AT&TT

beat second-quarter estimates as wireless and fiber subscriber growth came in well above expectations. Revenue rose 2.3% while free cash flow came in above estimates at $4.7B.

The company added 432K net postpaid phone subscribers in the quarter, beating analyst estimates of roughly 338.5K. Internet additions hit 646K total, with 367K from fiber and 279K from fixed wireless, a combined record for those two categories.

CEO John Stankey said the quarter represented the strongest consumer postpaid wireless account growth in more than three years.

Bundling is working

AT&T's convergence strategy of selling wireless and home internet together is showing up in the numbers. About 42.5% of homes using AT&T's advanced internet service also subscribe to its wireless.

The company launched OneConnect earlier this year, a single subscription bundling unlimited wireless with home internet under one monthly bill. It also rolled out customizable plan options and new entry-level wireless tiers with more high-speed data.

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Stankey announced an acceleration of share repurchases to roughly $10B this year, up from the roughly $8B outlined earlier. The company kept its full-year adjusted EPS guidance of $2.25 to $2.35 and its commitment to return $45B or more to shareholders through 2028.

Stankey pushes back on Starlink

The earnings beat gave Stankey a platform to address Wall Street's loudest concern: competition from SpaceX's Starlink.

The worry intensified after SpaceX president Gwynne Shotwell told IPO roadshow investors that SpaceX plans to launch a Starlink-branded retail service for US consumers, potentially building its own terrestrial wireless network.

That reframed Starlink from a carrier partner into a direct competitor for AT&T's more than 109M mobile subscribers.

Oppenheimer downgraded AT&T to 'Perform' on satellite competition concerns. Wells Fargo initiated coverage with an 'Underweight' rating and an $18 price target. Morgan Stanley cut its target to $25 from $30, though it kept an 'Overweight' rating.

Stankey wasn't buying the threat. "They're coming to the game very late after this industry has been established," he said. "They have to catch up."

He added that AT&T already handles more than 98% of traffic across its converged customer network. Rather than pick a single satellite partner, AT&T is working through a joint venture with VerizonVZ

and T-MobileTMUS

that can access SpaceX, AmazonAMZN

, and AST SpaceMobileASTS

for coverage outside its terrestrial network.

The company's shares rose on the news, with buybacks accelerating as satellite rivals were still building out their infrastructure.