Why AT&T Stock Is Soaring Today

AT&T (NYSE:T) stock is seeing big gains in Monday's trading despite a bearish backdrop for the broader market. The company's share price was up 7% as of 3:15 p.m. ET. Meanwhile, the S&P 500 (SNPINDEX:$SPX) was down 1.8%, and the Nasdaq Composite (NASDAQINDEX:$NASX) had fallen 3.6%.

AT&T's valuation is surging following the company's recent earnings report. In addition to posting sales and earnings performance that beat Wall Street's expectations, the company also issued encouraging guidance on returning value to shareholders and its plans in the artificial intelligence (AI) space.

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AT&T stock surges on sales and earnings beats

AT&T published its fourth-quarter results before the market opened this morning and reported sales and earnings for the period that beat Wall Street's targets. The company posted adjusted non-GAAP (generally accepted accounting principles) earnings per share of $0.54 on sales of $32.3 billion, beating the average analyst estimate's call for per-share earnings of $0.51 and sales of $31.94 billion.

The telecom giant's revenue increased 0.9% year over year in Q4, with growth for mobile and broadband services offsetting declines for wireline. AT&T's mobility services segment saw sales increase 3.3% year over year to reach roughly $16.6 billion, and consumer broadband revenue rose 7.8% to hit $2.9 billion. AT&T recorded 482,000 net postpaid phone service additions and 307,000 fiber service additions in the quarter.

What's next for AT&T?

In conjunction with its Q4 report, AT&T also laid out performance guidance for 2025. The company expects that overall service revenue will grow at a low-single-digit percentage, with mobility service revenue likely being at the higher end of a growth range between 2% and 3% and fiber consumer broadband revenue growing at a mid-teens rate.

Excluding DirecTV, the company expects adjusted earnings per share to come in between $1.97 and $2.07. Meanwhile, management anticipates free cash flow of roughly $16 billion for the year, excluding its stake in the satellite TV business. For comparison, the business posted adjusted earnings per share of $2.26 and free cash flow of $17.6 billion last year.

In addition to its solid forward guidance, AT&T also discussed plans to significantly increase its investments in AI and deliver $40 billion in dividends and stock buybacks over the next three years. The company is looking to artificial intelligence to help improve service performances and further reduce operating expenses, and investors seem to be excited about the potential impact that greater integration of the tech could have on margins.

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Keith Noonan has positions in AT&T. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.