AT&T (T) Q2 FY2026: Adjusted EPS $0.65 Beats Consensus, but Pre-Tax Income Falls 4.5% as Interest Costs and DirecTV Income Exit Create a $742M Below-the-Line Drag

AT&T reported second-quarter 2026 revenue of $31.56 billion, up 2.3% year-over-year, and operating income of $7.04 billion (+8.3%), lifting its operating margin to 22.3%—a 1.2-percentage-point improvement. Adjusted EPS of $0.65 beat the Street consensus of $0.59, though revenue came in slightly below the $31.8 billion estimate. GAAP diluted EPS from continuing operations was $0.66.

The headline beat conceals a more cautious story below the operating line. Pre-tax income from continuing operations fell 4.5% to $5.82 billion, and first-half net income declined 3.8% to $9.19 billion. Q2 net income rose 3.1% to $5.01 billion only because the effective tax rate dropped to 13.5% from 20.3%—without that benefit, Q2 net income would have declined year-over-year.

The strategic context: AT&T's February 2026 acquisition of Lumen's Mass Markets fiber business for $5.76 billion, funded from cash, was accompanied by $8.64 billion in net new long-term bond issuance in H1—lifting total long-term debt by $7.54 billion over six months—and pushed total company debt to $143.9 billion ($126 billion net of cash). Management reaffirmed full-year adjusted EPS guidance of $2.25–$2.35 and free cash flow (FCF) above $18 billion. Shares rose approximately 5% on the earnings day (per company release and press reports).