Buoyed by a holistic growth model, AT&T Inc. (T Quick QuoteT - Free Report) is currently trading in the vicinity of 52-week high. The stock has gained 24% over the past year compared with the industry’s growth of 23.1%, outperforming peers like Verizon Communications Inc. (VZ Quick QuoteVZ - Free Report) but lagging T-Mobile US, Inc. (TMUS Quick QuoteTMUS - Free Report) .

With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.

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Riding the 5G Bandwagon

AT&T is benefiting from the 5G boom. As the first carrier in the industry, the company unveiled its 5G policy framework that hinges on three pillars — mobile 5G, fixed wireless and edge computing. For a seamless transition among Wi-Fi, Long-Term Evolution and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets, while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. 

In a bid to bridge the digital divide in the United States, AT&T recently announced an additional $3 billion investment by 2030, bringing the tally to $5 billion since 2021. This commitment underscores its dedication to providing affordable, high-speed Internet access to millions of Americans, aiming to help 25 million people get connected by the end of the decade.

Betting Big on Open RAN Architecture

To augment operational efficiency and help build a more robust ecosystem of network infrastructure providers and suppliers, AT&T intends to leverage Ericsson (ERIC Quick QuoteERIC - Free Report) technology to deploy a commercial-scale open radio access network (Open RAN) across the country. The Open RAN architecture facilitates healthy competition among vendors for the supply of essential components and reduces dependence on a single manufacturer. It is likely to offer more flexibility, lower costs and monetize the network while thwarting security risks by avoiding reliance on non-U.S. vendors such as Huawei.

AT&T aims to deploy Open RAN for 70% of its wireless network traffic across open-capable platforms by late 2026. The company expects to have fully integrated Open RAN sites operating in coordination with Ericsson from 2024, enabling it to move away from closed proprietary interfaces for rapid scaling and management of mixed supplier hardware at each cell site. From 2025, the company intends to scale this Open RAN environment throughout its wireless network in coordination with multiple suppliers to establish itself as the leading player in the industry.

Edge Compute Traction

AT&T anticipates gaining a competitive edge over rivals through edge computing services that allow businesses to route application-specific traffic where they need it and where it’s most effective — whether that’s in the cloud, the network or on their premises. Through its Multi-access Edge Compute (MEC) solution, the company offers the flexibility to better manage the data traffic. The MEC leverages an indigenous software-defined network to enable low-latency, high-bandwidth applications for faster access to data processing. Utilizing machine learning techniques and more connected devices, the MEC could transform the way data-intensive images are transferred across the industry on a real-time basis. 

The company has extended its long-standing business relationship with Google Cloud to offer end-to-end solutions for improved customer experiences. The solutions are likely to facilitate diverse businesses to better harness edge connections and edge computing capabilities as increased 5G deployments give rise to a large quantum of data.

Margin Woes Persist

AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.

Estimate Revision Trend

Earnings estimates for AT&T for 2024 have moved down 10.4% to $2.23 over the past year, while the same for 2025 has declined 7.2% to $2.32. The negative estimate revision depicts bearish sentiments about the stock.

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T Trading Above 50-Day Moving Average

AT&T is currently trading above the 50-day moving average.

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End Note

By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business.

However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), AT&T appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.