T 10-K & 10-Q changes, risk factors and insider trading

Adverse changes in the U.S. securities markets, increasinga higher interest rates,rate environment, rising inflation and medical costs could materially increase our benefit plan costs and future funding requirements.

Our costs to provide current benefits and funding for future benefits are subject to increases, primarily due to continuing increases in medical and prescription drug costs, in part due to inflation, and can be affected by lower returns on assets held by our pension and other benefit plans, which are reflected in our financial statements for that year. In calculating the recognized benefit costs, we have made certain assumptions regarding future investment returns, interest rates and medical costs. These assumptions could change significantly over time and could be materially different than originally projected. Lower than assumed investment returns, an increase in our benefit obligations, and higher than assumed medical and prescription drug costs will increase expenses.

As a provider of telecommunications and technology services, we sell handsets, wireless data cards, wireless computing devices and customer premises equipment manufactured by various suppliers for use with our voice and data services and depend on suppliers to provide us, directly or through other suppliers, with items such as network equipment, customer premises equipment, and wireless-related equipment such as mobile hotspots, handsets, wirelessly enabled computers, wireless data cards and other connected devices for our customers. In recent years, the costs of these inputs and the costs of labor necessary to develop, deploy and maintain our networks and our products and services have increased. In addition, many of these inputs are subject to price fluctuations from a number of factors, including, but not limited to, market conditions, demand for raw materials used in the production of these devices and network components, severe weather, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and other factors beyond our control. Inflationary and supply pressures may continue into the future and could have an adverse impact on our ability to source materials.

Our attempts to offset these cost and supply pressures, such as through increases in the selling prices of some of our products and services, may not be successful. Higher product or service prices may result in reductions in sales volume or increases in subscriber churn. Consumers may be less willing to pay a price differential for our products and services and may increasingly purchase lower-priced offerings,offerings from us or our competitors, or may forego some purchases altogether, during a period of inflationary pressure or an economic downturn. To the extent that price increases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition or operating results may be adversely affected. Furthermore, we may not be able to offset any cost increases through productivity and cost-saving initiatives.

A company’s cost of borrowing is affected by evaluations given by various credit rating agencies, and these agencies have been applying tighter credit standards when evaluating debt levels and future growth prospects. While we have been successful in continuing to access the credit and fixed income markets when needed, adverse changes in the financial markets could render us either unable to access these markets or able to access these markets only at higher interest costs and with restrictive financial or other conditions, severely affecting our business operations. Additionally, downgrades of our credit rating by the major credit rating agencies could increase our cost of borrowing and also impact the collateral we would be required to post under certain agreements we have entered into with our derivative counterparties, which could negatively impact our liquidity. Further, valuation changes in our derivative portfolio due to interest rates and foreign exchange rates could require us to post collateral and thus may negatively impact our liquidity.

We have international operations, particularly in Mexico, and other countries worldwide where we need to comply with a wide variety of complex local laws, regulations and treaties, and are subject to evolving political environments. In addition, we are exposed to, among other factors, fluctuations in currency values, changes in relationships between U.S. and foreign governments, war or other hostilities, and other regulations that may materially affect our earnings. Involvement with foreign firms also exposes us to the risk of being unable to control the actions of those firms and therefore exposes us to risks associated with our obligation to comply with the Foreign Corrupt Practices Act (FCPA). Violations of the FCPA could have a material adverse effect on our operating results.

Our subsidiaries providing wired services are subject to significant federal and state regulation, while many of our competitors are not. In addition, our subsidiaries and affiliates operating outside the United States are also subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided. Our wireless subsidiaries are regulated to varying degrees by the FCC and in some instances, by state and local agencies. Adverse regulations and rulings by the courts, the FCC or states relating to broadband and wireless deployment,,deployment could impede our ability to manage our networks and recover costs and lessen incentives to invest in our networks. The continuing growth of IP-based services, especially when accessed by wireless devices, has created or potentially could create conflicting regulation between the FCC and various state and local authorities, which may involve lengthy litigation to resolve and may result in outcomes unfavorable to us. In addition, in response to the Federal Aviation Administration (FAA) questioning whether cell sites transmitting C-Band spectrum could impact radio altimeter equipment on airplanes, we voluntarily committed to temporary, precautionary measures near certain airports through January 1, 2028, which may have limited impacts to deployments and services. In addition, increased public focus on a variety of issues related to our operations, such as privacy issues, government requests or orders for customer data, state rate regulation of broadband and concerns about global climate change, have led to proposals or new legislation at state, federal and foreign government levels to change or increase regulation on our operations, which could result in additional costs of compliance or litigation. Enactment of new privacy laws and regulations could, among other things, adversely affect our ability to collect data and offer targeted advertisements or result in additional costs of compliance or litigation. Should customers decide that our competitors offer a more customer-friendly environment, our competitive position, results of operations or financial condition could be materially adversely affected.

The potential physical effects of extreme weather events and other potential effects of climate change, such as increased frequency and severity of storms, floods, fires, freezing conditions, sea-level rise and other climate-related events, could damage our networks and cause disruptions in our services, which could adversely affect our operations, infrastructure and financial results. Operational impacts resulting from the potential physical effects of climate change, such as damage to our network infrastructure, could result in increased costs and loss of revenue. While we currently do not believe the potential losses or costs associated with the physical effects of climate change will be material, it is difficult to accurately and precisely calculate the future impacts of the physical effects of climate change given the dynamic nature of climate change’sits impacts on the environment.

Wireless and broadband services are undergoing rapid and significant technological changes and a dramatic increase in usage, including, in particular, the demand for faster and seamless usage of data across mobile and fixed devices. TheRecent COVID-19world pandemicevents and trends accelerated these changes and also resulted in higher network utilization, as more customers consumed bandwidth from changes in work and learn from home trends.bandwidth. Streaming, augmented reality, “smart” technologies, user generated content and artificial intelligence (AI) are expected to continue to drive greater demand for broadband. We must continually invest in our networks in order to improve our wireless and broadband services to meet this increasing demand and changes in customer expectations while remaining competitive. Improvements in these services depend on many factors, including continued access to and deployment of adequate spectrum and the capital needed to expand our wireline network to support transport of these services. In order to stem broadband subscriberconnectivity losses to cable competitors in our non-fiber wireline areas, we have been expanding our all-fiber wireline network.network and where we offer our fixed wireless access product. We must maintain and expand our network capacity and coverage for transport of data, including video, and voice between cell and fixed landline sites. To this end, we participate in spectrum auctions and continue to deploy software and other technology advancements in order to efficiently invest in our network.

We have spent, and plan to continue spending, significant capital and other resources on the ongoing development and deployment of our 5G and fiber networks. This deployment and other network service enhancements and product launches may not occur as scheduled or at the cost expected due to many factors, including unexpected inflation, delays in determining equipment and wireless handset operating standards, supplier delays, software issues, increases in network and handset component costs, regulatory permitting delays for tower sites or enhancements, or labor-related delays. Deployment of new technology also may adversely affect the performance of the network for existing services. If we cannot acquire needed spectrum, if our 5G and fiber standalone or converged offerings fail to gain acceptance in the marketplace or if we otherwise fail to deploy the services customers desire on a timely basis with acceptable quality and at reasonable costs, then our ability to attract and retain customers, and, therefore, maintain and improve our operating margins, could be materially adversely affected. In 2023, the FCC’s statutory authority to conduct spectrum auctions lapsed and it is uncertain when Congress will act to reauthorize it. Also in 2023, the federal government released a national spectrum strategy that focused on spectrum sharing but did not include terms of future spectrum sharing model(s) or specific timelines to make additional spectrum bands available for 5G and future generations of service. As a result, the federal government’s ability and intent to make sufficient spectrum available to the industry in needed timeframes and on terms suitable for mobile broadband network deployments remains uncertain.

We have multiple wireless competitors in each of our service areas and compete for customers based principally on service/device offerings, price, network quality, reliability, speed, coverage area and customer service. In addition, we are facing growing competition from providers offering services using advanced wireless technologies and IP-based networks, among others. We expect market saturation to continue, which may cause the wireless industry’s customer growth rate to moderate in comparison with historical growth rates, leading to increased competition for customers, including from strategic alliances in converged connectivity. Our share of industry sales could be reduced due to aggressive pricing or promotional strategies pursued by competitors. We also expect that our customers’ growing demand for high-speed video and data services will place constraints on our network capacity. These competition and capacity constraints will continue to put pressure on pricing and margins as companies compete for potential customers. Additionally, we may not be able to accurately predict future consumer demands or the success of new services in markets. Our ability to address these issues will depend, among other things, on continued improvement in network quality and customer service and our ability to price our products and services competitively as well as effective marketing of attractive products and services. These efforts will involve significant expenses and require strategic management decisions on, and timely implementation of, equipment choices, network deployment and service offerings. In addition, a sustained decline in a reporting unit’s revenues and earnings has resulted in the past, and may again result in the future, in a significant negative impact on its fair value, requiring us to record an impairment charge, which could have an adverse impact on our results of operations.

We believe that our brand image, awareness and reputation strengthen our relationship with consumers and contribute significantly to the success of our business. Our reputation and brand image could be negatively affected by a number of factors, including the safety, quality or reliability issues related toof our services, products and operations; cybersecurity incidents and data breaches, including our actual or perceived responses thereto; regulatory compliance; governance issues; our actual or perceived position or lack of position on social and other sensitive matters; and the conduct of our employees and former employees. Our ability to attract and retain employees is highly dependent upon our commitment to an inclusive workplace, ethical business practices and other qualities.

We currently are, and may in the future be, named as a defendant in lawsuits, claims and other legal proceedings that arise in or outside the ordinary course of our business based on alleged acts of misconduct by employees.employees, contractors or other third parties. These actions seek, among other things, compensation for alleged personal injury (including claims for loss of life), workers’ compensation, employment discrimination, sexual harassment, workplace misconduct, wage and hour claims and other employment-related damages, compensation for breach of contract, statutory or regulatory claims, negligence or gross negligence, punitive damages, consequential damages, and civil penalties or other losses or injunctive or declaratory relief. The outcome of any allegations, lawsuits, claims or legal proceedings is inherently uncertain and could result in significant costs, damage to our brands or reputation and diversion of management’s attention from our business. In 2023, The Wall Street Journal published a series of articles alleging that lead-clad telecommunications cables are a public-healthpublic health hazard or may pose environmental risks. We are currently subject to litigation and have received inquiries from government authorities as a result of these assertions. We may be subject to additional litigation, government investigations and potentially new regulation or legislation relating to lead-clad cables. Any damage to our reputation or payments of significant amounts as a result of any of these issues, even if reserved, could materially and adversely affect our business, ability to serve customers, reputation, financial condition, results of operations and cash flows.

The communications industry has experienced rapid changes in the past several years. An increasing number of our customers are using mobile devices for using AI-enabled applications and as their primary means of viewing video. In addition, businesses and government bodies are broadly shifting to wireless-based services for homes and infrastructure to improve services to their respective customers and constituencies. We have spent, and continue to spend, significant capital to shift our wired network to software-based technology and are expanding 5G wireless technology to address these demands. We have entered and continue to enter into a significant number of software licensing agreements and continue to work with software developers to provide network functions in lieu of installing switches or other physical network equipment in order to respond to rapid developments in wireless demand. While software-based functionality can be changed much more quickly than, for example, physical switches, the rapid pace of development means that we may increasingly need to rely on single-source and software solutions that have not previously been deployed in production environments. Should this software not function as intended or our license agreements provide inadequate protection from intellectual property infringement claims, we could be forced to either substitute (if available) or else spend time to develop alternative technologies at a much higher cost and incur harm to our reputation for reliability, and, as a result, our ability to remain competitive could be materially adversely affected.

We depend on suppliers to provide us, directly or through other suppliers, with items such as network equipment, customer premises equipment and wireless-related equipment such as mobile hotspots, handsets, wirelessly enabled computers, wireless data cards and other connected devices for our customers. In some instances, we depend on key single-source suppliers to provide important inputs where there are few alternative suppliers available. These suppliers could fail to provide equipment on a timely or cost-effective basis, or fail to meet our performance expectations, for a number of reasons, including difficulties in obtaining export licenses for certain technologies, inflationary pressures, inability to secure component parts, general business disruption, natural disasters, safety issues, economic and political instability, including the outbreak of war and other hostilities, and public health emergencies. In certain circumstances, we could be liable for the actions of our suppliers and other third parties we do business with. These factors have caused, and may again cause, delays in the development, manufacturing (including the sourcing of key components) and shipment of products to the extent that we or our suppliers are impacted. In certain limited circumstances, suppliers have been unable to supply products in a timely fashion, affecting our ability to provide products and services precisely as and when requested by our customers. It is possible that, in some circumstances, we could be forced to switch to a different key supplier or be unable to meet customer demand for certain products or services. Because of the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products of one or more key suppliers with products from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a negative effect on our operating results.

We may not realize or sustain the expected benefits from acquisitions, joint ventures or our business transformation initiatives, andincluding thesedispositions, effortswhich could have a materiallymaterial adverse effect on our business, operations, financial condition, results of operations and competitive position.

We have been and will be undertaking certain transformation initiatives,initiatives and investments, which are designed to reduce costs, enable legacy rationalization, streamline and modernize distribution and customer service, improve our products and services, remove redundancies and simplify and improve processes and support functions. Our focus is on supporting added customer value with an improved customer experience. We intend for these efficiencies to enable increased investments in our strategic areas of focus, which include improving broadband connectivity (for example, fiber and 5G). We also expect these initiatives to drive efficiencies and improved margins. If we do not successfully manage and timely execute these initiatives,initiatives and investments, which may include acquisitions, joint ventures, particularly those aimed at enhancing our fiber serviceable locations, and other strategic transactions, or if they are inadequate or ineffective, we may fail to meet our financial goals and achieve anticipated benefits, improvements may be delayed, not sustained or not realized, and our business, operations and competitive position could be adversely affected. In addition, any such initiative or investment entails certain risks and could present financial, managerial and operational challenges. Further, we are using and intend to further use artificial intelligence (AI)-drivenAI-driven efficiencies in our network design and operations, software development, sales, marketing, customer support services and general and administrative costs. The models used in those products,products or operations, particularly generative AI models, may produce output or take action that is incorrect, release private or confidential information, reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others, or be otherwise harmful. AnyAI-related laws and regulations continue to remain uncertain and may vary from jurisdiction to jurisdiction. There can be no assurance that the usage of theseAI riskswill couldmeaningfully expose us to liability or adverse legal or regulatory consequences and harmenhance our reputation and the public perception of our business or the effectiveness of our security measures.

We are subject to a number of lawsuits both in the United States and in foreign countries, including, at any particular time, claims relating to antitrust, patent infringement, wage and hour, personal injury, environmental, customer data and privacy violations, cyberattacks, regulatory proceedings, breach of contract, and selling and collection practices. We also spend substantial resources complying with various government standards, which may entail related investigations and litigation. In the wireless and wireline area, we also face current and potential litigation relating to alleged adverse health effects on customers or employees who use such technologies including, for example, wireless devices. We may incur significant expenses defending such suits or government charges and may be subject to injunctions or required to pay amounts or otherwise change our operations in ways that could materially adversely affect our operations or financial results.

Cyberattacks – including through the use of malware, computer viruses, distributed denial of services attacks, ransomware attacks, credential harvesting, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems or accessing our data and those of our suppliers, vendors and other service providers – could have a material adverse effect on our operations or results of operations. As a critical infrastructure service provider, thewe Company believesbelieve that itwe isare a particularly attractive target for such cyberattacks, including from nation states and highly sophisticated, state-sponsored, or otherwise well-funded actors, and thewe Company experiencesexperience heightened risk from time to time as a result of geopolitical events.

Cyberattacks canhave causecaused, and may in the future cause, equipment or network failures, copying or loss of information, including sensitive personal information of customers or employees or proprietary information, as well as disruptions to our or our customers’, suppliers’ or vendors’ operations, which have and in the future could result in significant expenses, potential investigations and legal liability, a loss of current or future customers and reputational damage. Additional resources and management attention may be necessary to respond to government inquiries and requirements, including potentially conflicting demands and requirements from multiple government agencies. Moreover, the amount and scope of insurance that we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our business that may result. As our networks evolve, they are becoming increasingly reliant on software and cloud technologies to handle growing demands for data consumption. Cyberattacks against the Companyus and itsour suppliers and vendors have occurred in the past, including from highly sophisticated, state-sponsored actors as noted above, and will continue to occur in the future and are increasing in frequency, scope and potential harm over time. For example, in July 2024, the Companywe disclosed a cybersecurity incident on Item 1.05 of Form 8-K relating to the copying of mobile customer call data.

Extensive and costly efforts are undertaken to develop and test systems before deployment and to conduct ongoing monitoring and updating to prevent and withstand such attacks. While the Companywe may have contractual rights to assess the effectiveness of many of itsour suppliers’ and vendors’ systems and protocols, the Companywe cannot know or assess the effectiveness of all of our providers’ systems and controls at all times. While, to date, we have not been subject to a cyberattack that has had a material adverse effect on our operations or results of operations, the preventive actions we take, or our suppliers or vendors take, to reduce the risks associated with cyberattacks may be insufficient to repel or mitigate the effects of a major cyberattack in the future.

Our business operations could be subject to interruption by equipment or network failures caused by human error, system failures, unauthorized access to our network and critical infrastructure, power outages, terrorist or other hostile acts, including acts of war, and natural disasters, such as flooding, hurricanes and forest fires. Such events could cause significant damage to the infrastructure upon which our business operations rely, resulting in degradation or disruption of service to our customers, as well as significant recovery time and expenditures to resume operations. Our system redundancy and other measures we take to protect our infrastructure and operations from the impacts of such events may be ineffective or inadequate to sustain our operations through all such events. Any of these occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits.

We intend to and have incurred debt to fund significant acquisitions, as well as spectrum purchases needed to compete in our industry. While we believe such decisions were prudent and necessary to take advantage of both growth opportunities and respond to industry developments, we did experience credit rating downgrades from historical levels. Banks and potential purchasers of our publicly traded debt may decide that these strategic decisions and similar actions we may take in the future, as well as expected trends in the industry, will continue to increase the risk of investing in our debt and may demand a higher rate of interest, impose restrictive covenants or otherwise limit the amount of potential borrowing. Additionally, our capital allocation plan is focused on, among other things, managing our debt level going forward.level. Any failure to successfully execute this plan could adversely affect our cost of funds, liquidity, competitive position and access to capital markets.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In many cases, the application of existing, newly enacted or amended tax laws (such as the U.S. Tax Cuts and Jobs Act of 2017 and the Inflation Reduction Act of 2022) may be uncertain and subject to differing interpretations, especially when evaluated against ever-changing products and services provided by our global telecommunications and technology businesses. In addition, tax legislation has been introduced or is being considered in various jurisdictions that could significantly impact our tax rate, tax liabilities and carrying value of deferred tax assets or deferred tax liabilities. Any of these changes could materially impact our financial performance and our tax provision, net income and cash flows.

•The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review of such proceedings) and legislative and regulatory efforts involving issues important to our business, including, without limitation, pending Noticesresults of Apparentpending Liabilitygovernmental investigations; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations; E911 services; rules concerning digital discrimination; competition policy; privacy; net neutrality; copyright protection; availability of new spectrum on fair and reasonable terms; and wireless and satellite license awards and renewals, and our response to such legislative and regulatory efforts.

•Enactment of or changes to state, local, federal and/or foreign tax laws and regulations, and actions by tax agencies and judicial authorities, and the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments.jurisdictions.

•U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent, which are rapidly evolving.consent.

•Our ability to compete in an increasinglya competitive industry and against competitors that can offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies and/or government-owned or subsidized networks, and our response to such competition and emerging technologies.technologies, including artificial intelligence.

•The impact from major equipment, software or other failures or errors that disrupt our networks or cyber incidents; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; severe weather conditions or other natural disasters including earthquakes and forest fires; public health emergencies; energy shortages; or wars or terrorist attacks.

•The imposition of tariffs and their duration and uncertainty surrounding further tariffs and congressional action regarding spending and taxation, which may result in changes in government spending and affect the abilitybusiness and willingnessconsumer ofspending businesses and consumers to spend in general.trends.

•Our ability to successfully complete divestitures,acquisitions, divestitures and joint venture transactions, as well as achieve our expectations regarding the financial impact of completed and/or pending transactions.

•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 20242025 and 20232024 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.

Consolidated Results Our financial results from continuing operations are summarized in the following table. We then discuss factors affecting our overall results from continuing operations.results. Additional analysis is discussed in our “Segment Results” section. We also discuss our expected revenue and expense trends for 20252026 in the “Operating Environment and Trends of the Business” section.

Asset impairments and abandonments and restructuring increaseddecreased in 2025, with higher impairments in 2024. TheNoncash increasecharges in 2024 was primarily duerelated to a third-quarter noncash goodwill impairment charge of $4,422 associated with our Business Wireline reporting unit. We performed an interim goodwill impairment test of the Business Wireline reporting unit andas concludedwell that the calculated fair value was lower than the book value, which was driven by a faster-than-previously anticipated industry-wide secular decline of legacy services (see Note 9). Noncash charges in 2024 also includedas 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.

Operating income increased in 2025 and decreased in 2024 and increased in 2023.2024. Our operating margin was 19.2% in 2025, compared to 15.6% in 2024, compared toand 19.2% in 2023, and (3.8)% in 2022, which included noncash goodwill impairment charges of $24,812.2023.

Interest expense increased in 2024,2025, primarily due to lower capitalized interest associated with spectrum acquisitions,acquisitions. mostlyThe increase was partially offset by lower debtaverage commercial paper balances. Interest expense in 2023 also includes distributions on Mobility preferred interests, which were repurchased on April 5, 2023 (see Note 16).

Equity in net income of affiliates increaseddecreased in 2024.2025, reflecting our sale of DIRECTV in July 2025. The increasedecrease reflectswas partially offset by cash distributions received by AT&T in excess of the carrying amount of our investment in DIRECTV,DIRECTV partiallyprior offsetto by the performance of our investment in DIRECTVdisposition (see Notes 10 and 19).

Other income (expense) – net increased in 2024.2025. The increase was primarily drivendue byto actuariala remeasurementgain of benefitapproximately plan$5,600 assetsrecognized andon obligations,the with an actuarial losssale of $56our interest in 2024, compared to net actuarial and settlement losses of $1,594 in 2023DIRECTV (see Note 1410). Also contributing to theThe increase was thealso prior-yeardriven write-downby ofa gain on a prior disposition and noncash impairment charges for a held-for-sale business and our SKY Mexico equity investment. ThesePartially offsetting the increases were partially offset by lower pension and postretirement benefit credits and lower returns on other benefit-related investments.

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.principles (GAAP).

Operating income increased in 2025 and decreased in 2024 and increased in 2023.2024. The 20242025 operating income reflects aan decreaseincrease in operating income from our Business Wireline business unit, partially offset by increases in our Mobility and Consumer Wireline business units.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 2024,2024 and 23.6% in 2023 and 22.8% in 2022.2023. Our Communications segment EBITDA margin was 39.6% in 2025, 39.5% in 2024,2024 and 38.3% in 2023 and 37.1% in 2022.2023.

Service revenue increased during 2024,2025, largely due to growth from subscriber gainsgains, andpartially higheroffset postpaidby averagepromotional revenue per subscriber (ARPU).activity.

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-onlyphone churn were lowerhigher in 2024.2025, partially driven by an increase in our customer base that reached the end of device financing periods, which normalized in the second half of 2025.

Equipment revenue decreasedincreased in 2024,2025, primarily driven by lowerhigher wireless device sales volumes. The decrease was partially offset by sales of higher-priced phones in 2024.

Depreciation expense increased in 2024,2025, primarily due to ongoing capital investmentspending for strategicnetwork initiativesupgrades suchand asexpansion, fiber,partially whichoffset weby expectlower todepreciation furtherimpacts increasefrom inour 2025.network modernization efforts.

Operating income decreasedincreased in 20242025 and 2023.2024. Our Business WirelineMobility operating income margin was (0.5)%30.4% in 2024,2025, 6.2%30.9% in 20232024 and 10.2%30.8% in 2022.2023. Our Business WirelineMobility EBITDA margin was 29.1%42.0% in 2024,2025, 31.9%42.8% in 20232024 and 33.7%40.9% in 2022.2023.

Broadband revenues increased in 2024,2025, driven by an increase in fiber revenues of 17.0%. 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,ARPU. This increase also includes growth in AIA revenues and was partially offset by declines in copper-based broadband services.

Legacy voice and data service revenues decreased in 2024,2025, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber.fiber services.

Operations and support expenses decreased in 2024,2025, driven by lower customer support costs, lower marketing expensecosts and savingscontent fromlicensing cost initiatives,fees, offset by higher network-related costsexpenses asand ourmarketing fiber build scales.costs.

Depreciation expense increased in 2024,2025, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion, whichpartially weoffset expectby tofully furtherdepreciated increaselegacy in 2025.assets.

Operations and support expenses increased in 2024,2025, driven by increased equipmentsales volume, resulting in higher equipment, selling and sellingbad costsdebt resulting from higher sales,expense, partially offset by favorable impact of foreign exchange.

Depreciation expense decreasedincreased in 2024,2025, drivenprimarily bydue lowerto in-serviceaccelerated depreciation on certain network assets and higher in-service assets, partially offset by favorable impact of foreign exchange.

Operating income improved in 20242025 and 2023.2024. Our Mexico operating income margin was 3.3% in 2025, 0.9% in 2024,2024 and (3.6)% in 2023 and (10.4)% in 2022.2023. Our Mexico EBITDA margin was 18.6% in 2025, 16.5% in 2024,2024 and 14.8% in 2023 and 10.6% in 2022.2023.

20252026 Revenue Trends We expect revenue growth in our wireless and broadband businesses as customers demand instant connectivity and higher speeds made possible by wireless network enhancements through 5G deployment and our fiber network expansion. We believe that our simplified go-to-market strategy for 5G in underpenetrated markets will continue to contribute to wireless subscriber and service revenue growth and that expansion of our fiber footprint and our multi-gig offerings will drive greater demand for broadband services on our fast-growing fiber network, as well as increasing our converged customers that have both wireless and fiber.

As we expand our fiber reach, we will be orienting our business portfolio to leverage this opportunity to offset continuing declines in legacy Business Wireline products by growing connectivity with small to mid-sized businesses. We plan to use our strong fiber and wireless assets, broad distribution and integrated product offerings to strengthen our overall market position. We will continue to rationalize our product portfolio with a longer-term shift of the business to fiber and mobilewireless connectivity, and growth in value-added services. As customers are demanding faster and more reliable services, we are decommissioning our legacy copper network and enhancing our offerings to include services that provide better experiences over newnewer technologies, such as AT&T Internet Air.

20252026 Expense Trends During 2025,2026, we expect expense trends consistent with the prior year, and that we will continue to focus on efficiency, led by our cost transformation initiative. We expect the spending required to support growth and efficiency initiatives, primarily our continued deployment of fiber and 5G, to pressure expense trends in 2025.2026. These investments will help prepare us to meet increasedthe continued increase in customer demand for enhanced wireless and broadband services, including on-the-go video streaming, augmented reality, “smart” technologies, user generated content and artificialAI. intelligenceOur (AI).network Themodernization software benefits of our 5G wireless technologyefforts should result in a more efficient use of capital and lower network-related expenses in the coming years. Furthermore, access to theour extentnetwork and newer technology may drive customers to upgrade theirdevices handsetsand in 2025,equipment, the expenses associated with those deviceequipment sales are expected to contribute to higher costs.

We continue to transform our operations to be more efficient and effective. We are restructuring businesses, working with regulators and customers to sunset legacy networks, improving customer service and ordering functions through digital transformation, sizing our support costs and staffing with current activity levels, and reassessing overall benefit costs. We also expect cost savings through AI-driven efficiencies in our network design and operations, software development, sales, marketing, customer support services and general and administrative costs.

Market Conditions In recent years, uncertainty surrounding global growth rates, tariffs, inflation and ana increasinghigher interest rate environment continued to produce volatility in the credit, currency and equity markets. We expect ongoing pressure on pricing during 20252026 as we respond to the geopolitical and macroeconomic environment and our competitive marketplace, especially in wireless services.

Included on our consolidated balance sheets are assets held by benefit plans for the payment of future benefits. Our pension plans are subject to funding requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). We plan to voluntarily contribute approximately $350 to our pension plans in 2026 and expect only minimal ERISA contribution requirements to our pension plans for 2025.requirements. Investment returns on these assets depend largely on trends in the economy, and a weakness in the equity, fixed income and real asset markets could require us to make future contributions to the pension plans. In addition, our policy of recognizing actuarial gains and losses related to our pension and other postretirement plans in the period in which they arise subjects us to earnings volatility caused by changes in market conditions; however, these actuarial gains and losses do not impact segment performance as they are required to be recorded in “Other income (expense) – net.” Changes in our discount rate, which are tied to changes in the bond market, and changes in the performance of equity markets, may have significant impacts on the valuation of our pension and other postretirement obligations at the end of 20252026 (see “Critical Accounting Policies and Estimates”).

Expected Growth Areas Over the next few years, we expect our growth to come from wireless and IP-based fiber broadband services. We provide integrated services to diverse groups of customers in the U.S.United States. on a converged telecommunications network utilizing different technological platforms. In 2025,2026, our key initiatives include:

•Continuing our wireless subscriber momentum and 5G deployment, with expansion of wireless subscribers in underpenetrated markets and converged customers.connectivity.

•Continuing our fiber deployment, improving fiber penetration, growing AT&T Internet Air services, accelerating subscriberconnectivity growth and increasing broadband revenues.revenues, inclusive of impact of integrating recent acquisitions of spectrum and fiber assets.

We discuss in our Annual Report on Form 10-K for the year ended December 31, 2025 various risks that may materially affect our business. We use this section to update this discussion to reflect material developments. For the firstsecond quarter of 2026, there were no such material developments.

Operating revenues increased in the second quarter and for the first quartersix months of 2026, reflecting higher Advanced Connectivity wirelessfiber and fiberwireless revenues, includingwith fiber revenues fromincluding customersthe impact of ouracquiring acquiredLumen’s mass markets fiber business. Operating revenues in Mexico were also higher due to favorable foreign exchange impacts during the first quarter of 2026.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 firstsecond quarter and for the first six months of 2026,2026. The increase in the second quarter was primarily due to higheran wirelessasset salesabandonment volumes,charge whichassociated drovewith the reprioritization of our spectrum strategy, higher equipment,advertising selling and bad debt expenses. The increase was also due to higher network costs that included vendor credits in the prior year, andexpense, incremental customer costs related to our acquired mass markets fiber business.business Theand increasehigher wasbad debt expenses driven by subscriber growth. These increases were partially offset by higher restructuring charges in the prior year, cost reductions from transformation initiatives andinitiatives, lower content licensing fees.fees and gains on tower transactions.

Operating income increased in the second quarter and for the first quartersix months of 2026. Our operating income margin in the firstsecond quarter increased from 18.8%21.1% in 2025 to 21.1%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 quartersix 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 quartersix months of 2026, primarily due to the sale of our interest in DIRECTV Entertainment Holdings, LLC to TPG Capital on July 2, 2025.

Income tax expense decreased in the second quarter and for the first quartersix months of 2026. The decrease was primarily due to lower income from continuing operations before income tax. Our effective tax rate was 21.8% inand the first quarterresolution of 2026,certain versusInternal 21.7%Revenue inService the(IRS) comparable period in the prior year, reflecting larger discrete state tax benefits in 2025.examinations.

Wireless service revenue increased in the second quarter and for the first quartersix months of 2026 driven by growth in retail wireless subscribers in underpenetrated categories and converged accounts, and pricing actions that were partially offset by promotional activity.discounts on wireless subscriber additions. The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Phone churn was slightly higherlower in the second quarter and slightly higher for the first quartersix months of 2026, driven byreflecting the competitive dynamics of the industry.

Advanced home internet revenue increased in the second quarter and for the first quartersix months of 2026 driven by an increase in fiber and AIA revenues. Fiber revenues increased 21.2%21.4% and 21.3% in the firstsecond quarter of 2026,2026 and for the first six months, due to growth in fiber customers, including customers of our acquired mass markets fiber business. We expect revenue growth to continue as we invest further in building our fiber footprint. AIA revenue increases exceeded 100% as we continue to make these services available in additional markets.markets and ramp marketing and promotion activities.

Business fiber and advanced connectivity revenues increased in the second quarter and for the first quartersix months of 2026 driven by higher fiber and fixed wireless revenues.

Business transitional and other revenues decreased in the second quarter and for the first quartersix months of 2026 driven by lower demand for Virtual Private Network (VPN) and wholesale services, both of which we expect to continue.

Other service revenues decreased in the second quarter and for the first quartersix months of 2026, reflecting the continued decline in the number of consumer VoIP customers.

Depreciation expense decreased in the second quarter and for the first quartersix 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. Depreciation of our shared network, including copper-based assets prior to decommissioning, is managed in our Advanced Connectivity segment, consistent with our composite group depreciation methodology.

Operating income increased in the second quarter and for the first quartersix months of 2026. Our Advanced Connectivity operating income margin in the firstsecond quarter increased from 22.0%22.2% in 2025 to 24.1%25.7% in 2026 and for the first six months increased from 22.1% in 2025 to 24.9% in 2026. Our Advanced Connectivity EBITDA margin in the firstsecond quarter increased from 40.3%40.5% in 2025 to 40.6%42.0% in 2026 and for the first six months increased from 40.4% in 2025 to 41.3% in 2026.

Operating revenues decreased in the second quarter and for the first quartersix months of 2026, driven by lower demand for legacy services, which we expect to continue as we decommission our copper-based legacy network.

Operations and support represent direct operating costs and decreased in the second quarter and for the first quartersix months of 2026. Expense declines were primarily driven by lower personnel and other costs resulting from the decommissioning of our legacy network and lower fulfillment cost amortization, which we expect to continue. These decreases were partially offset by vendor credits in the prior year.settlements.

Operating income decreased in the second quarter and for the first quartersix months of 2026. Our Legacy operating income and EBITDA margins in the firstsecond quarter decreased from 43.0%43.6% in 2025 to 34.6%32.0% in 2026 and for the first six months decreased from 43.3% in 2025 to 33.4% in 2026.

Service revenues increased in the second quarter and for the first quartersix months of 2026, primarily due to favorable foreign exchange impacts and growth in subscribers.postpaid subscribers and ARPU.

Equipment revenues increased in the second quarter and for the first quartersix months of 2026, primarilysubstantially due to favorable foreign exchange impacts and higher equipment sales.impacts.

Operations and support expenses increased in the second quarter and for the first quartersix months of 2026, driven by unfavorable foreign exchange rates and increased sales volume, resulting in higher equipment costs and bad debt expenses.

Depreciation and amortization expense increased in the second quarter and for the first quartersix months of 2026, driven by unfavorable foreign exchange rates,rates and spectrum renewal fees, with accelerated depreciation onimpacting certainthe assetsfirst andthree highermonths in-serviceof assets.the year.

Operating income decreased in the second quarter and for the first quartersix months of 2026. Our Mexico operating income margin in the firstsecond quarter decreased from 4.4% in 2025 to 1.7%3.1% in 2026 and for the first six months decreased from 4.4% in 2025 to 2.4% in 2026. Our Mexico EBITDA margin in the firstsecond quarter decreased from 19.9%19.1% in 2025 to 18.8%18.5% in 2026 and for the first six months decreased from 19.5% in 2025 to 18.6% in 2026.

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. For a discussion of these regulations, 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, 2025.

Our cash balance at June 30, 2026 remained elevated as we anticipate the completion of our pending transaction with EchoStar Corporation (EchoStar). We had $11,964$17,570 in cash and cash equivalents available at MarchJune 31,30, 2026, decreasing $6,270$664 since December 31, 2025. Cash and cash equivalents included cash of $3,490$5,744 and money market funds and other cash equivalents of $8,474.$11,826. Approximately $1,077$1,251 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 threesix months of 2026, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties. These inflows were exceeded by 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.expenses. The cash generated from operating activities was primarily used to repay long-term debt, fund capital improvements and business acquisitions, repay long-term debt, repurchase common stock,stock and make dividend payments to stockholders. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

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 $1,136$272 and $2,042$2,146 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. All supplier financing payments are due within one year. (See Note 10)

For the first threesix months of 2026, cash used in investing activities totaled $7,484$13,233 and consisted primarily of $4,877$10,577 (including interest during construction) for capital expenditures. During the first threesix months of 2026, investing activities also included $413$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).

A tabular summary of our debt activities for the threesix months ended MarchJune 31,30, 2026 is as follows:

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.3%4.4% as of MarchJune 31,30, 2026 and 4.2% as of December 31, 2025. We had $137,017$142,578 of total notes and debentures outstanding at MarchJune 31,30, 2026. This also included Euro, British pound sterling, Canadian dollar, Australian dollar, and Swiss franc denominated debt that totaled approximately $34,994.$34,652.

At MarchJune 31,30, 2026, we had $6,818$9,323 of long-term debt maturing within one year. We had no outstanding commercial paper or other short-term borrowings on MarchJune 31,30, 2026.

For the first threesix months of 2026, we paid $212$643 of cash under our vendor financing program, compared to $203$423 in the prior-year comparable period. Total vendor financing payables included in our MarchJune 31,30, 2026 consolidated balance sheet were $2,437,$2,868, with $1,474$1,875 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).