714 $ 924 Balance sheet classification Accounts receivable Notes receivable 1,581 — 1,695 — Trade receivables 651 1,260 548 924 Other Assets Noncurrent notes and trade receivables 962 — 1,471 — Outstanding portfolio of receivables derecognized from our consolidated balance sheets $ 12,210 $ 1,800 $ 12,027 $ 1,500 Cash proceeds received, net of remittances 1 8,947 1,800 9,361 1,500 1 Represents amounts to which financial institutions remain entitled, excluding the beneficial interests. Equipment Installment Receivables Program We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and beneficial interests. In the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred. 22 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts The following table sets forth a summary of equipment installment receivables sold under this program: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Gross receivables sold 1 $ 2,557 $ 2,687 $ 5,461 $ 5,247 Net receivables sold 2 2,438 2,554 5,195 4,992 Cash proceeds received 2,532 2,656 5,406 5,185 Guarantee obligation recorded 217 242 483 448 1 Receivables net of promotion credits. 2 Receivables net of allowance and other reserves. Beneficial interests, when applicable, and guarantee obligations are initially recorded at estimated fair value and subsequently adjusted for changes in present value of expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties and contemplates changes in value after the launch of a device model. The fair value measurements used for the beneficial interests and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7). The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated beneficial interests: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Fair value of repurchased receivables $ 724 $ 765 $ 1,442 $ 1,306 Carrying value of beneficial interests 743 769 1,464 1,311 Gain (loss) on repurchases 1 $ ( 19 ) $ ( 4 ) $ ( 22 ) $ ( 5 ) 1 These gains (losses) are included in “Selling, general and administrative” expense in the consolidated statements of income. At June 30, 2024 and December 31, 2023, our beneficial interests were $ 2,764 and $ 2,270 , respectively, of which $ 1,639 and $ 1,296 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at June 30, 2024 and December 31, 2023 was $ 299 and $ 385 , respectively, of which $ 106 and $ 111 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our beneficial interests and guarantee obligation. Revolving Receivables Program During the first quarter of 2024, we expanded our revolving agreement to transfer up to $ 1,800 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. This agreement is subject to renewal on an annual basis and the transfer limit may be expanded or reduced from time to time. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The transferred receivables are fully guaranteed by our bankruptcy-remote subsidiaries, which hold additional receivables in the amount of $ 1,260 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. Our maximum exposure to loss related to these receivables transferred is limited to the derecognized amount outstanding. 23 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts The following table sets forth a summary of the revolving receivables sold: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Gross receivables sold/cash proceeds received 1 $ 4,672 $ 1,000 $ 8,846 $ 1,000 Total collections under revolving agreement 4,672 — 8,546 — Net cash proceeds received $ — $ 1,000 $ 300 $ 1,000 Net receivables sold 2 $ 4,549 $ 982 $ 8,612 $ 982 1 Includes initial sales of receivables of $ 0 and $ 1,000 for the three months and $ 300 and $ 1,000 for the six months ended June 30, 2024 and 2023, respectively. 2 Receivables net of allowance and other reserves. NOTE 9. TRANSACTIONS WITH DIRECTV We account for our investment in DIRECTV under the equity method and record our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party. At June 30, 2024, our investment in DIRECTV was $ 293 . The following table sets forth our share of DIRECTV’s earnings included in “Equity in net income of affiliates” and cash distributions received from DIRECTV: Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 DIRECTV’s earnings included in Equity in net income of affiliates $ 350 $ 377 $ 674 $ 911 Distributions classified as operating activities $ 350 $ 377 $ 674 $ 911 Distributions classified as investing activities 392 200 586 974 Cash distributions received from DIRECTV $ 742 $ 577 $ 1,260 $ 1,885 For the three and six months ended June 30, 2024, we billed DIRECTV approximately $ 134 and $ 279 under commercial arrangements and transition service agreements, which were recorded as a reduction to the operations and support expenses incurred. At June 30, 2024 , we had accounts receivable from DIRECTV of $ 247 and accounts payable to DIRECTV of $ 50 . We are not committed, implicitly or explicitly, to provide financial or other support, other than as noted above, as our involvement with DIRECTV is limited to the carrying amount of the assets and liabilities recognized on our consolidated balance sheet. NOTE 10. SUPPLIER AND VENDOR FINANCING PROGRAMS Supplier Financing Program We actively manage the timing of our supplier payments for operating items to optimize the use of our cash and seek to make payments on 90-day or greater terms, while providing suppliers with access to bank facilities that permit earlier payment at their cost. Our supplier financing program does not result in changes to our normal, contracted payment cycles or cash from operations. 24 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts At the supplier’s election, they can receive payment of AT&T obligations prior to the scheduled due dates, at a discounted price from the third-party financial institution. The discounted price paid by participating suppliers is based on a variable rate that is indexed to the overnight borrowing rate. We agree to pay the financial institution the stated amount generally within 90 days of receipt of the invoice. We do not have pledged assets or other guarantees under our supplier financing program. Suppliers had elected to sell to the third-party financial institutions $ 3,059 and $ 2,844 of our outstanding payment obligations as of June 30, 2024 and December 31, 2023, respectively. These amounts are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets. Our supplier financing programs are reported as operating or investing (when capitalizable) activities in our statements of cash flows when paid. Direct Supplier Financing We also have arrangements with suppliers of handset inventory that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (variable rate extension fee). We had $ 3,432 of direct supplier financing outstanding at June 30, 2024 and $ 5,442 as of December 31, 2023, which are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets. Our direct supplier financing is reported as operating activities in our statements of cash flows when paid. Vendor Financing In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms of 120 days or more (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. For the six months ended June 30, 2024 and 2023, we recorded vendor financing commitments related to capital investments of $ 523 and $ 1,341 , respectively. We had $ 1,827 of vendor financing payables at June 30, 2024, with $ 883 included in “Accounts payable and accrued liabilities” and $ 2,833 of vendor financing payables at December 31, 2023, with $ 1,975 included in “Accounts payable and accrued liabilities.” NOTE 11. ADDITIONAL FINANCIAL INFORMATION Cash and Cash Flows We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments. The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets: June 30, December 31, 2024 2023 2023 2022 Cash and cash equivalents $ 3,093 $ 9,528 $ 6,722 $ 3,701 Restricted cash in Prepaid and other current assets 1 1 2 1 Restricted cash in Other Assets 109 93 109 91 Cash and Cash Equivalents and Restricted Cash $ 3,203 $ 9,622 $ 6,833 $ 3,793 25 AT&T INC. JUNE 30, 2024 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Dollars in millions except per share amounts The following table summarizes cash paid during the periods for interest and income taxes: Six months ended June 30, Cash paid (received) during the period for: 2024 2023 Interest $ 3,644 $ 3,604 Income taxes, net of refunds 299 335 The following table summarizes capital expenditures: Six months ended June 30, 2024 2023 Purchase of property and equipment $ 8,042 $ 8,515 Interest during construction - capital expenditures 1 76 90 Total Capital Expenditures $ 8,118 $ 8,605 The following table summarizes acquisitions, net of cash acquired: Six months ended June 30, 2024 2023 Business acquisitions $ — $ — Spectrum acquisitions 147 68 Interest during construction - spectrum 1 123 447 Total Acquisitions $ 270 $ 515 1 Total capitalized interest was $ 199 and $ 537 for the six months ended June 30, 2024 and 2023, respectively. 26 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Dollars in millions except per share amounts OVERVIEW AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document. AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc., and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes). We have two reportable segments: Communications and Latin America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. Percentage increases and decreases that are not considered meaningful are denoted with a dash. Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Operating Revenues Communications $ 28,582 $ 28,845 (0.9) % $ 57,439 $ 57,997 (1.0) % Latin America - Mexico 1,103 967 14.1 2,166 1,850 17.1 Corporate 112 105 6.7 220 209 5.3 AT&T Operating Revenues $ 29,797 $ 29,917 (0.4) % $ 59,825 $ 60,056 (0.4) % Operating Income Communications $ 7,005 $ 7,177 (2.4) % $ 13,750 $ 13,920 (1.2) % Latin America - Mexico 6 (39) — 9 (69) — Segment Operating Income 7,011 7,138 (1.8) 13,759 13,851 (0.7) Corporate (731) (743) 1.6 (1,465) (1,481) 1.1 Certain significant items (520) 11 — (687) 38 — AT&T Operating Income $ 5,760 $ 6,406 (10.1) % $ 11,607 $ 12,408 (6.5) % The Communications segment provides services to businesses and consumers located in the U.S. and businesses globally. Our business strategies reflect integrated product offerings that cut across product lines and utilize shared assets. This segment contains the following business units: • Mobility provides nationwide wireless service and equipment. • Business Wireline provides advanced ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers. In the first quarter of 2024, we began offering our fixed wireless access product that provides internet services delivered over our 5G wireless network where available. • Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services to residential customers in select locations and our fixed wireless access product that provides home internet services delivered over our 5G wireless network where available. Consumer Wireline also provides legacy telephony voice communication services. The Latin America segment provides wireless services and equipment in Mexico. 27 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts RESULTS OF OPERATIONS Consolidated Results Our financial results are summarized in the discussions that follow. Additional analysis is discussed in our “Segment Results” section. Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Operating Revenues Service $ 25,006 $ 24,850 0.6 % $ 49,848 $ 49,467 0.8 % Equipment 4,791 5,067 (5.4) 9,977 10,589 (5.8) Total Operating Revenues 29,797 29,917 (0.4) 59,825 60,056 (0.4) Operating Expenses Operations and support 18,965 18,836 0.7 38,099 38,342 (0.6) Depreciation and amortization 5,072 4,675 8.5 10,119 9,306 8.7 Total Operating Expenses 24,037 23,511 2.2 48,218 47,648 1.2 Operating Income 5,760 6,406 (10.1) 11,607 12,408 (6.5) Interest expense 1,699 1,608 5.7 3,423 3,316 3.2 Equity in net income of affiliates 348 380 (8.4) 643 918 (30.0) Other income (expense) — net 682 987 (30.9) 1,133 1,922 (41.1) Income Before Income Taxes 5,091 6,165 (17.4) 9,960 11,932 (16.5) Net Income 3,949 4,762 (17.1) 7,700 9,215 (16.4) Net Income Attributable to AT&T 3,597 4,489 (19.9) 7,042 8,717 (19.2) Net Income Attributable to Common Stock $ 3,546 $ 4,437 (20.1) % $ 6,941 $ 8,613 (19.4) % Operating revenues decreased in the second quarter and for the first six months of 2024, reflecting declines in Business Wireline service and Mobility equipment revenues, partially offset by Mobility service, Consumer Wireline and Mexico revenues . Operations and support expenses increased in the second quarter and decreased for the first six months of 2024. The increase in the second quarter reflects $480 of restructuring charges primarily related to termination fees of a RAN vendor whose equipment is being phased out of our network as part of our network modernization programs. This increase is largely offset by lower Mobility equipment costs resulting from lower wireless sales volumes and expense declines from our continued transformation efforts. Expense decreases for the first six months reflect lower Mobility equipment costs and our transformation efforts that were partially offset by higher restructuring charges associated with our deployment of Open RAN. Depreciation and amortization expense increased in the second quarter and for the first six months of 2024, primarily due to the shortening of estimated economic lives of wireless network equipment that will be replaced earlier than originally anticipated with our deployment of Open RAN. Also contributing to higher depreciation expense was the impact of ongoing capital spending for strategic initiatives such as fiber and network upgrades. Operating income decreased in the second quarter and for the first six months of 2024. Our operating income margin in the second quarter decreased from 21.4% in 2023 to 19.3% in 2024 and for the first six months decreased from 20.7% in 2023 to 19.4% in 2024. Interest expense increased in the second quarter and for the first six months of 2024, primarily due to lower capitalized interest associated with spectrum acquisitions, partially offset by lower debt balances. Interest expense for the first six months of 2023 also included distributions on Mobility preferred interests, which were repurchased on April 5, 2023. 28 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Equity in net income of affiliates decreased in the second quarter and for the first six months of 2024, primarily due to the performance of our investment in DIRECTV, which included our share of a gain on a sale-leaseback transaction by DIRECTV of approximately $100 in the first quarter of 2023 (see Note 9). Other income (expense) – net decreased in the second quarter and for the first six months of 2024. The decreases were primarily driven by lower pension and postretirement benefit credits in 2024 and net actuarial and settlement gains in 2023 with no corresponding remeasurement in 2024 (see Note 6). Also contributing to the decrease for the first six months were first-quarter 2024 noncash impairments recognized on a held-for-sale business and an equity investment in a Latin America satellite business. Income tax expense decreased in the second quarter and for the first six months of 2024, primarily due to lower income before income tax. Our effective tax rate was 22.4% in the second quarter of 2024 and 22.7% for the first six months of 2024, versus 22.8% and 22.8% in the comparable periods in the prior year. COMMUNICATIONS SEGMENT Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Segment Operating Revenues Mobility $ 20,480 $ 20,315 0.8 % $ 41,074 $ 40,897 0.4 % Business Wireline 4,755 5,279 (9.9) 9,668 10,610 (8.9) Consumer Wireline 3,347 3,251 3.0 6,697 6,490 3.2 Total Segment Operating Revenues $ 28,582 $ 28,845 (0.9) % $ 57,439 $ 57,997 (1.0) % Segment Operating Income Mobility $ 6,719 $ 6,613 1.6 % $ 13,187 $ 12,884 2.4 % Business Wireline 102 396 (74.2) 166 774 (78.6) Consumer Wireline 184 168 9.5 397 262 51.5 Total Segment Operating Income $ 7,005 $ 7,177 (2.4) % $ 13,750 $ 13,920 (1.2) % Selected Subscribers and Connections June 30, (in 000s) 2024 2023 Mobility Subscribers 1 115,474 111,854 Total domestic broadband connections 15,352 15,304 Network access lines in service 3,702 4,677 VoIP connections 2,387 2,749 1 Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics. Connected devices include data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Operating revenues decreased in the second quarter and for the first six months of 2024, primarily driven by declines in our Business Wireline business unit, which reflects lower demand for legacy services and product simplification, as well as the absence of revenues from our cybersecurity business that was contributed to a new cybersecurity joint venture LevelBlue in the second quarter of 2024. Revenue declines were also driven by lower Mobility equipment revenue. These decreases were partially offset by increases in our Mobility and Consumer Wireline business units, driven by gains in wireless and broadband services. 29 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Operating income decreased in the second quarter and for the first six months of 2024. Our Communications segment operating income margin in the second quarter decreased from 24.9% in 2023 to 24.5% in 2024 and for the first six months decreased from 24.0% in 2023 to 23.9% in 2024. Communications Business Unit Discussion Mobility Results Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Operating revenues Service $ 16,277 $ 15,745 3.4 % $ 32,271 $ 31,228 3.3 % Equipment 4,203 4,570 (8.0) 8,803 9,669 (9.0) Total Operating Revenues 20,480 20,315 0.8 41,074 40,897 0.4 Operating expenses Operations and support 11,285 11,579 (2.5) 22,924 23,792 (3.6) Depreciation and amortization 2,476 2,123 16.6 4,963 4,221 17.6 Total Operating Expenses 13,761 13,702 0.4 27,887 28,013 (0.4) Operating Income $ 6,719 $ 6,613 1.6 % $ 13,187 $ 12,884 2.4 % The following tables highlight other key measures of performance for Mobility: Subscribers June 30, Percent (in 000s) 2024 2023 Change Postpaid 87,999 85,846 2.5 % Postpaid phone 71,930 70,331 2.3 Prepaid 19,271 19,352 (0.4) Reseller 8,204 6,656 23.3 Total Mobility Subscribers 1 115,474 111,854 3.2 % 1 Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics. Connected devices include data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. 30 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Mobility Net Additions Second Quarter Six-Month Period Percent Percent (in 000s) 2024 2023 Change 2024 2023 Change Postpaid Phone Net Additions 419 326 28.5 % 768 750 2.4 % Total Phone Net Additions 454 449 1.1 804 913 (11.9) Postpaid 2 593 464 27.8 982 1,006 (2.4) Prepaid 82 167 (50.9) 83 207 (59.9) Reseller 322 432 (25.5) 673 540 24.6 Mobility Net Subscriber Additions 1 997 1,063 (6.2) % 1,738 1,753 (0.9) % Postpaid Churn 3 0.85 % 0.95 % (10) BP 0.87 % 0.97 % (10) BP Postpaid Phone-Only Churn 3 0.70 % 0.79 % (9) BP 0.71 % 0.80 % (9) BP 1 Excludes migrations between wireless subscriber categories, including connected devices, and acquisition-related activity during the period. 2 In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were 64 and (31) for the quarters ended June 30, 2024 and 2023 and 52 and (49) for the first six months ended June 30, 2024 and 2023. Wearables and other net adds were 110 and 169 for the quarters ended June 30, 2024 and 2023 and 162 and 305 for the first six months ended June 30, 2024 and 2023. 3 Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month by the total number of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period. Service revenue increased in the second quarter and for the first six months of 2024. The increases are largely due to growth from subscriber gains and postpaid phone average revenue per subscriber (ARPU) growth. ARPU ARPU increased in the second quarter and for the first six months of 2024, reflecting pricing actions. Churn The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-only churn were lower in the second quarter and for the first six months of 2024. Equipment revenue decreased in the second quarter and for the first six months of 2024, primarily driven by lower wireless sales volumes. Operations and support expenses decreased in the second quarter and for the first six months of 2024, primarily due to lower equipment costs driven by lower device sales. Depreciation expense increased in the second quarter and for the first six months of 2024, primarily due to shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our Open RAN deployment and network transformation, and ongoing capital spending for network upgrades and expansion, which we expect to continue through the remainder of 2024. Operating income increased in the second quarter and for the first six months of 2024. Our Mobility operating income margin in the second quarter increased from 32.6% in 2023 to 32.8% in 2024 and for the first six months increased from 31.5% in 2023 to 32.1% in 2024. Our Mobility EBITDA margin in the second quarter increased from 43.0% in 2023 to 44.9% in 2024 and for the first six months increased from 41.8% in 2023 to 44.2% in 2024. EBITDA is defined as operating income excluding depreciation and amortization. 31 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Business Wireline Results Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Operating revenues Service $ 4,571 $ 5,114 (10.6) % $ 9,271 $ 10,314 (10.1) % Equipment 184 165 11.5 397 296 34.1 Total Operating Revenues 4,755 5,279 (9.9) 9,668 10,610 (8.9) Operating expenses Operations and support 3,267 3,550 (8.0) 6,754 7,173 (5.8) Depreciation and amortization 1,386 1,333 4.0 2,748 2,663 3.2 Total Operating Expenses 4,653 4,883 (4.7) 9,502 9,836 (3.4) Operating Income $ 102 $ 396 (74.2) % $ 166 $ 774 (78.6) % Service revenues decreased in the second quarter and for the first six months of 2024, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services. We expect these trends to continue. Revenue declines also reflect the absence of revenues from our cybersecurity business that was contributed to LevelBlue. Equipment revenues increased in the second quarter and for the first six months of 2024, driven by higher customer premises equipment sales, which are nonrecurring in nature. Operations and support expenses decreased in the second quarter and for the first six months of 2024, primarily driven by lower personnel costs associated with ongoing transformation initiatives, and lower network access and customer support expenses. Partially offsetting the decreases were higher vendor credits in the second quarter of 2023 and higher equipment costs for the six-month period. Expense declines also reflect the contribution of our cybersecurity business. As part of our transformation activities, we expect operations and support expense improvements through the remainder of 2024 as we further right size our operations in alignment with the strategic direction of the business. Depreciation expense increased in the second quarter and for the first six months of 2024, primarily due to ongoing capital investment for strategic initiatives such as fiber, which we expect to continue through the remainder of 2024. Operating income decreased in the second quarter and for the first six months of 2024. Our Business Wireline operating income margin in the second quarter decreased from 7.5% in 2023 to 2.1% in 2024 and for the first six months decreased from 7.3% in 2023 to 1.7% in 2024. Our Business Wireline EBITDA margin in the second quarter decreased from 32.8% in 2023 to 31.3% in 2024 and for the first six months decreased from 32.4% in 2023 to 30.1% in 2024. 32 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Consumer Wireline Results Second Quarter Six-Month Period Percent Percent 2024 2023 Change 2024 2023 Change Operating revenues Broadband $ 2,741 $ 2,561 7.0 % $ 5,463 $ 5,088 7.4 % Legacy voice and data services 323 383 (15.7) 665 779 (14.6) Other service and equipment 283 307 (7.8) 569 623 (8.7) Total Operating Revenues 3,347 3,251 3.0 6,697 6,490 3.2 Operating expenses Operations and support 2,249 2,226 1.0 4,505 4,510 (0.1) Depreciation and amortization 914 857 6.7 1,795 1,718 4.5 Total Operating Expenses 3,163 3,083 2.6 6,300 6,228 1.2 Operating Income $ 184 $ 168 9.5 % $ 397 $ 262 51.5 % The following tables highlight other key measures of performance for Consumer Wireline: Connections June 30, Percent (in 000s) 2024 2023 Change Broadband Connections Total Broadband and DSL Connections 13,962 13,895 0.5 % Broadband 1 13,836 13,695 1.0 Fiber Broadband Connections 8,798 7,738 13.7 Voice Connections Retail Consumer Switched Access Lines 1,468 1,829 (19.7) Consumer VoIP Connections 1,794 2,126 (15.6) Total Retail Consumer Voice Connections 3,262 3,955 (17.5) % 1 Includes AT&T Internet Air. Broadband Net Additions Second Quarter Six-Month Period Percent Percent (in 000s) 2024 2023 Change 2024 2023 Change Total Broadband and DSL Net Additions 32 (54) — % 72 (96) — % Broadband Net Additions 1 52 (35) — 107 (58) — Fiber Broadband Net Additions 239 251 (4.8) % 491 523 (6.1) % 1 Includes AT&T Internet Air. Broadband revenues increased in the second quarter and for the first six months of 2024, driven by an increase in fiber customers, which we expect to continue as we invest further in building our fiber footprint, and higher ARPU due to prior-year promotional pricing, partially offset by declines in copper-based broadband services. Legacy voice and data service revenues decreased in the second quarter and for the first six months of 2024, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber services. 33 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Other service and equipment revenues decreased in the second quarter and for the first six months of 2024, reflecting the continued decline in the number of VoIP customers. Operations and support expenses increased in the second quarter and decreased for the first six months of 2024. Expense increases in the second quarter were primarily due to higher network-related costs as our fiber build scales, largely offset by lower customer support costs. Expense decreases for the first six months were driven by lower customer support costs and operating taxes that were offset by higher network-related costs. Depreciation expense increased in the second quarter and for the first six months of 2024, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion, which we expect to continue through the remainder of 2024. Operating income increased in the second quarter and for the first six months of 2024. Our Consumer Wireline operating income margin in the second quarter increased from 5.2% in 2023 to 5.5% in 2024 and for the first six months increased from 4.0% in 2023 to 5.9% in 2024. Our Consumer Wireline EBITDA margin in the second quarter increased from 31.5% in 2023 to 32.8% in 2024 and for the first six months increased from 30.5% in 2023 to 32.7% in 2024. LATIN AMERICA SEGMENT Second Quarter Six-Month Period 2024 2023 Percent Change 2024 2023 Percent Change Segment Operating Revenues Service $ 699 $ 635 10.1 % $ 1,389 $ 1,226 13.3 % Equipment 404 332 21.7 777 624 24.5 Total Segment Operating Revenues 1,103 967 14.1 2,166 1,850 17.1 Segment Operating Expenses Operations and support 925 821 12.7 1,808 1,559 16.0 Depreciation and amortization 172 185 (7.0) 349 360 (3.1) Total Segment Operating Expenses 1,097 1,006 9.0 2,157 1,919 12.4 Operating Income (Loss) $ 6 $ (39) — % $ 9 $ (69) — % The following tables highlight other key measures of performance for Mexico: Subscribers June 30, Percent (in 000s) 2024 2023 Change Mexico Wireless Subscribers Postpaid 5,494 5,030 9.2 % Prepaid 16,809 16,196 3.8 Reseller 333 463 (28.1) Total Mexico Wireless Subscribers 22,636 21,689 4.4 % 34 AT&T INC. JUNE 30, 2024 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Mexico Wireless Net Additions Second Quarter Six-Month Period Percent Percent (in 000s) 2024 2023 Change 2024 2023 Change Mexico Wireless Net Additions Postpaid 142 56 — % 258 105 — % Prepaid 67 50 34.0 146 (8) — Reseller (32) (30) (6.7) (84) (11) — Total Mexico Wireless Net Additions 177 76 — % 320 86 — % Service revenues increased in the second quarter and for the first six months of 2024. The increase in the second quarter was primarily due to growth in subscribers and ARPU, as well as favorable foreign exchange impacts. The increase for the first six months reflects favorable exchange rates primarily from the first quarter of 2024, with subscriber and ARPU growth also contributing to higher revenues. Equipment revenues increased in the second quarter and for the first six months of 2024, primarily driven by higher equipment sales and favorable foreign exchange impacts. Operations and support expenses increased in the second quarter and for the first six months of 2024, primarily due to increased equipment and selling costs resulting from higher sales and unfavorable impact of foreign exchange. Approximately 4% of Mexico expenses are U.S. dollar based, with the remainder in the local currency. Depreciation and amortization expense decreased in the second quarter and for the first six months of 2024, primarily driven by lower in-service assets, partially offset by unfavorable impact of foreign exchange. Operating income improved in the second quarter and for the first six months of 2024. Our Mexico operating income margin in the second quarter increased from (4.0)% in 2023 to 0.5% in 2024 and for the first six months increased from (3.7)% in 2023 to 0.4% in 2024. Our Mexico EBITDA margin in the second quarter increased from 15.1% in 2023 to 16.1% in 2024 and for the first six months increased from 15.7% in 2023 to 16.5% in 2024. COMPETITIVE AND REGULATORY ENVIRONMENT Overview AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided. In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. Nonetheless, since then, the FCC and some state regulatory commissions have maintained, re-imposed or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. Recently, the FCC’s regulatory approach has depended on control of the executive branch, eliminating a variety of antiquated and unnecessary regulations in a number of areas, while imposing or re-imposing regulations in other areas. We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, to reduce inappropriate regulatory burdens that inhibit our ability to compete effectively and offer needed services to our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition. Until 2015, the FCC classified fixed and mobile consumer broadband internet access services as information services subject to minimal regulation. In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by the FCC and imposed “net neutrality rules.” Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC in an order adopted on April 25, 2024, and scheduled to take effect on July 22, 2024. Multiple trade associations and other parties have challenged the FCC’s 35 AT&T INC. JUNE 30, 2024