TLS -3.2%: delivered a broadly solid FY26 result, with underlying earnings growth, another dividend increase and a further A$1 billion buyback. However, shares traded on the back of softer-than-expected FY27 cash EBIT guidance and some emerging weakness in postpaid mobile momentum.
Key results:
- Net profit of A$2.24 billion, up 3.2%, inline with consensus.
- EBITDA of A$8.82 billion, around 1% below the A$8.94 billion expected.
- Total income of A$23.41 billion, around 4% below the A$23.75 billion expected.
- Underlying EBITDAaL of A$8.34 billion, up 4%.
- Mobile product income of A$11.37 billion, up 3.2% and broadly in line with expectations.
- Final dividend of 5c per share.
- Capital expenditure of A$3.91 billion, broadly in line with the prior year.
- A further A$1 billion on-market buyback was announced.
The mobile business remains the key earnings engine, but this was also where some of the concern emerged. Postpaid trends softened through the second half, while subscriber additions slowed, suggesting recent price increases and a more competitive environment may be starting to bite.
The bigger issue was FY27 guidance. Telstra expects underlying EBITDAaL of A$8.5–8.8 billion, while cash EBIT is expected to be A$4.75–4.95 billion. Consensus had been sitting near the top end of that range, so the midpoint represents a modest downgrade to expectations.
The outlook also reflects ongoing investment. BAU capex is expected to be A$3.35–3.65 billion in FY27, while strategic investment will add another A$200–300 million. Telstra has also lifted its total strategic investment estimate to around A$1.8 billion through FY28, from A$1.6 billion previously, reflecting inflation and project-specific costs.
Management continues to deal with the fallout from July’s network outage, although the initial root cause has been identified and remediation is underway. Encouragingly, management does not appear to be building a major customer churn or cost impact into FY27 guidance.
MM’s view: A steady result rather than a standout one. The core business continues to grow, the dividend remains dependable and another A$1 billion buyback is supportive, but the market was looking for more from FY27 cash earnings. Mobile remains the key driver, and the next leg higher will depend on Telstra sustaining pricing power without materially weakening subscriber growth. We don’t own TLS, and todays result should see the stock continue to track lower from here, in our view.
MM would only get interested in TLS ~$4.50
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