AT&T Inc. exceeded Wall Street’s expectations for profit and wireless subscriber growth, easing concerns about the costs of free-phone promotions and the expansion of its fiber and 5G networks.

Third-quarter earnings, excluding some items, were 87 cents a share, the company reported Thursday, surpassing the 80-cent estimate by analysts. Revenue fell to $39.9 billion due to the separation of the DirecTV business, which was less than the $40.48 billion analysts were expecting. 

AT&T added 1.2 million regular wireless customers. Analysts expected a gain of 705,461. Of those, 928,000 were new phone subscribers.

“We are moving into what I would call the golden age of connectivity and ubiquity of connectivity,” CEO John Stankey said on a conference call.

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The performance marks AT&T’s best quarterly phone results in more than a decade, boosting Stankey’s effort to return the company to the wireless and broadband businesses it’s best known for. Ever since the Dallas-based company abandoned its media strategy, the pressure has been on to show strong subscriber results in the phone and internet businesses.

AT&T recently dialed down aggressive free-phone promotions, which were matched intermittently by rivals Verizon Communications Inc. and T-Mobile US Inc. The profit-denting giveaways did help AT&T book its fifth consecutive quarter of wireless subscriber gains. Verizon said Wednesday that it added 699,000 regular monthly subscribers in the third quarter. Highlighting the competitiveness of the subscriber race, T-Mobile announced Thursday that it would offer as much as $1,000 to customers that switched from other carriers.

The company said that it lost 1.8 million U.S. HBO and HBO Max subscribers in the third quarter due to the discontinuation of the Amazon.com Inc. distribution agreement. Total U.S. HBO Max and HBO subscribers were 45.2 million, while global subscribers increased to 69.4 million. Analysts predicted AT&T would have a total of 48.3 million U.S. subscribers.

AT&T says it expects to reach the top of the forecast range for total HBO Max subscribers. The company raised the range last quarter to 70 million to 73 million. The company is in a race globally to catch up with streaming rivals Netflix and Disney+, which have more than 200 million and 100 million subscribers respectively.  

AT&T shares rose 1% at 9:35 a.m. in New York. The stock had dropped nearly 10% this year through Wednesday, in line with Verizon and T-Mobile as phone price battles threatened profits.

Shedding DirecTV

AT&T no longer reports its TV subscriber numbers. The company has lost more than 10 million TV customers since acquiring DirecTV. To get the declining business off its books, it shifted its TV operations on July 31 to a joint venture with TPG. AT&T is also merging its WarnerMedia unit with Discovery Inc. to create a new independent company. Both moves are intended to return AT&T to its roots with a stronger focus on 5G wireless and fiber broadband networks.

Similar to Verizon, AT&T spent billions of dollars on new 5G midband airwaves. Both carriers are in a crucial race to use this new portion of spectrum to bolster their 5G networks in an effort to catch up to T-Mobile US Inc.

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—Bloomberg News