AT&T Inc.TNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $182.44 per share(market-calibrated)

+551.3%

Upside to Fair Value

Current

$28.01

Pure Model

$211.52

Fair Value

$182.44

Bull Case

$255.47

Bear Case

$169.24

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $211.52.

What's Driving This Ratingfor T

↓

CapEx normalizing toward maintenance

Historical CapEx is 15.14% of revenue (heavy investment phase). Model fades this to 4.50% by Year 10, freeing up ~$17.8B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 33.58% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 2.18% revenue growth, fading to 3.00% by Year 10. Revenue reaches $166.9B (vs $125.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $247.74/share (41.2x terminal FCF) while exit multiple gives $175.30/share (27.6x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 79.79% indicates efficient cash generation. FCF reaches $65.1B by Year 10 (39.00% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.61

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.24%

Cost of Debt

Pre-tax Cost of Debt3.80%

Tax Rate13.41%

After-tax Cost of Debt3.29%

Equity Weight (E/V)53.58%

Debt Weight (D/V)46.42%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (53.58% × 7.24%) + (46.42% × 3.29%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$128.4B	$133.7B	$140.6B	$151.6B	$166.9B
EBIT	$43.1B	$44.9B	$47.2B	$50.9B	$56.0B
Tax	$5.8B	$6.0B	$6.3B	$6.8B	$7.5B
NOPAT	$37.3B	$38.9B	$40.9B	$44.1B	$48.5B
+ Depreciation	$19.6B	$20.4B	$21.5B	$23.2B	$25.5B
- Capex	$19.4B	$17.1B	$14.6B	$12.2B	$7.5B
- Δ NWC	$823M	$767M	$1.7B	$1.6B	$1.5B
Free Cash Flow	$36.7B	$41.5B	$46.0B	$53.4B	$65.1B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$34.8B	$35.3B	$35.2B	$36.7B	$38.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$65.1B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$2.7T

PV of Terminal Value$1.6T

Exit Multiple Method

Year 10 EBITDA$81.6B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.8T

PV of Terminal Value$1.1T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$361.8B

PV of Terminal Value$1.6T

Enterprise Value$1.9T

(-) Net Debt$155.8B

Equity Value$1.8T

Shares Outstanding7.2B

Price per Share$247.74

Exit Multiple Method

PV of Projected FCFs$361.8B

PV of Terminal Value$1.1T

Enterprise Value$1.4T

(-) Net Debt$155.8B

Equity Value$1.3T

Shares Outstanding7.2B

Price per Share$175.30

Pure Model Fair Value

$211.52

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$273.97	$261.94	$250.48	$239.56	$229.14
4.50%	$231.39	$261.94	$250.48	$239.56	$229.14
5.50%	$179.47	$192.83	$211.52	$239.56	$229.14
6.50%	$147.67	$154.82	$164.02	$176.29	$193.46
7.50%	$125.36	$129.67	$134.93	$141.51	$149.96

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$169.24

504.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.76

Base Case

$211.52

655.2% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.61

Bull Case

$255.47

812.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.52

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Communication Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.18%

Year 3 Revenue Growth1.95%

Year 5 Revenue Growth4.24%

Year 7 Revenue Growth3.74%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin33.58%

Tax Rate13.41%

Historical Capex / Rev15.14%

Terminal Capex / Rev4.50%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Communication Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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