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AT&T Beats Earnings Forecast, Lifts 2021 Profit Guidance as HBO Gains Impress

'HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices,' says CEO John Stankey.

AT&T  (T) - Get AT&T Inc. Report posted stronger-than-expected second-quarter earnings Thursday, and boosted its full-year revenue guidance, as it continues to build its HBO Max subscriber base while reducing churn rates in its wireless division.

AT&T said adjusted earnings for the three months ending in June were pegged at 89 cents per share, up 7.2% from the same period last year and 10 cents ahead of the Street consensus forecast. Group revenues, the company said, rose 7.6% to $44 billion, a figure that beat analysts' estimates of a $42.66 billion tally. 

AT&T said it added 2.8 million U.S. subscribers to its HBO Max streaming service, an expects its global base to rise to between 70 million and 73 million by the end of the year, as it continues to challenge its larger rival Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report for new additions.

Looking into the second half of the year, AT&T said it sees consolidated revenues rising by between 2% and 3% from 2020, up from its earlier forecast of 1%, with adjusted earnings rising in the "low to mid-single digits".

“We’re pleased with our performance and our momentum is strong,” said CEO John Stankey. “For the fourth consecutive quarter, we saw good subscriber growth across wireless, fiber and HBO Max. Mobility delivered strong service revenue, EBITDA and postpaid phone growth."

"HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices," he added "As a result, we’re raising our global HBO Max year-end forecast to 70 million to 73 million subscribers. Also, we’re updating full-year guidance for consolidated revenue, wireless service revenue, adjusted EPS and free cash flow.”  

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AT&T shares were marked 0.3% lower in early trading immediately following the earnings release to change hands at $27.80 each.

AT&T said it added 789,000 net wireless phone subscribers over the three months ending in June, of the year, nearly triple the FactSet consensus of around 278,000 and up 32% from the first quarter.

Earlier this spring, AT&T said it would slash its annual dividend by around $7 billion following a deal to merge its media assets with Discovery  (DISCA) - Get Discovery, Inc. Class A Report

AT&T said its dividend payout ratio, which was around 63% in the previous quarter, will be "re-sized" to account for the distribution of WarnerMedia assets into a new company. 

The remaining AT&T assets will aim to give shareholders a dividend payout ratio of between 40% and 43%, the company said, based on anticipated free cash flow of around $20 billion.