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Fourth Straight Quarter of Double-Digit Adjusted EPS Growth; Best-Ever U.S. Wireless EBITDA Service Margins; Full-Year Guidance on Track

Highlights

• Consolidated revenues of $40.5 billion, up 24% versus the year-earlier period primarily due to DIRECTV acquisition
• Diluted EPS of $0.61 as reported; $0.72 diluted adjusted EPS, a 10.8% increase
• Cash from operations of $7.9 billion; free cash flow of $3.2 billion, up 17% year over year
• Adjusted margins expand in every domestic segment
• 2.3 million North American wireless net adds driven by connected devices, Mexico and Cricket; 712,000 branded (postpaid and prepaid) phone net adds
• Total churn of 1.42% in U.S., stable year over year; postpaid churn of 1.10%

• Business Solutions revenues up 0.3% year over year; wireless revenues up 2.3%

• Strategic business services revenues of $2.8 billion, up nearly $250 million

• 328,000 U.S. DIRECTV net adds; total video subscribers decline slightly

• Entertainment Group broadband grew with 186,000 IP broadband net adds

Note: AT&T's first-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, April 26, 2016. The webcast and related materials will be available on AT&T’s Investor Relations website at www.att.com/investor.relations .

DALLAS, April 26, 2016 — AT&T Inc. (NYSE:T) today reported strong revenue, adjusted operating margin, adjusted EPS and free cash flow growth for the first quarter.

“It was a good start to the year. We had solid financial results and executed well on our strategy to be the premier integrated communications provider for businesses and consumers,” said Randall Stephenson, AT&T chairman and CEO. “We’re seeing good momentum with our initial integrated wireless, video and broadband offers. And we’ll expand the integrated choices for customers in the fourth quarter when we launch our new video streaming services."

“Our consolidated revenues, adjusted earnings and free cash flow continue to grow as margins continue to expand. And we’re putting up these numbers even as we invest in building our Mexico wireless business. In addition, DIRECTV merger synergies are on track to reach $1.5 billion or better by the end of the year.”

Consolidated Financial Results

AT&T's consolidated revenues for the first quarter totaled $40.5 billion, up more than 24% versus the year-earlier period largely due to the July 24, 2015 acquisition of DIRECTV. Compared with results for the first quarter of 2015, operating expenses were $33.4 billion versus $27.0 billion; operating income was $7.1 billion versus $5.6 billion; and operating income margin was 17.6% versus 17.1%. When adjusting for amortization, merger- and integration-related costs and other expenses and a gain on spectrum transfers, operating income was $8.1 billion versus $6.1 billion; and operating income margin was 19.9%, up 110 basis points from a year ago.

First-quarter net income attributable to AT&T totaled $3.8 billion, or $0.61 per diluted share, compared to $3.3 billion, or $0.63 per diluted share, in the year-ago quarter. Adjusting for the $0.17 of costs for merger- and integration-related expenses and amortization, $0.02 of other costs and the $0.08 gain on spectrum transfers, earnings per diluted share was $0.72 compared to an adjusted $0.65 in the year-ago quarter, an increase of 10.8%.

Cash from operating activities was $7.9 billion in the first quarter, and capital investment¹ totaled $4.7 billion. Free cash flow — cash from operating activities minus capital expenditures — was $3.2 billion, up 17% year over year.

For detailed segment results, please go to the Investor Briefing and Financial and Operational Results on the AT&T Investor Relations website .

¹ 1Q16 includes $43 million in capital purchases in Mexico with favorable vendor payment terms.