Financial Analysis

NOTE 21. CONTINGENT LIABILITIES We are party to numerous lawsuits, regulatory proceedings and other matters arising in the ordinary course of business. In evaluating these matters on an ongoing basis, we take into account amounts already accrued on the balance sheet. In our opinion, although the outcomes of these proceedings are uncertain, they should not have a material adverse effect on our financial position, results of operations or cash flows. See Note 12 for a discussion of collateral and credit-risk contingencies. We have contractual obligations to purchase certain goods or services from various other parties. Our purchase obligations are expected to be approximately $8,545 in 2026, $10,698 in total for 2027 and 2028, $2,505 in total for 2029 and 2030 and $2,890 in total for years thereafter.

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NOTE 11. DEBT Long-term debt of AT&T and its subsidiaries, including interest rates and maturities, is summarized as follows at December 31: 2025 2024 Notes and debentures Interest Rates 1 Maturities 0.00% 2.99% 2025 2033 $ 22,240 $ 21,860 3.00% 4.99% 2025 2061 89,379 83,725 5.00% 6.99% 2025 2095 29,165 22,679 7.00% 8.75% 2025 2097 3,524 3,565 Fair value of interest rate swaps recorded in debt 3 6 144,311 131,835 Unamortized (discount) premium net (9,193) (9,340) Unamortized issuance costs (400) (379) Total notes and debentures 134,718 122,116 Finance lease obligations 1,382 1,416 Total long-term debt, including current maturities 136,100 123,532 Current maturities of long-term debt (9,011) (5,089) Total long-term debt $ 127,089 $ 118,443 1 Foreign debt includes the impact from hedges, when applicable. We had outstanding Euro, British pound sterling, Canadian dollar, Australian dollar and Swiss franc denominated debt of approximately $35,307 and $30,685 at December 31, 2025 and 2024, respectively. The weighted-average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of December 31, 2025 and 2024. Our long-term debt maturing within one year was $9,011 and $5,089 at December 31, 2025 and 2024, respectively. We had no outstanding commercial paper or other short-term borrowings as of December 31, 2025 and 2024. Financing Activities During 2025, we received net proceeds of $14,027 on t …

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Revenue Categories The following tables set forth reported revenue by category and by business unit: For the year ended December 31, 2025 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 67,384 $ $ $ 2,715 $ $ 70,099 Fiber and advanced connectivity 1 7,333 8,645 15,978 Non-fiber consumer broadband 3,542 3,542 Legacy and other transitional 9,170 1,013 179 10,362 Other 983 194 1,177 Total Service 67,384 16,503 14,183 2,715 373 101,158 Equipment 22,098 728 1,664 24,490 Total $ 89,482 $ 17,231 $ 14,183 $ 4,379 $ 373 $ 125,648 1 Advanced connectivity services reported in Business Wireline. For the year ended December 31, 2024 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 65,373 $ $ $ 2,668 $ $ 68,041 Fiber and advanced connectivity 1 6,969 7,391 14,360 Non-fiber consumer broadband 3,821 3,821 Legacy and other transitional 11,095 1,265 253 12,613 Other 1,101 199 1,300 Total Service 65,373 18,064 13,578 2,668 452 100,135 Equipment 19,882 755 1,564 22,201 Total $ 85,255 $ 18,819 $ 13,578 $ 4,232 $ 452 $ 122,336 1 Advanced connectivity services reported in Business Wireline. For the year ended December 31, 2023 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total Wireless service $ 63,175 $ $ $ 2,569 $ $ 65,744 Fiber and advanced connectivity 1 6,594 6,267 12,861 Non-fiber consumer broadband …

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NOTE 15. SHARE-BASED COMPENSATION Under our various share-based compensation plans, senior and other management employees and nonemployee directors have received performance stock units and other nonvested stock units. As of December 31, 2025, we were authorized to issue up to approximately 41 million shares of common stock (including shares that may be issued upon exercise of outstanding options or upon vesting of performance stock units or other nonvested stock units) pursuant to these various plans: Performance stock units, which are nonvested stock units, which are valued based upon the market price of our common stock at the date of grant and performance expectations. These distribute in the form of AT&T common stock and cash at the end of a three -year period, subject to the achievement of certain performance goals. We treat the cash-settled portion of these awards as a liability. Restricted stock and restricted stock units are valued at the market price of our common stock at the date of grant and do not have any performance conditions. Restricted stock predominantly vests over a three - to ten -year period and restricted stock units predominantly vest over a three -year period. We account for our share-based compensation arrangements based on the fair value of the awards on their respective grant date, which may affect our ability to fully realize the value shown on our consolidated balance sheets of deferred tax assets associated with compensation expense. We rec …

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NOTE 12. FAIR VALUE MEASUREMENTS AND DISCLOSURE The Fair Value Measurement and Disclosure framework in ASC 820, Fair Value Measurement, provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs. The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2024. Long-Term Debt and Other Financial Instruments The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments …

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NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS We test goodwill for impairment at a reporting unit level, which is deemed to be our principal operating segments or one level below, using the methodology described in Note 1. With our annual impairment testing as of October 1, the calculated fair value of each reporting unit exceeded its book value. Changes to our goodwill in 2024 resulted from a third-quarter noncash goodwill impairment charge of $4,422 in our consolidated statements of income, which represented the entirety of our Business Wireline reporting unit goodwill. The decline in fair value was primarily due to the change in the long-term strategic plan of our Business Wireline reporting unit, which reflected lower long-term projected future cash flows associated with the industry-wide secular decline, including a faster-than-previously anticipated decline of legacy services. Our Communications segment has three reporting units: Mobility, Consumer Wireline and Business Wireline. Business Wireline goodwill was fully impaired in 2024. The reporting unit is deemed to be the operating segment for Latin America and its goodwill was fully impaired in 2022. At December 31, 2025, accumulated goodwill impairments totaled $29,234. The following table sets forth the changes in the carrying amounts of goodwill for the Communications segment: 2025 2024 Balance at Jan. 1 Dispositions and other Balance at Dec. 31 Balance at Jan. 1 Impairment Balance at Dec. 31 Communications Goodwill …

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NOTE 13. INCOME TAXES Significant components of our deferred tax liabilities (assets) are as follows at December 31: 2025 2024 Depreciation and amortization $ 37,570 $ 36,531 Licenses and nonamortizable intangibles 21,742 20,660 Lease right-of-use assets 5,494 5,103 Lease liabilities (5,464) (5,107) Employee benefits (2,585) (3,017) Deferred fulfillment costs 1,657 1,788 Equity in partnership 14 2,716 Net operating loss and other carryforwards (5,567) (5,619) Other net 1,401 1,466 Subtotal 54,262 54,521 Deferred tax assets valuation allowance 3,978 4,338 Net deferred tax liabilities $ 58,240 $ 58,859 Noncurrent deferred tax liabilities $ 58,312 $ 58,939 Less: Noncurrent deferred tax assets (72) (80) Net deferred tax liabilities $ 58,240 $ 58,859 At December 31, 2025, we had combined net operating and capital loss carryforwards (tax effected) for federal income tax purposes of $695, state of $545 and foreign of $2,227, expiring through 2045. Additionally, we had federal credit carryforwards of $645 and state credit carryforwards of $1,454, expiring primarily through 2045. We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Our valuation allowances at December 31, 2025 and 2024 related primarily to state and foreign net operating losses and state credit carryforwards. We consider post-1986 unremitted foreign earnings subjected to the one-time transit …

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NOTE 8. LEASES We have operating and finance leases for certain facilities and equipment used in our operations. Our leases generally have remaining lease terms of up to 15 years. Some of our operating leases (e.g., for towers and real estate) contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year. We have recognized a right-of-use asset for both operating and finance leases, and a corresponding lease liability that represents the present value of our obligation to make payments over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease, which will be updated on a quarterly basis for measurement of new lease liabilities. The components of lease expense were as follows: 2025 2024 2023 Operating lease cost $ 5,927 $ 5,776 $ 5,577 Finance lease cost: Amortization of leased assets in property, plant and equipment $ 182 $ 205 $ 232 Interest on lease obligation 142 171 184 Total finance lease cost $ 324 $ 376 $ 416 The following table provides supplemental cash flows information related to leases: 2025 202 …

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Income Taxes In December 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). Beginning with our 2025 annual reporting, we adopted, through retrospective application, ASU 2023-09, which requires that a public entity disclose specific categories in its annual income tax rate reconciliation table and provide additional qualitative information for reconciling items representing at least 5% of pre-tax income or loss from continuing operations, using the federal statutory tax rate. The standard also requires an annual breakdown of income taxes paid by jurisdiction (i.e., federal, state and foreign), with further disaggregation by jurisdictions representing at least 5% of total income taxes paid. Segment Reporting In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). Beginning with our 2024 annual reporting, we adopted, through retrospective application, ASU 2023-07, which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity disclose the title and position o …

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NOTE 14. PENSION AND POSTRETIREMENT BENEFITS We offer noncontributory pension programs covering the majority of domestic nonmanagement employees in our Communications business. Nonmanagement employees pension benefits are generally calculated using one of two formulas: a flat dollar amount applied to years of service according to job classification, or a cash balance plan with negotiated annual pension band credits as well as interest credits. Most employees can elect to receive their pension benefits in either a lump sum payment or an annuity. Pension programs covering U.S. management employees are closed to new entrants. These programs continue to provide benefits to participants that were generally hired before January 1, 2015, who receive benefits under either cash balance pension programs that include annual or monthly credits based on salary as well as interest credits, or a traditional pension formula (i.e., a stated percentage of employees adjusted career income). We also provide a variety of medical, dental and life insurance benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. In 2023, AT&T and State Street Global Advisors Trust Company, as independent fiduciary of the AT&T Pension Benefit Plan (Plan), entered into a commitment agreement with subsidiaries of Athene Holding Ltd. (Athene) under which AT&T agreed to purchase nonparticipating single p …

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NOTE 19. TRANSACTIONS WITH DIRECTV Prior to its sale, we accounted for our investment in DIRECTV under the equity method and recorded our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party. On July 2, 2025, we sold our interest in DIRECTV to TPG. (See Note 10) The following table sets forth our share of DIRECTVs earnings included in Equity in net income of affiliates and cash distributions received from DIRECTV: 2025 2024 2023 DIRECTVs earnings included in Equity in net income of affiliates $ 1,926 $ 2,027 $ 1,666 Distributions classified as operating activities $ 1,926 $ 2,027 $ 1,666 Distributions classified as investing activities 928 2,049 Cash distributions received from DIRECTV $ 1,926 $ 2,955 $ 3,715 For the years ended December 31, 2025, 2024 and 2023, we billed DIRECTV approximately $240, $536 and $730 under commercial arrangements and transition service agreements, which were recorded as a reduction to the operations and support expenses incurred. …

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NOTE 5. REVENUE RECOGNITION We report our revenues net of sales taxes and record certain regulatory fees, primarily Universal Service Fund (USF) fees, on a net basis. No customer accounted for more than 10% of consolidated revenues in 2025, 2024 or 2023. We offer service-only contracts and contracts that bundle equipment used to access the services and/or with other service offerings. Some contracts have fixed terms and others are cancelable on a short-term basis (i.e., month-to-month arrangements). Examples of service revenues include wireless, fiber and other advanced connectivity, transitional and legacy voice and data. These services represent a series of distinct services that is considered a separate performance obligation. Service revenue is recognized when services are provided, based upon either period of time (e.g., monthly service fees) or usage (e.g., bytes of data processed). Some of our services require customer premises equipment that, when combined and integrated with AT&Ts specific network infrastructure, facilitates the delivery of service to the customer. In evaluating whether the equipment is a separate performance obligation, we consider the customers ability to benefit from the equipment on its own or together with other readily available resources and if so, whether the service and equipment are separately identifiable (i.e., is the service highly dependent on, or highly interrelated with the equipment). When equipment is a separate performance obli …

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NOTE 4. SEGMENT INFORMATION Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two reportable segments: Communications and Latin America. Our chief operating decision maker (CODM) is our Chief Executive Officer and President. Our CODM uses operating income to evaluate performance and allocate resources, including capital allocations, when managing the business. Our CODM manages operations through the review of actual and forecasted Operations and Support Expenses information at a segment and business unit level, with Communications and Latin America segments primarily evaluated on a direct cost basis and comprised of equipment, compensation, network and technology, sales, advertising and other costs. Additionally, business unit expenses within the Communications segment include direct and shared costs. Direct costs are incurred in support of products and services offered by the business units, such as equipment costs (predominantly wireless devices), network access, rents, leases, sales support, customer provisioning and commission expenses. Shared costs amongst the business units generally include information technology, network engineering and construction costs, advertising and other general and administrative expense. The Communications segment provides wireless and wireline telecom …

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NOTE 16. STOCKHOLDERS AND MEZZANINE EQUITY Authorized Shares We have authorized 14 billion common shares of AT&T stock and 10 million preferred shares of AT&T stock, each with a par value of $1.00 per share. Cumulative perpetual preferred shares consist of the following: Series A: 48 thousand shares outstanding at December 31, 2025 and December 31, 2024, with a $25,000 per share liquidation preference and a dividend rate of 5.000%. Series B: no shares outstanding at December 31, 2025 and 20 thousand shares outstanding at December 31, 2024, with a 100,000 per share liquidation preference, and an initial rate of 2.875%. We redeemed all outstanding Series B cumulative preferred shares on March 3, 2025. The shares had a total liquidation preference of 2.0 billion and were redeemed for $2,075. Series C: 70 thousand shares outstanding at December 31, 2025 and December 31, 2024, with a $25,000 per share liquidation preference, and a dividend rate of 4.75%. So long as the quarterly preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no limitations on our ability to declare a dividend on or repurchase AT&T common shares. The preferred shares are optionally redeemable by AT&T at the liquidation price on or after five years from the issuance date, or upon certain other contingent events. Stock Repurchase Program From time to time, we repurchase shares of common stock. Over the past few years, these repurchases have ge …

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NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE The Fair Value Measurement and Disclosure framework in ASC 820, Fair Value Measurement, provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2025. Long-Term Debt and Other Financial Instruments The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments a …

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NOTE 6. PENSION AND POSTRETIREMENT BENEFITS Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in 2026. During the second quarter of 2026, we voluntarily contributed $100 to our pension plans, with an additional $250 planned in the second half of 2026. We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of Other income (expense) net at our annual measurement date of December 31, unless earlier remeasurements are required. The following table details qualified pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension (credit) cost is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in Other income (expense) net. Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Pension cost: Service cost benefits earned …

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NOTE 5. REVENUE RECOGNITION We report our revenues net of sales taxes and record certain regulatory fees, primarily Universal Service Fund (USF) fees, on a net basis. Revenue is disaggregated by services provided by segment, with additional details provided for our Advanced Connectivity consumer and business relationships (see Note 4). Deferred Customer Contract Acquisition and Fulfillment Costs Costs to acquire and fulfill customer contracts, including commissions on service activations are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to seven years. The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets: June 30, December 31, Consolidated Balance Sheets 2026 2025 Deferred Acquisition Costs Prepaid and other current assets $ 3,620 $ 3,550 Other Assets 5,109 4,778 Total deferred customer contract acquisition costs $ 8,729 $ 8,328 Deferred Fulfillment Costs Prepaid and other current assets $ 1,683 $ 1,862 Other Assets 2,781 2,864 Total deferred customer contract fulfillment costs $ 4,464 $ 4,726 The following table presents deferred customer contract acquisition and fulfillment cost amortization, which are primarily included in Selling, general and administrative and Other cost of revenues, respectively, for the six months ended: June 30, June 30, Consolidated Statements of Income 2026 2025 Deferred acquisition co …

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NOTE 4. SEGMENT INFORMATION Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have three reportable segments: Advanced Connectivity, Legacy and Latin America. Our chief operating decision maker (CODM) is our Chairman of the Board, Chief Executive Officer and President. Our CODM uses operating income to evaluate performance and allocate resources, including capital allocations, when managing the business. Our CODM manages operations through the review of actual and forecasted Operations and Support Expenses information, which are primarily comprised of costs for wireless devices, network access, rents, leases, sales support, customer provisioning and commissions. Operating costs and depreciation of our shared network, including copper-based assets prior to decommissioning, are managed in our Advanced Connectivity segment. Our Legacy and Latin America segments are primarily evaluated on a direct cost basis. Our CODM does not review disaggregated assets on a segment basis, therefore, that information is not presented. The Advanced Connectivity segment provides domestic 5G and fiber-based wireless, internet and other advanced connectivity services to consumer and business customers. The Legacy segment provides domestic legacy voice and data services to consumer and business customers over our co …

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