What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-31 compared with 2025-07-24 · 49 added, 33 removed, 85 unchanged (49% of the section changed)

1 unchanged sentence

Dollars in millions except per share amounts

Cash Provided by Operating Activities

During the first nine months of 2025, cash provided by operating activities was $28,964, compared to $26,875 for the first nine months of 2024, with increases resulting from higher cash flows related to DIRECTV, including a first-quarter 2025 dividend of $1,138, and operational growth.

Partially offsetting this increase and lowering cash from operations during the first nine months of 2025, were advanced cash payments of approximately $1,000 for wholesale access which can be utilized on invoices over future periods.

We actively manage the timing of our supplier payments for operating items to optimize the use of our cash.

1 unchanged sentence

In addition, for payments to suppliers of handset inventory, as part of our working capital initiatives, we have arrangements that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (referred to as direct supplier financing).

The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities approximately $2,146 and $2,120 for the six months ended June 30, 2025 and 2024, respectively.

The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities approximately $2,430 and $3,648 for the nine months ended September 30, 2025 and 2024, respectively.

All supplier financing payments are due within one year.

1 unchanged sentence

Cash Used in Investing Activities

For the first six months of 2025, cash used in investing activities totaled $11,044 and consisted primarily of $9,174 (including interest during construction) for capital expenditures.

During the first six months of 2025, investing activities also included $38 of FirstNet sustainability payments net of reinvestment, and $620 for our investment in a new strategic partner related to wireline network transformation accounted for under the equity method of accounting.

For the first nine months of 2025, cash used in investing activities totaled $14,433 and consisted primarily of $14,061 (including interest during construction) for capital expenditures.

During the first nine months of 2025, investing activities also included $110 of FirstNet sustainability payments net of reinvestment, and $620 for our investment in a new strategic partner related to wireline network transformation accounted for under the equity method of accounting.

On July 2, 2025, we completed the sale of our interest in DIRECTV to TPG and recorded a current note receivable of approximately $3,600, which we expect to receive the majority of by the end of 2025, and a long-term note receivable of $500.

As of September 30, 2025, we have collected approximately $320 of the current note receivable.

We enter into multi-year software licensing arrangements, which are typically paid over the license terms of two to five years and referred to as vendor financing.

1 unchanged sentence

Vendor financing is excluded from capital expenditures and reported as financing activities.

For the first six months of 2025, vendor financing payments were $423, compared to $1,391 for the first six months of 2024.

Capital expenditures for the first six months of 2025 were $9,174, and when including $423 cash paid for vendor financing, capital investment was $9,597 ($88 higher than the prior-year comparable period).

For the first nine months of 2025, vendor financing payments were $823, compared to $1,571 for the first nine months of 2024.

Capital expenditures for the first nine months of 2025 were $14,061, and when including $823 cash paid for vendor financing, capital investment was $14,884 ($107 lower than the prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems.

During the first six months of 2025, we placed $831 of productive assets in service under vendor financing arrangements (compared to $523 in the prior-year comparable period).

During the first nine months of 2025, we placed $1,014 of productive assets in service under vendor financing arrangements (compared to $581 in the prior-year comparable period).

The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

On July 2, 2025, we completed the sale of our interest in DIRECTV to TPG.

Upon close, we will record a current note receivable of approximately $3,600, which we expect to receive the majority of by the end of 2025, and a long-term note receivable of $500.

In November 2024, we agreed to purchase select spectrum licenses from United States Cellular Corporation (UScellular) for approximately $1,000, subject to closing conditions, including the consummation of UScellular’s sale of its wireless operations and select spectrum assets to T-Mobile US, Inc, which was closed on August 1, 2025.

On May 21, 2025, we agreed to acquire substantially all of Lumen’s mass markets fiber business for $5,750 cash, subject to purchase price adjustments.

At the time of signing, the pending acquisition covered approximately one million fiber customers, and also included fiber network assets that reached more than four million fiber locations.

The transaction is expected to close in early 2026, pending regulatory approval and other customary closing conditions.

On August 25, 2025, we agreed to purchase FCC licenses in the 600 MHz and 3.45 GHz bands from EchoStar Corporation for approximately $23,000, subject to certain adjustments.

The transaction is expected to close in the first half of 2026 and is subject to regulatory approval and other closing conditions.

The FCC licenses will be used to expand our 5G network, meet future capacity demands and support future wireless communications services.

We signed a short-term spectrum manager lease on the 3.45 GHz spectrum.

We expect these licenses will be deployed in cell sites covering nearly two-thirds of the U.S.

population by mid-November 2025.

SEPTEMBER 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Cash Provided by or Used in Financing Activities

For the first six months of 2025, cash used in financing activities totaled $598 and was primarily comprised of dividend payments, preferred and common stock repurchases, debt repayments and vendor financing payments, offset by issuances of long-term debt and preferred interests.

A tabular summary of our debt activities for the six months ended June 30, 2025 is as follows:

For the first nine months of 2025, cash provided by financing activities totaled $2,391 and was primarily comprised of issuances of long-term debt and preferred interests, offset by dividend payments, preferred and common stock repurchases, debt repayments and vendor financing payments.

A tabular summary of our debt activities for the nine months ended September 30, 2025 is as follows:

Quarter Second

Quarter Six months ended

June 30, 2025

Quarter Third

Quarter Nine months ended September 30, 2025

Issuance of Notes and Debentures:

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Repayments of long-term debt $ (1,526) $ (94) $ (229) $ (1,849)

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of June 30, 2025 and as of December 31, 2024.

We had $130,929 of total notes and debentures outstanding at June 30, 2025.

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of September 30, 2025 and as of December 31, 2024.

We had $138,090 of total notes and debentures outstanding at September 30, 2025.

This also included Euro, British pound sterling, Canadian dollar, Swiss franc and Australian dollar denominated debt that totaled approximately $38,496.

JUNE 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

At June 30, 2025, we had $9,254 of long-term debt maturing within one year.

We had no outstanding commercial paper or other short-term borrowings on June 30, 2025.

For the first six months of 2025, we paid $423 of cash under our vendor financing program, compared to $1,391 in the prior-year comparable period.

Total vendor financing payables included in our June 30, 2025 consolidated balance sheet were $1,916, with $1,193 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

During the first six months of 2025, we repurchased approximately 34 million shares totaling $958 under our $10,000 common stock repurchase authorization approved by the Board of Directors in December 2024, excluding brokerage fees and the one percent excise tax imposed by the Inflation Reduction Act of 2022.

At June 30, 2025, we had approximately $9,042 remaining under this repurchase authorization.

We paid dividends on common and preferred shares of $4,135 during the first six months of 2025, compared with $4,133 for the first six months of 2024.

Dividends on common stock declared by our Board of Directors totaled $0.5550 per share in the first six months of 2025 and 2024.

At September 30, 2025, we had $11,378 of long-term debt maturing within one year.

We had no outstanding commercial paper or other short-term borrowings on September 30, 2025.

For the first nine months of 2025, we paid $823 of cash under our vendor financing program, compared to $1,571 in the prior-year comparable period.

Total vendor financing payables included in our September 30, 2025 consolidated balance sheet were $1,674, with $908 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

During the first nine months of 2025, we repurchased approximately 87 million shares totaling $2,444 under our $10,000 common stock repurchase authorization approved by the Board of Directors in December 2024, excluding brokerage fees and the one percent excise tax imposed by the Inflation Reduction Act of 2022.

At September 30, 2025, we had approximately $7,556 remaining under this repurchase authorization.

We paid dividends on common and preferred shares of $6,168 during the first nine months of 2025, compared with $6,171 for the first nine months of 2024.

Dividends on common stock declared by our Board of Directors totaled $0.8325 per share in the first nine months of 2025 and 2024.

Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities.

Financing activities in the first six months of 2025 also included the issuance of $2,250 of nonconvertible cumulative preferred interests in Telco LLC, with the funds used to redeem all outstanding Series B preferred stock for $2,075 (see Note 11).

Financing activities in the first nine months of 2025 also included the issuance of $2,250 of nonconvertible cumulative preferred interests in Telco LLC, with the funds used to redeem all outstanding Series B preferred stock for $2,075 (see Note 11).

We also received approximately $850 in upfront cash proceeds from a structured sale-leaseback of real estate.

3 unchanged sentences

We currently have one $12,000 revolving credit agreement that terminates on November 18, 2029 (Revolving Credit Agreement).

No amount was outstanding under the Revolving Credit Agreement as of June 30, 2025.

No amount was outstanding under the Revolving Credit Agreement as of September 30, 2025.

SEPTEMBER 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program.

Our Revolving Credit Agreement contains covenants that are customary for an issuer with investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1.

As of June 30, 2025, we were in compliance with the covenants for our credit facilities.

As of September 30, 2025, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

1 unchanged sentence

Under these arrangements, which cover the majority of our approximate $39,142 derivative portfolio, counterparties are still required to post collateral.

During the first six months of 2025, we received $237 of cash collateral, on a net basis.

During the first nine months of 2025, we received $218 of cash collateral, on a net basis.

Cash postings under these arrangements vary with changes in credit ratings and netting agreements.

1 unchanged sentence

Our capital structure does not include debt issued by our equity method investments.

At June 30, 2025, our debt ratio was 51.7%, compared to 51.8% at June 30, 2024 and 50.7% at December 31, 2024.

At September 30, 2025, our debt ratio was 52.0%, compared to 52.2% at September 30, 2024 and 50.7% at December 31, 2024.

The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests.

JUNE 30, 2025

SEPTEMBER 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

6 unchanged sentences

EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

37 unchanged sentences

EBITDA margin 18.2 % 16.4 % 19.0 % 16.5 %

JUNE 30, 2025

SEPTEMBER 30, 2025

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis