AT&T INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts We actively manage the timing of our supplier payments for operating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost (referred to as supplier financing program). 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 approximately 120 days, with an average of 85 days outstanding, 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 $272 and $2,146 for the six months ended June 30, 2026 and 2025, respectively. All supplier financing payments are due within one year. (See Note 10) Cash Used in Investing Activities from Continuing Operations For the first six months of 2026, cash used in investing activities totaled $13,233 and consisted primarily of $10,577 (including interest during construction) for capital expenditures. During the first six months of 2026, investing activities also included $360 of FirstNet sustainability payments, net of reinvestment, and approximately $574 related to the note receivable payment from DIRECTV. In addition, we paid $1,018 in connection with our January 2026 acquisition of select spectrum licenses from United States Cellular Corporation (UScellular) and $5,756 in connection with our February 2026 acquisition of Lumen’s Mass Markets fiber business, of which $1,656 was included in investing activities from continuing operations and $4,100 was included as investing activities from discontinued operations (see Notes 1, 8 and 12). 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. Additionally, for capital improvements, we have negotiated favorable vendor payment terms of 120 days or more with some of our vendors, which are also referred to as vendor financing. Vendor financing is excluded from capital expenditures and reported as financing activities. For the first six months of 2026, vendor financing payments were $643, compared to $423 for the first six months of 2025. Capital expenditures for the first six months of 2026 were $10,577, and when including $643 cash paid for vendor financing, capital investment was $11,220 ($1,623 higher 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 2026, we placed $1,603 of productive assets in service under vendor financing arrangements (compared to $831 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 August 25, 2025, we agreed to purchase Federal Communications Commission (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 subject to certain 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, which was deployed in cell sites covering nearly two-thirds of the U.S. population. We expect to close this transaction by the end of July 2026 and will fund the acquisition using a combination of cash on hand and term loan borrowings. Cash Provided by or Used in Financing Activities from Continuing Operations For the first six months of 2026, cash used in financing activities totaled $1,417 and was comprised of debt repayments, common stock repurchases, dividend payments, and vendor financing payments, partially offset by issuances of long-term debt. 33 AT&T INC. JUNE 30, 2026 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts A tabular summary of our debt activities for the six months ended June 30, 2026 is as follows: First Quarter Second Quarter Six months ended June 30, 2026 Issuance of Notes and Debentures: USD notes $ 6,465 $ 5,939 $ 12,404 CAD notes 1,633 — 1,633 Debt Issuances $ 8,098 $ 5,939 $ 14,037 Repayments USD notes $ (3,741) $ — $ (3,741) EUR notes (1,103) (32) (1,135) AUD notes (216) — (216) Other (187) (119) (306) Repayments of long-term debt $ (5,247) $ (151) $ (5,398) The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.4% as of June 30, 2026 and 4.2% as of December 31, 2025. We had $142,578 of total notes and debentures outstanding at June 30, 2026. This also included Euro, British pound sterling, Canadian dollar, Australian dollar, and Swiss franc denominated debt that totaled approximately $34,652. At June 30, 2026, we had $9,323 of long-term debt maturing within one year. We had no outstanding commercial paper or other short-term borrowings on June 30, 2026. For the first six months of 2026, we paid $643 of cash under our vendor financing program, compared to $423 in the prior-year comparable period. Total vendor financing payables included in our June 30, 2026 consolidated balance sheet were $2,868, with $1,875 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 2026, we repurchased approximately 174 million shares totaling $4,435 under our $10,000 common stock repurchase authorization approved by the Board of Directors in December 2024 (the “2024 Authorization”), excluding brokerage fees and the one percent excise tax imposed by the Inflation Reduction Act of 2022. On January 27, 2026, the Board approved an authorization to repurchase an additional $10,000 of common stock (the “2026 Authorization”). At June 30, 2026, we had approximately $1,296 remaining under the 2024 Authorization, and $10,000 remaining under the 2026 Authorization. We paid dividends on common and preferred shares of $3,973 during the first six months of 2026, compared with $4,135 for the first six months of 2025. Dividends on common stock declared by our Board of Directors totaled $0.5550 per share in the first six months of 2026 and 2025. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. Credit Facilities The following summary of our various credit and loan agreements does not purport to be complete. The summaries of the Revolving Credit Agreement and Term Loan (each as defined below) are qualified in their entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K. We use credit facilities as a tool in managing our liquidity status. We currently have one $12,000 revolving credit agreement that terminates on November 3, 2030 (Revolving Credit Agreement). No amount was outstanding under the Revolving Credit Agreement as of June 30, 2026. In November 2025, we entered into a $17,500 Delayed Draw Term Loan Credit Agreement (Term Loan), with Bank of America, N.A., as agent. The Term Loan is comprised of (i) a $6,000 364-day delayed draw term loan facility (364-Day Term 34 AT&T INC. JUNE 30, 2026 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Loan Facility) and (ii) a $11,500 two-year delayed draw term loan facility (Two-Year Term Loan Facility). Each of the 364-Day Term Loan Facility and Two-Year Term Loan Facility is available for a single draw at any time before November 3, 2026. No amount was outstanding under the Term Loan as of June 30, 2026. In March 2026, we entered into two bilateral term loan facilities totaling $1,500, that will allow us to borrow funds during the year. When drawn, $500 will be due in 2031 and $1,000 will be due in 2033. Advances will bear interest at a variable rate based on the secured overnight financing rate (SOFR) plus a margin. No amounts were outstanding under these facilities as of June 30, 2026. In May 2026, we entered into a $1,000 bilateral term loan facility, that will allow us to borrow funds during the year. When drawn, $1,000 will be due in 2029. Advances will bear interest at a variable rate based on SOFR plus a margin. No amount was outstanding under this facility as of June 30, 2026. 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. The Revolving Credit Agreement and the Term Loan contain covenants that are customary for an issuer with investment grade senior debt credit ratings, including a net debt-to-EBITDA financial ratio covenant requiring us 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, 2026, we were in compliance with the covenants for our credit facilities. Collateral Arrangements Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover the majority of our approximate $36,037 derivative portfolio, counterparties are still required to post collateral. During the first six months of 2026, we received $351 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7) Other Our total capital consists of debt (long-term debt and debt maturing within one year), redeemable noncontrolling interest and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At June 30, 2026, our debt ratio was 52.8%, compared to 51.7% at June 30, 2025 and 51.4% at December 31, 2025. 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. 35 AT&T INC. JUNE 30, 2026 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURES We also evaluate segment performance based on EBITDA, which is defined as operating income excluding depreciation and amortization, and/or EBITDA margin, which is defined as EBITDA divided by total revenue. 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 operations. 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. There are material limitations to using these non-GAAP financial measures. 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 Percent Percent 2026 2025 Change 2026 2025 Change Advanced Connectivity Segment Operating income $ 7,345 $ 6,106 20.3 % $ 14,198 $ 12,078 17.6 % Add: Depreciation and amortization 4,687 5,035 (6.9) 9,392 10,008 (6.2) EBITDA $ 12,032 $ 11,141 8.0 % $ 23,590 $ 22,086 6.8 % Operating income margin 25.7 % 22.2 % 24.9 % 22.1 % EBITDA margin 42.0 % 40.5 % 41.3 % 40.4 % Legacy Segment Operating income $ 523 $ 959 (45.5) % $ 1,135 $ 1,978 (42.6) % Add: Depreciation and amortization — — — — — — EBITDA $ 523 $ 959 (45.5) % $ 1,135 $ 1,978 (42.6) % Operating income margin 32.0 % 43.6 % 33.4 % 43.3 % EBITDA margin 32.0 % 43.6 % 33.4 % 43.3 % Latin America Segment Operating income $ 38 $ 46 (17.4) % $ 58 $ 89 (34.8) % Add: Depreciation and amortization 189 155 21.9 389 305 27.5 EBITDA $ 227 $ 201 12.9 % $ 447 $ 394 13.5 % Operating income margin 3.1 % 4.4 % 2.4 % 4.4 % EBITDA margin 18.5 % 19.1 % 18.6 % 19.5 % 36 AT&T INC. JUNE 30, 2026