Discussion and Reconciliation of Non-GAAP Measures
 
We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP). Prior periods have been recast to conform to the current period presentation to remove cash flows and equity in net income from our investment in DIRECTV, which we sold to TPG Capital on July 2, 2025.

Free Cash Flow

Free cash flow is defined as cash from operations minus cash flows related to our DIRECTV equity investment (cash distributions minus cash taxes from DIRECTV), minus capital expenditures and cash paid for vendor financing (classified as financing activities). Free cash flow after dividends is defined as cash from operations minus cash flows related to our DIRECTV equity investment, capital expenditures, cash paid for vendor financing and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures and vendor financing, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.
Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Net Cash Provided by Operating Activities$9,763 $9,093 $18,812 $16,640 
Less: Distributions from DIRECTV classified as operating activities(503)(350)(1,926)(674)
Less: Cash taxes paid on DIRECTV251 121 251 270 
Less: Capital expenditures(4,897)(4,360)(9,174)(8,118)
Less: Payment of vendor financing(220)(550)(423)(1,391)
Free Cash Flow4,394 3,954 7,540 6,727 
Less: Dividends paid(2,044)(2,099)(4,135)(4,133)
Free Cash Flow after Dividends$2,350 $1,855 $3,405 $2,594 
Free Cash Flow Dividend Payout Ratio46.5 %53.1 %54.8 %61.4 %

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems. 
Cash Paid for Capital Investment
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Capital expenditures
$(4,897)$(4,360)$(9,174)$(8,118)
Payment of vendor financing
(220)(550)(423)(1,391)
Cash paid for Capital Investment$(5,117)$(4,910)$(9,597)$(9,509)

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not
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control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing cash generation potential with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA and Adjusted EBITDA
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Net Income
$4,861 $3,949 $9,553 $7,700 
Additions:  
Income Tax Expense1,237 1,142 2,536 2,260 
Interest Expense1,655 1,699 3,313 3,423 
Equity in Net (Income) of Affiliates(485)(348)(1,925)(643)
Other (Income) Expense - Net(767)(682)(1,222)(1,133)
Depreciation and amortization5,251 5,072 10,441 10,119 
EBITDA11,752 10,832 22,696 21,726 
Transaction, legal and other costs
49 35 128 67 
   Benefit-related (gain) loss (70)(10)(64)(49)
Asset impairments and abandonments and restructuring— 480 504 639 
Adjusted EBITDA1
$11,731 $11,337 $23,264 $22,383 
1See "Adjusting Items" section for additional discussion and reconciliation of adjusted items.
   
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Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Communications Segment
Operating Income$7,065 $7,005 $14,056 $13,750 
  Add: Depreciation and amortization5,035 4,776 10,008 9,506 
EBITDA$12,100 $11,781 $24,064 $23,256 
Total Operating Revenues$29,699 $28,582 $59,259 $57,439 
Operating Income Margin23.8 %24.5 %23.7 %23.9 %
EBITDA Margin40.7 %41.2 %40.6 %40.5 %
Mobility
Operating Income$6,931 $6,719 $13,671 $13,187 
  Add: Depreciation and amortization2,556 2,476 5,082 4,963 
EBITDA$9,487 $9,195 $18,753 $18,150 
Total Operating Revenues$21,845 $20,480 $43,415 $41,074 
Service Revenues16,853 16,277 33,504 32,271 
Operating Income Margin31.7 %32.8 %31.5 %32.1 %
EBITDA Margin43.4 %44.9 %43.2 %44.2 %
EBITDA Service Margin56.3 %56.5 %56.0 %56.2 %
Business Wireline
Operating Income (Loss)
$(201)$102 $(299)$166 
  Add: Depreciation and amortization1,521 1,386 3,019 2,748 
EBITDA$1,320 $1,488 $2,720 $2,914 
Total Operating Revenues$4,313 $4,755 $8,781 $9,668 
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 $184 $684 $397 
  Add: Depreciation and amortization958 914 1,907 1,795 
EBITDA$1,293 $1,098 $2,591 $2,192 
Total Operating Revenues$3,541 $3,347 $7,063 $6,697 
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 amortization155 172 305 349 
EBITDA$201 $178 $394 $358 
Total Operating Revenues$1,054 $1,103 $2,025 $2,166 
Operating Income Margin4.4 %0.5 %4.4 %0.4 %
EBITDA Margin19.1 %16.1 %19.5 %16.5 %


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Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including the amortization of intangible assets. While the expense associated with the amortization of certain wireless licenses and customer lists is excluded, the revenue of the acquired companies is reflected in the measure and that those assets contribute to revenue generation. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the adjusted effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.   
Adjusting Items
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Operating Expenses  
Transaction, legal and other costs1
$49 $35 $128 $67 
   Benefit-related (gain) loss(70)(10)(64)(49)
Asset impairments and abandonments and restructuring
— 480 504 639 
Adjustments to Operations and Support Expenses(21)505 568 657 
   Amortization of intangible assets9 15 18 30 
Adjustments to Operating Expenses(12)520 586 687 
Other  
 Equity in net income of DIRECTV
(503)(350)(1,926)(674)
   Benefit-related (gain) loss, impairments of investments and other
(189)(16)(125)238 
Adjustments to Income Before Income Taxes(704)154 (1,465)251 
Tax impact of adjustments(168)35 (333)57 
Adjustments to Net Income$(536)$119 $(1,132)$194 
Preferred stock redemption gain
— — (90)— 
Adjustments to Net Income Attributable to Common Stock
$(536)$119 $(1,222)$194 
1Includes costs associated with legacy legal matters and the expected resolution of certain litigation associated with cyberattacks disclosed in 2024, which is presented net of expected insurance recoveries.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses, other income (expense) and income tax expense, certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, actuarial gains and losses, significant abandonments and impairments, benefit-related gains and losses, employee separation and other material gains and losses. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

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Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA and Adjusted EBITDA Margin
Dollars in millions 
 Second QuarterSix-Month Period
 2025202420252024
Operating Income$6,501 $5,760 $12,255 $11,607 
Adjustments to Operating Expenses(12)520 586 687 
Adjusted Operating Income$6,489 $6,280 $12,841 $12,294 
EBITDA$11,752 $10,832 $22,696 $21,726 
Adjustments to Operations and Support Expenses(21)505 568 657 
Adjusted EBITDA$11,731 $11,337 $23,264 $22,383 
Total Operating Revenues$30,847 $29,797 $61,473 $59,825 
Operating Income Margin21.1 %19.3 %19.9 %19.4 %
Adjusted Operating Income Margin21.0 %21.1 %20.9 %20.5 %
Adjusted EBITDA Margin38.0 %38.0 %37.8 %37.4 %

Adjusted Diluted EPS
 Second QuarterSix-Month Period
 2025202420252024
Diluted Earnings Per Share (EPS)$0.62 $0.49 $1.22 $0.96 
Equity in net income of DIRECTV(0.05)(0.04)(0.21)(0.07)
   Restructuring and impairments— 0.05 0.05 0.11 
   Benefit-related, transaction, legal and other items
(0.03)0.01 (0.01)(0.01)
Adjusted EPS$0.54 $0.51 $1.05 $0.99 
Year-over-year growth - Adjusted5.9 %6.1 % 
Weighted Average Common Shares Outstanding with
Dilution (000,000)
7,219 7,198 7,221 7,195 

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Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and deposits at financial institutions that are greater than 90 days (e.g., certificates of deposit and time deposits), from the sum of debt maturing within one year and long-term debt.
Net Debt to Adjusted EBITDA - 2025
Dollars in millions   
 Three Months Ended 
 
Sept. 30,
Dec. 31,
March 31,
June 30,
Four Quarters
 
20241
20241
20251
2025
Adjusted EBITDA$11,586 $10,791 $11,533 $11,731 $45,641 
End-of-period current debt    9,254 
End-of-period long-term debt    123,057 
Total End-of-Period Debt    132,311 
Less: Cash and Cash Equivalents    10,499 
Less: Time Deposits1,500 
Net Debt Balance    120,312 
Annualized Net Debt to Adjusted EBITDA Ratio   2.64 
1As reported in AT&T's Form 8-K filed April 23, 2025.

Net Debt to Adjusted EBITDA - 2024
Dollars in millions   
 Three Months Ended 
 Sept. 30,
Dec. 31,
March 31,
June 30,
Four Quarters
 
20231
20231
20241
20241
Adjusted EBITDA$11,203 $10,555 $11,046 $11,337 $44,141 
End-of-period current debt    5,249 
End-of-period long-term debt    125,355 
Total End-of-Period Debt    130,604 
Less: Cash and Cash Equivalents    3,093 
Less: Time Deposits650 
Net Debt Balance    126,861 
Annualized Net Debt to Adjusted EBITDA Ratio  2.87 
1As reported in AT&T's Form 8-K filed April 23, 2025.


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Supplemental Operational Measures

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers. Our supplemental presentation of business solutions operations is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results. Prior period amounts have been conformed to the current period’s presentation.
Supplemental Operational Measures
 Second Quarter
 June 30, 2025June 30, 2024
 MobilityBusiness
Wireline
Adj.1
Business
Solutions		MobilityBusiness
Wireline
Adj.1
Business
Solutions		Percent
Change
Operating Revenues        
Wireless service$16,853 $— $(14,390)$2,463 $16,277 $— $(13,809)$2,468 (0.2)%
Legacy and other transitional services
— 2,349 — 2,349 — 2,839 — 2,839 (17.3)%
Fiber and advanced connectivity services
— 1,793 — 1,793 — 1,732 — 1,732 3.5 %
Wireless equipment4,992 — (4,168)824 4,203 — (3,459)744 10.8 %
Wireline equipment— 171 — 171 — 184 — 184 (7.1)%
Total Operating Revenues21,845 4,313 (18,558)7,600 20,480 4,755 (17,268)7,967 (4.6)%
Operating Expenses        
Operations and support12,358 2,993 (10,072)5,279 11,285 3,267 (9,201)5,351 (1.3)%
EBITDA9,487 1,320 (8,486)2,321 9,195 1,488 (8,067)2,616 (11.3)%
Depreciation and amortization2,556 1,521 (2,098)1,979 2,476 1,386 (2,025)1,837 7.7 %
Total Operating Expenses14,914 4,514 (12,170)7,258 13,761 4,653 (11,226)7,188 1.0 %
Operating Income (Loss)
$6,931 $(201)$(6,388)$342 $6,719 $102 $(6,042)$779 (56.1)%
Operating Income Margin4.5 %9.8 %(530) BP
1Non-business wireless reported in the Communications segment under the Mobility business unit.

Supplemental Operational Measures
 Six-Month Period
 June 30, 2025June 30, 2024
 MobilityBusiness
Wireline
Adj.1
Business
Solutions		MobilityBusiness
Wireline
Adj.1
Business
Solutions		Percent
Change
Operating Revenues        
Wireless service$33,504 $— $(28,592)$4,912 $32,271 $— $(27,417)$4,854 1.2 %
Legacy and other transitional services
— 4,824 — 4,824 — 5,836 — 5,836 (17.3)%
Fiber and advanced connectivity services
— 3,573 — 3,573 — 3,435 — 3,435 4.0 %
Wireless equipment9,911 — (8,304)1,607 8,803 — (7,293)1,510 6.4 %
Wireline equipment— 384 — 384 — 397 — 397 (3.3)%
Total Operating Revenues43,415 8,781 (36,896)15,300 41,074 9,668 (34,710)16,032 (4.6)%
Operating Expenses        
Operations and support24,662 6,061 (20,178)10,545 22,924 6,754 (18,727)10,951 (3.7)%
EBITDA18,753 2,720 (16,718)4,755 18,150 2,914 (15,983)5,081 (6.4)%
Depreciation and amortization5,082 3,019 (4,160)3,941 4,963 2,748 (4,058)3,653 7.9 %
Total Operating Expenses29,744 9,080 (24,338)14,486 27,887 9,502 (22,785)14,604 (0.8)%
Operating Income$13,671 $(299)$(12,558)$814 $13,187 $166 $(11,925)$1,428 (43.0)%
Operating Income Margin5.3 %8.9 %(360) BP
1Non-business wireless reported in the Communications segment under the Mobility business unit.
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