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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

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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 QuarterSix-Month Period
PercentPercent
20252024Change20252024Change
Operating revenues
Broadband$3,028$2,74110.5%$6,012$5,46310.0%
Legacy voice and data services265323(18.0)551665(17.1)
Other service and equipment248283(12.4)500569(12.1)
Total Operating Revenues3,5413,3475.87,0636,6975.5
Operating expenses
Operations and support2,2482,249—4,4724,505(0.7)
Depreciation and amortization9589144.81,9071,7956.2
Total Operating Expenses3,2063,1631.46,3796,3001.3
Operating Income$335$18482.1%$684$39772.3%

The following tables highlight other key measures of performance for Consumer Wireline:

Broadband Connections
June 30,Percent
(in 000s)20252024Change
Broadband114,26213,8363.1%
Fiber Broadband Connections9,8358,79811.8%
1Includes AIA.
Broadband Net Additions
Second QuarterSix-Month Period
PercentPercent
(in 000s)20252024Change20252024Change
Broadband Net Additions1,215052—%287107—%
Fiber Broadband Net Additions2432391.7%5044912.6%
1Includes AIA.
2Excludes the impact of subscriber disconnections resulting from the termination of AIA services in areas with unfavorable regulatory requirements in the first quarter of 2025.

Broadband revenues increased in the second quarter and for the first six months of 2025, driven by increases in fiber revenues of 18.9% and 19.0%. Higher fiber revenues reflect an increase in fiber customers, which we expect to continue as we invest further in building our fiber footprint, and higher ARPU. This increase was partially offset by declines in copper-based broadband services.

Legacy voice and data services revenues decreased in the second quarter and for the first six months of 2025, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber services.

Other service and equipment revenues decreased in the second quarter and for the first six months of 2025, reflecting the continued decline in the number of VoIP customers.

Operations and support expenses were flat in the second quarter and decreased for the first six months of 2025, primarily driven by lower customer support and content licensing costs, largely offset by higher network-related costs and higher marketing costs.

AT&T INC.

JUNE 30, 2025

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Depreciation expense increased in the second quarter and for the first six months of 2025, 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 2025.

Operating income increased in the second quarter and for the first six months of 2025. Our Consumer Wireline operating income margin in the second quarter increased from 5.5% in 2024 to 9.5% in 2025 and for the first six months increased from 5.9% in 2024 to 9.7% in 2025. Our Consumer Wireline EBITDA margin in the second quarter increased from 32.8% in 2024 to 36.5% in 2025 and for the first six months increased from 32.7% in 2024 to 36.7% in 2025.

LATIN AMERICA SEGMENTSecond QuarterSix-Month Period
20252024Percent Change20252024Percent Change
Segment Operating Revenues
Service$662$699(5.3)%$1,277$1,389(8.1)%
Equipment392404(3.0)748777(3.7)
Total Segment Operating Revenues1,0541,103(4.4)2,0252,166(6.5)
Segment Operating Expenses
Operations and support853925(7.8)1,6311,808(9.8)
Depreciation and amortization155172(9.9)305349(12.6)
Total Segment Operating Expenses1,0081,097(8.1)1,9362,157(10.2)
Operating Income$46$6—%$89$9—%

The following tables highlight other key measures of performance for Mexico:

Subscribers
June 30,Percent
(in 000s)20252024Change
Postpaid6,1805,49412.5%
Prepaid17,44016,8093.8
Reseller223333(33.0)
Total Mexico Wireless Subscribers23,84322,6365.3%
Mexico Wireless Net Additions
Second QuarterSix-Month Period
PercentPercent
(in 000s)20252024Change20252024Change
Postpaid18314228.9%34325832.9%
Prepaid6467(4.5)(46)146—
Reseller(12)(32)62.5(30)(84)64.3
Total Mexico Wireless Net Additions23517732.8%267320(16.6)%

Service revenues decreased in the second quarter and for the first six months of 2025, reflecting unfavorable foreign exchange impacts, partially offset by growth in subscribers and ARPU.

Equipment revenues decreased in the second quarter and for the first six months of 2025, reflecting unfavorable foreign exchange impacts, partially offset by higher equipment sales.

Operations and support expenses decreased in the second quarter and for the first six months of 2025, primarily due to favorable foreign exchange impacts, partially offset by increased equipment and selling costs resulting from higher sales.

AT&T INC.

JUNE 30, 2025

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Depreciation and amortization expense decreased in the second quarter and for the first six months of 2025, primarily due to favorable foreign exchange impacts.

Operating income increased in the second quarter and for the first six months of 2025. Our Mexico operating income margin in the second quarter increased from 0.5% in 2024 to 4.4% in 2025 and for the first six months increased from 0.4% in 2024 to 4.4% in 2025. Our Mexico EBITDA margin in the second quarter increased from 16.1% in 2024 to 19.1% in 2025 and for the first six months increased from 16.5% in 2024 to 19.5% in 2025.

COMPETITIVE AND REGULATORY ENVIRONMENT

Overview AT&T subsidiaries operating within the United States are subject to federal and state regulations. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulations in the markets where service is provided. Complying with these regulations may affect our results of operations and cash flow, and compliance may be very costly.

On July 4, 2025, the One Big Beautiful Bill Act was enacted, which restores or makes permanent certain expiring business tax provisions from the Tax Cuts and Jobs Act of 2017. We do not anticipate the legislation to materially impact our income tax expense, but expect that it will have a material impact on cash taxes paid.

For further discussion of regulations impacting AT&T and its subsidiaries, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Regulatory Landscape” in our Annual Report on Form 10-K for the year-ended December 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

For six months ended June 30,20252024
Cash provided by operating activities$18,812$16,640
Cash used in investing activities(11,044)(6,977)
Cash used in financing activities(598)(13,293)
June 30,December 31,
20252024
Cash and cash equivalents$10,499$3,298
Total debt132,311123,532

We had $10,499 in cash and cash equivalents available at June 30, 2025, increasing $7,201 since December 31, 2024. Cash and cash equivalents included cash of $2,795 and money market funds and other cash equivalents of $7,704. Approximately $1,376 of our cash and cash equivalents were held in accounts outside of the U.S. and may be subject to restrictions on repatriation.

For the first six months of 2025, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, and distributions from DIRECTV. These inflows exceeded cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, including higher device payments from higher sales volumes. The cash generated from operating activities was primarily used to fund capital improvements, make dividend payments to stockholders, repurchase preferred and common stock, and repay long-term debt. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

Cash Provided by Operating Activities

During the first six months of 2025, cash provided by operating activities was $18,812, compared to $16,640 for the first six 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.

AT&T INC.

JUNE 30, 2025

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 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. All supplier financing payments are due within one year. (See Note 10)

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.

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 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).

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). 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.

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:

First QuarterSecond QuarterSix months ended June 30, 2025
Issuance of Notes and Debentures:
EUR notes$2,956$—$2,956
USD notes—3,4733,473
Debt Issuances$2,956$3,473$6,429
Repayments
EUR notes$1,321$32$1,353
Other20562267
Repayments of long-term debt$1,526$94$1,620

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. This also included Euro, British pound sterling, Canadian dollar, Swiss franc and Australian dollar denominated debt that totaled approximately $36,181.

AT&T INC.

JUNE 30, 2025

Item 2. 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. 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). We also received approximately $850 in upfront cash proceeds from a structured sale-leaseback of real estate.

Credit Facilities

The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its 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 18, 2029 (Revolving Credit Agreement). No amount was outstanding under the Revolving Credit Agreement as of June 30, 2025.

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.

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 $36,499 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. 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, 2025, our debt ratio was 51.7%, compared to 51.8% at June 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.

AT&T INC.

JUNE 30, 2025

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 and business unit 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 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. 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 QuarterSix-Month Period
PercentPercent
20252024Change20252024Change
Communications Segment
Operating income$7,065$7,0050.9%$14,056$13,7502.2%
Add: Depreciation and amortization5,0354,7765.410,0089,5065.3
EBITDA$12,100$11,7812.7%$24,064$23,2563.5%
Operating income margin23.8%24.5%23.7%23.9%
EBITDA margin40.7%41.2%40.6%40.5%
Mobility
Operating income$6,931$6,7193.2%$13,671$13,1873.7%
Add: Depreciation and amortization2,5562,4763.25,0824,9632.4
EBITDA$9,487$9,1953.2%$18,753$18,1503.3%
Operating income margin31.7%32.8%31.5%32.1%
EBITDA margin43.4%44.9%43.2%44.2%
Business Wireline
Operating income (loss)$(201)$102—%$(299)$166—%
Add: Depreciation and amortization1,5211,3869.73,0192,7489.9
EBITDA$1,320$1,488(11.3)%$2,720$2,914(6.7)%
Operating income margin(4.7)%2.1%(3.4)%1.7%
EBITDA margin30.6%31.3%31.0%30.1%
Consumer Wireline
Operating income$335$18482.1%$684$39772.3%
Add: Depreciation and amortization9589144.81,9071,7956.2
EBITDA$1,293$1,09817.8%$2,591$2,19218.2%
Operating income margin9.5%5.5%9.7%5.9%
EBITDA margin36.5%32.8%36.7%32.7%
Latin America Segment
Operating income$46$6—%$89$9—%
Add: Depreciation and amortization155172(9.9)305349(12.6)
EBITDA$201$17812.9%$394$35810.1%
Operating income margin4.4%0.5%4.4%0.4%
EBITDA margin19.1%16.1%19.5%16.5%

AT&T INC.

JUNE 30, 2025

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