AT&T reports Q2 revenues of $39B, down from $39.8B YoY, vs. $39.39B expected, in its first quarter since completing its acquisition of Time Warner
loss of 286,000 net subscribers in the period https://variety.com/... via @variety
Context & Ripple Effects
This is the first earnings print since AT&T closed its Time Warner acquisition, and it lands mid-slide: quarterly revenue has fallen from $40.52B in Q2 2016 to $39.8B a year ago to $39B now, missing the $39.39B consensus. The company has been trading legacy video decay for streaming growth for over a year — including a record 385,000 traditional pay-TV losses in Q3 2017 partially offset by DirecTV Now adds.
The pattern continued into this year, when Q1 brought $38B in revenue, down 3.4% YoY, alongside 312K new DirecTV Now subscribers. Today's 286,000 net subscriber loss means the streaming offset is no longer covering the hole — and the Time Warner deal closes just as the distribution base it was meant to protect keeps shrinking.
First-order effects
- AT&T now reports as a combined media-and-telecom company while missing revenue expectations and shedding 286,000 net subscribers, so management's first post-merger narrative has to explain why the deal hasn't yet stabilized the customer base.
Second-order effects
- With DirecTV Now gains no longer masking traditional pay-TV attrition, AT&T faces pressure to fold Time Warner content into its streaming bundle faster to make DirecTV Now sticky enough to replace the legacy video revenue it is losing.
Third-order effects
- If subscriber losses persist after the close, the Time Warner acquisition gets judged as a bet that owned content can offset distribution decline — and the industry's pipe-plus-content consolidation wave will be measured against whether AT&T can actually reverse the churn that preceded the merger.
The trend: AT&T's multi-year revenue slide from $40.5B quarters in 2016 toward $39B today frames the Time Warner deal as a content-driven attempt to arrest subscriber erosion that streaming alone has stopped covering.