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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).

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). Upon acquisition, we initially sought an equity partner to co-invest in Forged Fiber and have since agreed to sell a controlling interest in the business. As such, Forged Fiber met the criteria of held-for-sale and accordingly is reflected as discontinued operations in the accompanying financial statements. The information below refers only to our continuing operations and does not include discussion of balances or activity of Forged Fiber.

Free Cash Flow

Free cash flow is defined as cash from operations minus cash flows related to our DIRECTV equity investment that was sold in July 2025, 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
Third QuarterNine-Month Period
2026202520262025
Net Cash Provided by Operating Activities from Continuing Operations
$10,519 $10,152 $28,915 $28,964 
Less: Distributions from DIRECTV classified as operating activities— — — (1,926)
Less: Cash taxes paid on DIRECTV— — — 251 
Less: Capital expenditures(5,061)(4,887)(15,638)(14,061)
Less: Payment of vendor financing(505)(400)(1,148)(823)
Free Cash Flow4,953 4,865 12,129 12,405 
Less: Dividends paid(1,950)(2,033)(5,923)(6,168)
Free Cash Flow after Dividends$3,003 $2,832 $6,206 $6,237 
Free Cash Flow Dividend Payout Ratio39.4 %41.8 %48.8 %49.7 %

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
Third QuarterNine-Month Period
2026202520262025
Capital expenditures
$(5,061)$(4,887)$(15,638)$(14,061)
Payment of vendor financing
(505)(400)(1,148)(823)
Cash paid for Capital Investment$(5,566)$(5,287)$(16,786)$(14,884)

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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 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.

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.

There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. 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 and EBITDA 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
Third QuarterNine-Month Period
2026202520262025
Income from Continuing Operations
$1,306 $9,677 $10,563 $19,230 
Additions:
Income Tax Expense1,390 976 3,353 3,512 
Interest Expense1,979 1,700 5,675 5,013 
Equity in Net (Income) Loss of Affiliates10 20 80 (1,905)
Other (Income) Expense - Net(590)(6,254)(1,880)(7,476)
Depreciation and amortization4,978 5,317 14,910 15,758 
EBITDA9,073 11,436 32,701 34,132 
Transaction, legal and other costs
44 487 339 615 
   Benefit-related (gain) loss 16 (62)(60)(126)
Asset impairments and abandonments and restructuring3,372 — 3,658 504 
Adjusted EBITDA1
$12,505 $11,861 $36,638 $35,125 
1See "Adjusting Items" section for additional discussion and reconciliation of adjusted items.
   
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Segment EBITDA and EBITDA Margin
Dollars in millions
Third QuarterNine-Month Period
2026202520262025
Advanced Connectivity Segment
Operating Income$7,628 $6,417 $21,826 $18,495 
  Add: Depreciation and amortization4,702 5,076 14,094 15,084 
EBITDA$12,330 $11,493 $35,920 $33,579 
Total Operating Revenues$29,481 $27,503 $86,567 $82,192 
Operating Income Margin25.9 %23.3 %25.2 %22.5 %
EBITDA Margin41.8 %41.8 %41.5 %40.9 %
Legacy Segment
Operating Income$498 $679 $1,633 $2,657 
  Add: Depreciation and amortization— — — — 
EBITDA$498 $679 $1,633 $2,657 
Total Operating Revenues$1,519 $2,013 $4,919 $6,583 
Operating Income Margin32.8 %33.7 %33.2 %40.4 %
EBITDA Margin32.8 %33.7 %33.2 %40.4 %
Latin America Segment
Operating Income
$45 $22 $103 $111 
  Add: Depreciation and amortization191 177 580 482 
EBITDA$236 $199 $683 $593 
Total Operating Revenues$1,240 $1,095 $3,637 $3,120 
Operating Income Margin3.6 %2.0 %2.8 %3.6 %
EBITDA Margin19.0 %18.2 %18.8 %19.0 %


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%.   
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Adjusting Items
Dollars in millions
Third QuarterNine-Month Period
2026202520262025
Operating Expenses
Transaction, legal and other costs1
$44 $487 $339 $615 
   Benefit-related (gain) loss16 (62)(60)(126)
Asset impairments and abandonments and restructuring
3,372 — 3,658 504 
Adjustments to Operations and Support Expenses3,432 425 3,937 993 
   Amortization of intangible assets80 10 221 28 
Adjustments to Operating Expenses3,512 435 4,158 1,021 
Other
 Equity in net income of DIRECTV
— — — (1,926)
   Gain on sale of DIRECTV— (5,479)— (5,479)
   Benefit-related (gain) loss, impairments of investments and other
(10)(99)(71)(224)
Adjustments to Income from Continuing Operations Before
Income Taxes
3,502 (5,143)4,087 (6,608)
Tax impact of adjustments(34)67 106 (266)
Tax-related items— 177 365 177 
Adjustments to Income From Continuing Operations
$3,536 $(5,387)$3,616 $(6,519)
Preferred stock redemption gain
— — — (90)
Adjustments to Income From Continuing Operations
Attributable to Common Stock
$3,536 $(5,387)$3,616 $(6,609)
1Includes certain legal reserves and settlements that cover extended historical periods, novel theories of liability and/or are unpredictable in both magnitude and timing, and therefore are distinct and separate from normal, recurring legal matters. Such costs are presented net of expected insurance recoveries and are primarily associated with legacy legal matters and cybersecurity events.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA 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 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
Third QuarterNine-Month Period
2026202520262025
Operating Income$4,095 $6,119 $17,791 $18,374 
Adjustments to Operating Expenses3,512 435 4,158 1,021 
Adjusted Operating Income$7,607 $6,554 $21,949 $19,395 
EBITDA$9,073 $11,436 $32,701 $34,132 
Adjustments to Operations and Support Expenses3,432 425 3,937 993 
Adjusted EBITDA$12,505 $11,861 $36,638 $35,125 
Total Operating Revenues$32,322 $30,709 $95,386 $92,182 
Operating Income Margin12.7 %19.9 %18.7 %19.9 %
Adjusted Operating Income Margin23.5 %21.3 %23.0 %21.0 %
Adjusted EBITDA Margin38.7 %38.6 %38.4 %38.1 %

Adjusted Diluted EPS
Third QuarterNine-Month Period
2026202520262025
Diluted Earnings Per Share (EPS) From Continuing
Operations
$0.13 $1.29 $1.34 $2.51 
Gain on sale of DIRECTV— (0.79)— (0.79)
Equity in net income of DIRECTV— — — (0.21)
   Restructuring and impairments0.50 — 0.53 0.05 
   Benefit-related, transaction, legal and other items
0.02 0.04 0.04 0.04 
Tax-related items— — (0.05)— 
Adjusted EPS$0.65 $0.54 $1.86 $1.60 
Year-over-year growth - Adjusted20.4 %16.3 %
Weighted Average Common Shares Outstanding with
Dilution (000,000)
6,844 7,169 6,938 7,203 

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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 adding debt classified as held-for-sale related to our Mexico wireless business and 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 - 2026
Dollars in millions
Three Months Ended
Dec. 31,March 31,June 30,Sept. 30,
Four
Quarters
20251
20261
20261
2026
Adjusted EBITDA$11,236 $11,795 $12,338 $12,505 $47,874 
End-of-period current debt9,483 
End-of-period long-term debt150,144 
Total End-of-Period Debt159,627 
Add: Mexico held-for-sale finance leases1,209 
Less: Cash and Cash Equivalents10,767 
Less: Time Deposits250 
Net Debt Balance149,819 
Annualized Net Debt to Adjusted EBITDA Ratio 3.13 
1As reported in AT&T's Form 8-K filed July 22, 2026.

Net Debt to Adjusted EBITDA - 2025
Dollars in millions
Three Months Ended
Dec. 31,March 31,June 30,Sept. 30,
Four
Quarters
20241
20251
20251
20251
Adjusted EBITDA$10,791 $11,533 $11,731 $11,861 $45,916 
End-of-period current debt11,378 
End-of-period long-term debt128,090 
Total End-of-Period Debt139,468 
Less: Cash and Cash Equivalents20,272 
Less: Time Deposits350 
Net Debt Balance118,846 
Annualized Net Debt to Adjusted EBITDA Ratio2.59 
1As reported in AT&T's Form 8-K filed July 22, 2026.


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