AT&T posts mixed results in first report since Time Warner deal

AT&T shares fell in after-hours trading on Tuesday as the media giant beat expectations on earnings but missed on quarterly revenue in its first report since acquiring Time Warner.

The company posted earnings of 91 cents per share, beating analyst estimates of 85 cents. Revenue fell slightly short at $38.99, below a projected $39.39, according to Thomson Reuters.

AT&T also raised its full-year adjusted EPS estimate to the high end of a $3.50 range and raised projections for free cash flow to the high end of a $21 billion range. AT&T’s stock fell by as much as 2% in after-hours trading on the revenue miss.

AT&T CEO Randall Stephenson told analysts that the company “now assembled the key elements of a modern media company” through its acquisition of Time Warner assets, adding that the company would focus on developing premium content offerings to lure new customers and subscribers.

“Our goal is to reshape the way media and entertainment work for consumers, and you will see us continue to do exactly that,” Stephenson said in prepared remarks.

Stephenson added that direct-to-consumer content will replace wholesale offerings as the key to developing a sustainable business in the future.

WarnerMedia, the combined entity that includes HBO, Turner and Warner Bros., posted quarterly revenue of $7.8 billion, up from $7.3 billion in the same period one year ago. HBO’s revenue rose 13% to $1.7 billion, as company officials praised the cable network’s original programming for earning 108 Emmy nominations.

“My goal is to give the HBO team the resources to greenlight original projects” that are already in development, WarnerMedia CEO John Stankey said during the earnings call. 

Stankey told HBO employees earlier this month that the network will boost production of original content to attract new subscribers and increase the amount of time users spend on its platform, the New York Times reported.

Asked about his remarks to employees, Stankey said the report did not “effectively characterize” the company’s plans for HBO. WarnerMedia plans to invest more resources in HBO’s original content offerings and add to the network’s schedule of programming.

“It’s going to be a very responsible investment in great projects that we have already scoped out and have rights,” Stankey said. 

AT&T’s entertainment group sector, which includes DirecTV, saw revenue decline 8% to $11.7 billion, owing in large part to the cord-cutting trend. The company lost 262,000 linear video subscribers and 286,000 satellite TV subscribers, even as the DirecTV Now streaming platform added 342,000 subscribers.

Last month, a U.S. district judge approved its $85.4 billion acquisition of Time Warner assets, including the cable network HBO. The Department of Justice, which opposes the merger on grounds that it will have a negative impact on consumers and hurt overall competition in the media industry, has appealed the decision.