T-Mobile US (NASDAQ: TMUS) announced its first-quarter earnings on Thursday, exceeding expectations. However, slower growth in its primary wireless phone subscribers negatively impacted investor confidence, leading to a 6.4% drop in shares during premarket trading on Friday.
The company posted adjusted earnings of $2.58 per share on revenues of $20.9 billion, beating analyst forecasts of $2.47 per share and $20.6 billion in revenue, according to FactSet.
This time last year, the company reported $2 per share in earnings with revenue of $19.6 billion.
High-speed Internet Growth Balances Subscriber Decline
T-Mobile gained 1.34 million postpaid net customers in the quarter, outperforming Wall Street’s prediction of 1.18 million new customers.
A significant portion of this growth was attributed to an increase in high-speed internet users.
However, new postpaid phone customer numbers fell short. The company reported 495,000 additions, falling short of the estimated 504,900 and down from 532,000 during the same quarter last year.
Despite this slowdown, T-Mobile reiterated its guidance for the full year, expecting total postpaid net customer additions to be between 5.5 million and 6 million for 2025.
The firm also announced its new satellite service would cost $10 per month, a strategic move in a highly competitive market.
Analysts See Long-term Potential but Note Valuation Concerns
Broker opinions on T-Mobile remain mostly positive, with 19 out of 30 analysts giving it a ‘buy’ or ‘strong buy’ rating, 10 rating it as a ‘hold’, and 1 as a ‘sell’.
The average price target is set at $275, based on data from LSEG. Nonetheless, some analysts have expressed worries about the stock’s valuation compared to others in the industry.
RBC Capital Markets, which rates T-Mobile as “sector perform” with a target price of $265, believes the company’s growing presence in the business sector will help achieve subscriber goals, despite challenging economic conditions.
However, they pointed out that T-Mobile’s enterprise value-to-earnings ratio for fiscal year 2026 is 11.09, significantly higher than the industry median of 6.56.
Moffett Nathanson, which has a neutral rating and a target price of $220, argues that while the stock is somewhat insulated from existing trade tensions, it remains overpriced. They also noted that the churn rate among postpaid phone subscribers is a trend affecting the entire industry.
Oppenheimer, rating the stock as “outperform” with a target price of $300, considers T-Mobile to be their top choice in the wireless sector.
“We see the company’s 5G network and ongoing stock buybacks as key components of its stock’s performance,” they mentioned.
NewStreet Research, offering a ‘buy’ rating and a target of $308, believes T-Mobile is “best situated” in a growing competitive market due to its lower average revenue per unit (ARPU), increased capacity, and strong momentum.
Economic Uncertainty Hangs Over Telecom, but T-Mobile Remains Optimistic
These results come on the heels of mixed earnings reports from Verizon and AT&T earlier this week.
Verizon exceeded profit forecasts but reported a larger-than-expected decline in postpaid phone subscribers.
Conversely, AT&T met expectations and had a slight increase in new phone customers.
“T-Mobile has a robust opportunity for market share growth due to its capacity advantage, and it can further drive EBITDA growth by matching AT&T and Verizon on pricing,” analysts from NewStreet Research noted.
The telecom sector is preparing for potential repercussions from the Trump administration’s tariffs on international trade partners.
Although smartphones are currently exempt, the possibility of tariffs later in the year has added to the uncertainty.
Analysts caution that inflation and economic instability may prompt consumers to delay phone upgrades or choose cheaper plans.
“Connectivity is a fundamental part of people’s lives,” stated T-Mobile CFO Peter Osvaldik in an interview with Barron’s. “This industry not only survived the pandemic but has continued to grow,” he added.
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