AT&T INC. (T)

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

Dollars in millions except per share amounts

RESULTS OF OPERATIONS

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). Percentage increases and decreases that are not considered meaningful are denoted with a dash.

On February 2, 2026, we closed our transaction with Lumen Technologies, Inc. (Lumen) and acquired substantially all of Lumen’s Mass Markets fiber business. The acquisition included customer relationships, which we include with our advanced home internet services and fiber network assets that were placed in a wholly owned subsidiary, Forged Fiber 37 Services, LLC (Forged Fiber). We plan to sell a controlling interest in Forged Fiber to an equity partner that will co-invest in the ongoing business. As such, Forged Fiber met the criteria of held-for-sale and accordingly is reflected as discontinued operations in the accompanying financial statements and are not included in our discussion of continuing operations. (See Notes 8 and 12)

Consolidated Results Our financial results from continuing operations are summarized in the discussions that follow. Additional analysis is discussed in our “Segment Results” section.

Operating revenues increased in the second quarter and for the first six months of 2026, reflecting higher Advanced Connectivity fiber and wireless revenues, with fiber revenues including the impact of acquiring Lumen’s mass markets fiber business. Operating revenues in Mexico were also higher due to favorable foreign exchange impacts. Offsetting the increases were lower Legacy revenues as we continue to work towards the decommissioning of our copper-based legacy network.

Operations and support expenses increased in the second quarter and for the first six months of 2026. The increase in the second quarter was primarily due to an asset abandonment charge associated with the reprioritization of our spectrum strategy, higher advertising expense, incremental customer costs related to our acquired mass markets fiber business and higher bad debt expenses driven by subscriber growth. These increases were partially offset by cost reductions from transformation initiatives, lower content licensing fees and gains on tower transactions.

The increase for the first six months was primarily due to higher wireless sales volumes, which drove higher equipment, selling and bad debt expenses. The increase was also due to higher network costs that included vendor credits in the prior year, and

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AT&T INC.

JUNE 30, 2026

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

Dollars in millions except per share amounts

incremental customer costs related to our acquired mass markets fiber business, which were partially offset by cost reductions from transformation initiatives, higher restructuring charges in the prior year and lower content licensing fees.

Depreciation and amortization expense decreased in the second quarter and for the first six months of 2026, primarily due to lower depreciation from fully depreciated legacy assets, partially offset by ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Operating income increased in the second quarter and for the first six months of 2026. Our operating income margin in the second quarter increased from 21.1% in 2025 to 22.3% in 2026 and for the first six months increased from 19.9% in 2025 to 21.7% in 2026.

Interest expense increased in the second quarter and for the first six months of 2026, primarily due to higher debt balances and interest rates on long-term borrowings.

Equity in net income (loss) of affiliates decreased in the second quarter and for the first six months of 2026, primarily due to the sale of our interest in DIRECTV Entertainment Holdings, LLC to TPG Capital on July 2, 2025.

Other income (expense) – net decreased in the second quarter and increased for the first six months of 2026. The decrease in the second quarter was primarily due to a gain recognized in the second quarter of 2025 associated with a prior disposition, partially offset by higher returns on benefit-related investments and interest income from higher average cash balances.

The increase for the first six months was primarily due to interest income from higher average cash balances.

Income tax expense decreased in the second quarter and for the first six months of 2026. The decrease was primarily due to lower income from continuing operations before income tax and the resolution of certain Internal Revenue Service (IRS) examinations.

Our effective tax rate was 13.5% in the second quarter and 17.5% for the first six months of 2026, versus 20.3% and 21.0% in the comparable periods in the prior year, reflecting the resolution of certain IRS examinations.

Segment Results 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. Effective with our first-quarter 2026 reporting, we realigned our internal management and reporting structure to reflect the evolution of our business model to focus on delivering converged advanced connectivity services across 5G and fiber to consumer and business customers. This new segment reporting structure also provides better visibility into the progress of exiting our copper-based legacy operations.

Our segment results presented in Note 4 and discussed below follow our internal management reporting. We evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin. See “Discussion and Reconciliation of Non-GAAP Measures” for a reconciliation of EBITDA and EBITDA margin to the most comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP). We have three reportable segments: Advanced Connectivity, Legacy and Latin America.

The Advanced Connectivity segment provides domestic 5G and fiber-based wireless, internet and other advanced connectivity services to consumer and business customers. We also provide supplemental information on our advanced consumer and business customer relationships as the product lifecycles in these customer categories influence the growth trajectories of Advanced Connectivity segment results. The Legacy segment provides domestic legacy voice and data services to consumer and business customers over our copper-based network. Legacy segment results include revenues derived from copper-based services and direct operating costs. The Latin America segment provides wireless service and equipment in Mexico.

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AT&T INC.

JUNE 30, 2026

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

Dollars in millions except per share amounts

The following tables highlight other key measures of performance for Advanced Connectivity:

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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).

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2024.

We have two reportable segments: Communications and Latin America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. Each segment’s percentage calculation of total segment operating revenue is derived from our segment results table in Note 4. Segment operating income is primarily attributable to our Communications segment due to prior-years operating losses in Latin America. Percentage increases and decreases that are not considered meaningful are denoted with a dash.

The Communications segment accounted for approximately 97% of our 2025 and 2024 total segment operating revenues and accounted for substantially all segment operating income in 2025 and 2024. This segment provides services to businesses and consumers located in the United States 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, fixed wireless services, IP Voice and managed professional services, as well as legacy voice and data services and related equipment, to business customers.

•Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services, and AT&T Internet Air (AIA) services, to residential customers in select locations. Consumer Wireline also provides legacy telephony voice communication services.

The Latin America segment accounted for approximately 3% of our 2025 and 2024 total segment operating revenues and less than 1% of segment operating income in 2025 and 2024. This segment provides wireless service and equipment in Mexico.

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RESULTS OF OPERATIONS

Consolidated Results Our financial results are summarized in the following table. We then discuss factors affecting our overall results. Additional analysis is discussed in our “Segment Results” section. We also discuss our expected revenue and expense trends for 2026 in the “Operating Environment and Trends of the Business” section.

OVERVIEW

Operating revenues increased in 2025, reflecting higher Mobility and Consumer Wireline revenues, partially offset by declines in Business Wireline. Operating revenues in Mexico were also higher, overcoming unfavorable foreign exchange impacts during the first half of 2025.

Operations and support expenses increased in 2025, reflecting higher sales volumes in our Mobility business unit, which drove higher equipment, advertising, selling and bad debt expenses. Also contributing to higher costs were approximately $440 of apportioned legal settlements during 2025, higher network-related expenses and advertising costs due to the launch of a new campaign in 2025. Increases were partially offset by declines from our continued transformation efforts and lower content licensing fees.

Asset impairments and abandonments and restructuring decreased in 2025, with higher impairments in 2024. Noncash charges in 2024 primarily related to a goodwill impairment charge of $4,422 associated with our Business Wireline reporting unit as well as restructuring charges, including termination fees associated with our network modernization program to deploy commercial scale open radio access network (Open RAN). Expenses in 2025 primarily relate to restructuring severance charges.

Depreciation and amortization expense increased in 2025, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades, partially offset by lower depreciation from fully depreciated legacy assets and impacts from our Open RAN network modernization efforts.

Operating income increased in 2025 and decreased in 2024. Our operating margin was 19.2% in 2025, compared to 15.6% in 2024, and 19.2% in 2023.

Interest expense increased in 2025, primarily due to lower capitalized interest associated with spectrum acquisitions. The increase was partially offset by lower average commercial paper balances.

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Equity in net income of affiliates decreased in 2025, reflecting our sale of DIRECTV in July 2025. The decrease was partially offset by cash distributions received by AT&T in excess of the carrying amount of our investment in DIRECTV prior to disposition (see Notes 10 and 19).

Other income (expense) – net increased in 2025. The increase was primarily due to a gain of approximately $5,600 recognized on the sale of our interest in DIRECTV (see Note 10). The increase was also driven by a gain on a prior disposition and noncash impairment charges for a held-for-sale business and our SKY Mexico equity investment. Partially offsetting the increases were lower pension and postretirement benefit credits and lower returns on other benefit-related investments.

Income tax expense decreased in 2025, primarily due to a lower effective tax rate driven by a tax-free gain on sale of DIRECTV in 2025 and a goodwill impairment in 2024, which is not deductible for tax purposes.

Our effective tax rate was 13.4% in 2025, 26.6% in 2024, and 21.3% in 2023, reflecting the nonrecognition of income taxes on the DIRECTV gain and larger discrete tax benefits in 2025, and the goodwill impairment in 2024, which was not deductible for tax purposes.

Segment Results 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 evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin. See “Discussion and Reconciliation of Non-GAAP Measures” for a reconciliation of EBITDA and EBITDA margin to the most comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP).

Operating revenues increased in 2025, driven by increases in Mobility service revenue and our Consumer Wireline business unit, driven by gains in wireless and broadband services. Partially offsetting these increases were declines in our Business Wireline business unit, which reflects lower demand for legacy services.

Operating income increased in 2025 and decreased in 2024. The 2025 operating income reflects an increase in operating income from our Mobility and Consumer Wireline business units, partially offset by a decrease in our Business Wireline business unit. Our Communications segment operating income margin was 23.1% in 2025, 23.0% in 2024 and 23.6% in 2023. Our Communications segment EBITDA margin was 39.6% in 2025, 39.5% in 2024 and 38.3% in 2023.

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Communications Business Unit Discussion

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