UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC FORM 8-K

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) July 25, 2017 AT&T INC. (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 208 S. Akard St., Dallas, Texas (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (210) (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Item 2.02 Results of Operations and Financial Condition. The registrant announced on July 25, 2017, its results of operations for the second quarter of The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference. Item 9.01 Financial Statements and Exhibits. The following exhibits are furnished as part of this report: (d) Exhibits 99.1 Press release dated July 25, 2017 reporting financial results for the second quarter ended June 30, AT&T Inc. selected financial statements and operating data Discussion and reconciliation of non-gaap measures.

3 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AT&T INC. Date: July 25, 2017 By: /s/ Debra L. Dial. Debra L. Dial Senior Vice President and Controller

4 AT&T Reports Second-Quarter Results Consolidated revenues of $39.8 billion Operating income of $7.3 billion Net income attributable to AT&T of $3.9 billion Diluted EPS of $0.63 as reported and $0.79 as adjusted, compared to $0.55 and $0.72 in the year-ago quarter Cash from operations of $8.9 billion Free cash flow of $3.7 billion Company Maintains Full-Year Guidance U.S. wireless results: o Best-ever postpaid phone churn of 0.79% o Total postpaid churn, including tablets, of 1.01% o Growing operating income margin of 30.4% with record-high EBITDA margins including best-ever wireless service margin of 50.4% 2.8 million wireless net adds o 2.3 million U.S., driven by connected devices, prepaid and postpaid o 476,000 Mexico net adds Entertainment Group results: o 112,000 IP broadband net adds; 8,000 total broadband net adds o More than 5.5 million AT&T Fiber customer locations passed o Total video losses of 199,000 with DIRECTV NOW gains helping offset traditional TV subscriber decline; Total video subscribers essentially flat year over year International results: o Revenues up 10.8% with favorable operating trends o Continued revenue growth and margin improvement in Mexico

5 Note: AT&T's second-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, July 25, The webcast and related materials will be available on AT&T's Investor Relations website at DALLAS, July 25, 2017 AT&T Inc. * ( NYSE:T ) reported strong adjusted earnings growth and margin expansion with lower expenses in the second quarter. "Once again our team delivered expanded consolidated margins and, as a result, grew adjusted earnings per share by nearly 10% as we executed well against our business priorities," said Randall Stephenson, AT&T chairman and CEO. "And in a quarter where our competitors used promotions aggressively, we added more than 500,000 branded smartphones to our base and more than 100,000 IP broadband subscribers, achieved record EBITDA wireless margins and had the lowest postpaid phone churn in our history. We continue to expect the Time Warner deal to close by year - end and further transform the company. " Consolidated Financial Results AT&T's consolidated revenues for the second quarter totaled $39.8 billion versus $40.5 billion in the year-ago quarter, primarily due to declines in legacy wireline services and consumer mobility. Compared with results for the second quarter of 2016, operating expenses were $32.5 billion versus $34.0 billion; operating income was $7.3 billion versus $6.6 billion; and operating income margin was 18.4% versus 16.2%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $8.6 billion versus $8.1 billion and operating income margin was 21.6%, up 150 basis points versus the year-ago quarter. Second-quarter net income attributable to AT&T totaled $3.9 billion, or $0.63 per diluted share, compared with $3.4 billion, or $0.55 per diluted share, in the year-ago quarter. Adjusting for $0.16 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.79 compared with an adjusted $0.72 in the year-ago quarter, up 9.7%. Cash from operating activities was $8.9 billion in the second quarter and $18.2 billion year to date. Capital expenditures were $5.2 billion in the quarter and $11.2 billion year to date. Free cash flow cash from operating activities minus capital expenditures was $3.7 billion for the quarter and $6.9 billion year to date.

6 *About AT&T AT&T Inc. ( NYSE:T ) helps millions around the globe connect with leading entertainment, business, mobile and high speed internet services. We offer the nation's best data network** and the best global coverage of any U.S. wireless provider. We're one of the world's largest providers of pay TV. We have TV customers in the U.S. and 11 Latin American countries. Nearly 3.5 million companies, from small to large businesses around the globe, turn to AT&T for our highly secure smart solutions. AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information about AT&T products and services is available at about.att.com. Follow our news on Twitter on Facebook at facebook.com/att and on YouTube at youtube.com/att AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners. **Claim based on the Nielsen Certified Data Network Score. Score includes data reported by wireless consumers in the Nielsen Mobile Insights survey, network measurements from Nielsen Mobile Performance and Nielsen Drive Test Benchmarks for Q Q across 121 markets. Cautionary Language Concerning Forward-Looking Statements Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-gaap financial measures. Reconciliations between the non- GAAP financial measures and the GAAP financial measures are available on the company's website at For more information, contact: Fletcher Cook AT&T Global Media Relations fletcher.cook@att.com Phone: (214) Eric Ryan AT&T Global Media Relations eric.ryan.1@att.com Phone: (929)

7 AT&T Inc. Financial Data Consolidated Statements of Income Dollars in millions except per share amounts Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Operating Revenues Service $ 36,538 $ 37, % $ 72,994 $ 74, % Equipment 3,299 3, % 6,208 6, % Total Operating Revenues 39,837 40, % 79,202 81, % Operating Expenses Cost of services and sales Equipment 4,138 4, % 7,986 8, % Broadcast, programming and operations 4,898 4, % 9,872 9, % Other cost of services (exclusive of depreciation and amortization shown separately below) 9,218 9, % 18,283 18, % Selling, general and administrative 8,113 8, % 16,600 17, % Depreciation and amortization 6,147 6, % 12,274 13, % Total Operating Expenses 32,514 33, % 65,015 67, % Operating Income 7,323 6, % 14,187 13, % Interest Expense (1,395) (1,258) 10.9% (2,688) (2,465) 9.0% Equity in Net Income (Loss) of Affiliates % (159) 41 -% Other Income (Expense) - Net % % Income Before Income Taxes 6,070 5, % 11,448 11, % Income Tax Expense 2,056 1, % 3,860 4, % Net Income 4,014 3, % 7,588 7, % Less: Net Income Attributable to Noncontrolling Interest (99) (107) -7.5% (204) (189) 7.9% Net Income Attributable to AT&T $ 3,915 $ 3, % $ 7,384 $ 7, % Basic Earnings Per Share Attributable to AT&T $ 0.63 $ % $ 1.19 $ % Weighted Average Common Shares Outstanding (000,000) 6,165 6, % 6,166 6, % Diluted Earnings Per Share Attributable to AT&T $ 0.63 $ % $ 1.19 $ % Weighted Average Common Shares Outstanding with Dilution (000,000) 6,184 6, % 6,185 6, %

8 AT&T Inc. Financial Data Consolidated Balance Sheets Dollars in millions Unaudited Jun. 30, Dec. 31, Assets Current Assets Cash and cash equivalents $ 25,617 $ 5,788 Accounts receivable - net of allowances for doubtful accounts of $732 and $661 14,997 16,794 Prepaid expenses 1,371 1,555 Other current assets 11,562 14,232 Total current assets 53,547 38,369 Property, Plant and Equipment - Net 126, ,899 Goodwill 105, ,207 Licenses 95,864 94,176 Customer Lists and Relationships - Net 12,414 14,243 Other Intangible Assets - Net 7,980 8,441 Investments in Equity Affiliates 1,615 1,674 Other Assets 17,645 16,812 Total Assets $ 420,795 $ 403,821 Liabilities and Stockholders' Equity Current Liabilities Debt maturing within one year $ 10,831 $ 9,832 Accounts payable and accrued liabilities 26,471 31,138 Advanced billing and customer deposits 4,371 4,519 Accrued taxes 3,331 2,079 Dividends payable 3,008 3,008 Total current liabilities 48,012 50,576 Long-Term Debt 132, ,681 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 61,926 60,128 Postemployment benefit obligation 31,422 33,578 Other noncurrent liabilities 20,753 21,748 Total deferred credits and other noncurrent liabilities 114, ,454 Stockholders' Equity Common stock 6,495 6,495 Additional paid-in capital 89,471 89,604 Retained earnings 36,067 34,734 Treasury stock (12,697) (12,659) Accumulated other comprehensive income 5,389 4,961 Noncontrolling interest 1, Total stockholders' equity 125, ,110 Total Liabilities and Stockholders' Equity $ 420,795 $ 403,821

9 AT&T Inc. Financial Data Consolidated Statements of Cash Flows Dollars in millions Six Months Ended Unaudited June 30, Operating Activities Net income $ 7,588 $ 7,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,274 13,139 Undistributed loss (earnings) from investments in equity affiliates 167 (22) Provision for uncollectible accounts Deferred income tax expense 964 1,767 Net loss (gain) from sale of investments, net of impairments 12 (85) Actuarial loss (gain) on pension and postretirement benefits (259) - Changes in operating assets and liabilities: Accounts receivable 119 (364) Other current assets 471 2,229 Accounts payable and other accrued liabilities (2,761) (3,032) Equipment installment receivables and related sales Deferred fulfillment costs (796) (1,190) Retirement benefit funding (280) (280) Other - net (1,041) (2,524) Total adjustments 10,572 10,807 Net Cash Provided by Operating Activities 18,160 18,207 Investing Activities Capital expenditures: Purchase of property and equipment (10,750) (9,702) Interest during construction (473) (437) Acquisitions, net of cash acquired 1,224 (485) Dispositions Sales of securities, net Net Cash Used in Investing Activities (9,948) (10,017) Financing Activities Net change in short-term borrowings with original maturities of three months or less (2) - Issuance of long-term debt 24,115 10,140 Repayment of long-term debt (6,118) (9,129) Purchase of treasury stock (458) (197) Issuance of treasury stock Dividends paid (6,021) (5,899) Other 77 (1,137) Net Cash Provided by (Used in) Financing Activities 11,617 (6,103) Net increase in cash and cash equivalents 19,829 2,087 Cash and cash equivalents beginning of year 5,788 5,121 Cash and Cash Equivalents End of Period $ 25,617 $ 7,208

10 AT&T Inc. Consolidated Supplementary Data Supplementary Financial Data Dollars in millions except per share amounts Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Capital expenditures Purchase of property and equipment $ 4,966 $ 5, % $ 10,750 $ 9, % Interest during construction $ 242 $ % $ 473 $ % Dividends Declared per Share $ 0.49 $ % $ 0.98 $ % End of Period Common Shares Outstanding (000,000) 6,140 6, % Debt Ratio 53.3% 50.5% 280BP Total Employees 260, , % Supplementary Operating Data Subscribers and connections in thousands Unaudited June 30, Percent Change Wireless Subscribers Domestic 136, , % Mexico 13,082 9, % Total Wireless Subscribers 149, , % Total Branded Wireless Subscribers 104,421 99, % Video Connections Domestic 25,200 25, % PanAmericana 8,103 7, % Brazil 5,519 5, % Total Video Connections 38,822 37, % Broadband Connections IP 14,234 13, % DSL 1,452 2, % Total Broadband Connections 15,686 15, % Voice Connections Network Access Lines 12,791 15, % U-verse VoIP Connections 5,853 5, % Total Retail Consumer Voice Connections 18,644 20, % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change Wireless Net Additions Domestic 2,282 1, % 4,363 3, % Mexico % 1,109 1, % Total Wireless Net Additions 2,758 2, % 5,472 4, % Total Branded Wireless Net Additions 888 1, % 1,626 2, % Video Net Additions Domestic (199) (49) -% (360) (101) -% PanAmericana % % Brazil (69) 6 -% (30) (95) 68.4% Total Video Net Additions (255) 38 -% (325) (87) -% Broadband Net Additions

11 IP % % DSL (133) (197) 32.5% (289) (413) 30.0% Total Broadband Net Additions (9) (123) 92.7% 81 (137) -%

12 BUSINESS SOLUTIONS The Business Solutions segment provides services to business customers, including multinational companies; governmental and wholesale customers; and individual subscribers who purchase wireless services through employer-sponsored plans. We provide advanced IP-based services including Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred to as strategic business services; as well as traditional data and voice products. We utilize our wireless and wired networks (referred to as "wired" or "wireline") to provide a complete communications solution to our business customers. Segment Results Dollars in millions Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Segment Operating Revenues Wireless service $ 8,006 $ 7, % $ 15,935 $ 15, % Fixed strategic services 3,028 2, % 6,002 5, % Legacy voice and data services 3,508 4, % 7,138 8, % Other service and equipment % 1,661 1, % Wireless equipment 1,721 1, % 3,219 3, % Total Segment Operating Revenues 17,107 17, % 33,955 35, % Segment Operating Expenses Operations and support expenses 10,313 10, % 20,489 21, % Depreciation and amortization 2,335 2, % 4,647 5, % Total Segment Operating Expenses 12,648 13, % 25,136 26, % Segment Operating Income 4,459 4, % 8,819 8, % Equity in Net Income of Affiliates - - -% - - -% Segment Contribution $ 4,459 $ 4, % $ 8,819 $ 8, % Segment Operating Income Margin 26.1% 23.9% 26.0% 24.2% Supplementary Operating Data Subscribers and connections in thousands Unaudited June 30, Percent Change Business Solutions Wireless Subscribers Postpaid/Branded 51,111 49, % Reseller % Connected Devices 33,611 28, % Total Business Solutions Wireless Subscribers 84,794 77, % Business Solutions IP Broadband Connections % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change Business Solutions Wireless Net Additions Postpaid/Branded % (89) 318 -% Reseller (5) (13) 61.5% 1 (35) -% Connected Devices 2,170 1, % 4,723 2, % Total Business Solutions Wireless Net Additions 2,201 1, % 4,635 3, % Business Solutions Wireless Postpaid Churn 0.97% 0.91% 6BP 1.02% 0.97% 5BP Business Solutions IP Broadband Net Additions % %

13 ENTERTAINMENT GROUP The Entertainment Group segment provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the U.S. or in U.S. territories. We utilize our copper and IP-based wired network and/or our satellite technology. Segment Results Dollars in millions Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Segment Operating Revenues Video entertainment $ 9,153 $ 8, % $ 18,173 $ 17, % High-speed internet 1,927 1, % 3,868 3, % Legacy voice and data services 1,005 1, % 2,061 2, % Other service and equipment % 1,203 1, % Total Segment Operating Revenues 12,682 12, % 25,305 25, % Segment Operating Expenses Operations and support expenses 9,558 9, % 19,159 19, % Depreciation and amortization 1,458 1, % 2,877 2, % Total Segment Operating Expenses 11,016 11, % 22,036 22, % Segment Operating Income 1,666 1, % 3,269 3, % Equity in Net Income (Loss) of Affiliates (11) (2) -% (17) 1 -% Segment Contribution $ 1,655 $ 1, % $ 3,252 $ 3, % Segment Operating Income Margin 13.1% 13.0% 12.9% 12.8% Supplementary Operating Data Subscribers and connections in thousands Six Months Ended Unaudited June 30, Percent Change Video Connections Satellite 20,856 20, % U-verse 3,825 4, % DIRECTV NOW % Total Video Connections 25,172 25, % Broadband Connections IP 13,242 12, % DSL 1,060 1, % Total Broadband Connections 14,302 14, % Voice Connections Retail Consumer Switched Access Lines 5,257 6, % U-verse Consumer VoIP Connections 5,439 5, % Total Retail Consumer Voice Connections 10,696 11, % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change Video Net Additions Satellite (156) 342 -% (156) 670 -% U-verse (195) (391) 50.1% (428) (773) 44.6% DIRECTV NOW % % Total Video Net Additions (199) (49) -% (360) (103) -% Broadband Net Additions IP % % DSL (104) (164) 36.6% (231) (345) 33.0% Total Broadband Net Additions 8 (110) -% 123 (105) -%

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15 CONSUMER MOBILITY The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale and resale wireless subscribers located in the U.S. or in U.S. territories. We utilize our U.S. wireless network to provide voice and data services, including high-speed internet, video, and home monitoring services. Segment Results Dollars in millions Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Segment Operating Revenues Service $ 6,528 $ 6, % $ 13,137 $ 13, % Equipment 1,263 1, % 2,394 2, % Total Segment Operating Revenues 7,791 8, % 15,531 16, % Segment Operating Expenses Operations and support expenses 4,520 4, % 9,048 9, % Depreciation and amortization % 1,744 1, % Total Segment Operating Expenses 5,391 5, % 10,792 11, % Segment Operating Income 2,400 2, % 4,739 5, % Equity in Net Income of Affiliates - - -% - - -% Segment Contribution $ 2,400 $ 2, % $ 4,739 $ 5, % Segment Operating Income Margin 30.8% 31.4% 30.5% 30.7% Supplementary Operating Data Subscribers and connections in thousands Unaudited June 30, Percent Change Consumer Mobility Subscribers Postpaid 26,290 27, % Prepaid 14,187 12, % Branded 40,477 40,495 -% Reseller 10,182 12, % Connected Devices 1, % Total Consumer Mobility Subscribers 51,706 54, % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change Consumer Mobility Net Additions Postpaid % % Prepaid % % Branded % % Reseller (363) (446) 18.6% (951) (824) -15.4% Connected Devices 86 (1) -% 105 (27) -% Total Consumer Mobility Net Additions 81 (10) -% (272) 82 -% Total Churn 2.15% 1.96% 19BP 2.29% 2.04% 25BP Postpaid Churn 1.09% 1.09% -BP 1.16% 1.16% -BP

16 INTERNATIONAL The International segment provides entertainment services in Latin America and wireless services in Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional and national wireless networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. Segment Results Dollars in millions Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Segment Operating Revenues Video entertainment $ 1,361 $ 1, % $ 2,702 $ 2, % Wireless service % 1, % Wireless equipment % % Total Segment Operating Revenues 2,026 1, % 3,955 3, % Segment Operating Expenses Operations and support expenses 1,772 1, % 3,531 3, % Depreciation and amortization % % Total Segment Operating Expenses 2,083 2, % 4,132 3, % Segment Operating Income (Loss) (57) (193) 70.5% (177) (391) 54.7% Equity in Net Income (Loss) of Affiliates % % Segment Contribution $ (32) $ (184) 82.6% $ (132) $ (368) 64.1% Segment Operating Income Margin (2.8)% (10.6)% (4.5)% (11.2)% Supplementary Operating Data Subscribers and connections in thousands Unaudited June 30, Percent Change Mexican Wireless Subscribers Postpaid 5,187 4, % Prepaid 7,646 5, % Branded 12,833 9, % Reseller % Total Mexican Wireless Subscribers 13,082 9, % Latin America Satellite Subscribers PanAmericana 8,103 7, % SKY Brazil 5,519 5, % Total Latin America Satellite Subscribers 13,622 12, % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change Mexican Wireless Net Additions Postpaid % % Prepaid % 919 1, % Branded % 1,141 1, % Reseller (18) (37) 51.4% (32) (74) 56.8% Total Mexican Wireless Net Additions % 1,109 1, % Latin America Satellite Net Additions PanAmericana % % SKY Brazil (69) 6 -% (30) (95) 68.4% Total Latin America Satellite Net Additions (56) 87 -% %

17 SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility). Operating Results Dollars in millions Three Months Ended Six Months Ended Unaudited June 30, Percent June 30, Percent Change Change Operating Revenues Service $ 14,534 $ 14, % $ 29,072 $ 29, % Equipment 2,984 3, % 5,613 6, % Total Operating Revenues 17,518 17, % 34,685 35, % Operating Expenses Operations and support expenses 10,197 10, % 20,195 21, % Depreciation and amortization 1,992 2, % 3,989 4, % Total Operating Expenses 12,189 12, % 24,184 25, % Operating Income $ 5,329 $ 5, % $ 10,501 $ 10, % Operating Income Margin 30.4% 29.8% 30.3% 29.6% Supplementary Operating Data Subscribers and connections in thousands Unaudited June 30, Percent Change AT&T Mobility Subscribers Postpaid 77,401 77, % Prepaid 14,187 12, % Branded 91,588 89, % Reseller 10,254 12, % Connected Devices 34,658 28, % Total AT&T Mobility Subscribers 136, , % Domestic Licensed POPs (000,000) % Three Months Ended Six Months Ended June 30, Percent June 30, Percent Change Change AT&T Mobility Net Additions Postpaid % (64) 386 -% Prepaid % % Branded % 485 1, % Reseller (368) (459) 19.8% (950) (859) -10.6% Connected Devices 2,256 1, % 4,828 2, % Total AT&T Mobility Net Additions 2,282 1, % 4,363 3, % M&A Activity, Partitioned Customers and Other Adjustments - (1) -% (2,723) 23 -% Total Churn 1.28% 1.35% -7BP 1.37% 1.38% -1BP Postpaid Churn 1.01% 0.97% 4BP 1.07% 1.04% 3BP

18 SUPPLEMENTAL SEGMENT RECONCILIATION Dollars in millions Unaudited Three Months Ended June 30, 2017 Operations and Support Expenses Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Revenues EBITDA Business Solutions $ 17,107 $ 10,313 $ 6,794 $ 2,335 $ 4,459 $ - $ 4,459 Entertainment Group 12,682 9,558 3,124 1,458 1,666 (11) 1,655 Consumer Mobility 7,791 4,520 3, ,400-2,400 International 2,026 1, (57) 25 (32) Segment Total 39,606 26,163 13,443 4,975 8,468 $ 14 $ 8,482 Corporate and Other Acquisition-related items (281) 1,170 (1,451) Certain Significant items - (164) AT&T Inc. $ 39,837 $ 26,367 $ 13,470 $ 6,147 $ 7,323 June 30, 2016 Operations and Support Expenses Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Revenues EBITDA Business Solutions $ 17,579 $ 10,857 $ 6,722 $ 2,521 $ 4,201 $ - $ 4,201 Entertainment Group 12,711 9,569 3,142 1,489 1,653 (2) 1,651 Consumer Mobility 8,186 4,680 3, ,574-2,574 International 1,828 1, (193) 9 (184) Segment Total 40,304 26,829 13,475 5,240 8,235 $ 7 $ 8,242 Corporate and Other (77) 20 (97) Acquisition-related items (233) 1,316 (1,549) Certain Significant items - 29 (29) - (29) AT&T Inc. $ 40,520 $ 27,384 $ 13,136 $ 6,576 $ 6,560 Dollars in millions Unaudited Six Months Ended June 30, 2017 Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Revenues Business Solutions $ 33,955 $ 20,489 $ 13,466 $ 4,647 $ 8,819 $ - $ 8,819 Entertainment Group 25,305 19,159 6,146 2,877 3,269 (17) 3,252 Consumer Mobility 15,531 9,048 6,483 1,744 4,739-4,739 International 3,955 3, (177) 45 (132) Segment Total 78,746 52,227 26,519 9,869 16,650 $ 28 $ 16,678 Corporate and Other Acquisition-related items (488) 2,372 (2,860) Certain Significant items - (282) AT&T Inc. $ 79,202 $ 52,741 $ 26,461 $ 12,274 $ 14,187 June 30, 2016 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution

19 Business Solutions $ 35,188 $ 21,659 $ 13,529 $ 5,029 $ 8,500 $ - $ 8,500 Entertainment Group 25,369 19,147 6,222 2,977 3, ,246 Consumer Mobility 16,514 9,592 6,922 1,854 5,068-5,068 International 3,495 3, (391) 23 (368) Segment Total 80,566 53,709 26,857 10,435 16,422 $ 24 $ 16,446 Corporate and Other (181) 37 (218) Acquisition-related items (528) 2,667 (3,195) Certain Significant items - (682) AT&T Inc. $ 81,055 $ 54,225 $ 26,830 $ 13,139 $ 13,691

20 Discussion and Reconciliation of Non-GAAP Measures We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. Free Cash Flow Free cash flow is defined as cash from operations minus Capital expenditures. Free cash flow after dividends is defined as cash from operations minus Capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the percentage of dividends paid to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including Capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners. Free Cash Flow and Free Cash Flow Dividend Payout Ratio Dollars in millions Three Months Ended Six Months Ended June 30, June 30, Net cash provided by operating activities $ 8,942 $ 10,307 $ 18,160 $ 18,207 Less: Capital expenditures (5,208) (5,470) (11,223) (10,139) Free Cash Flow 3,734 4,837 6,937 8,068 Less: Dividends paid (3,012) (2,952) (6,021) (5,899) Free Cash Flow after Dividends $ 722 $ 1,885 $ 916 $ 2,169 Free Cash Flow Dividend Payout Ratio 80.7% 61.0% 86.8% 73.1% EBITDA Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. generally accepted accounting principles (GAAP). EBITDA service margin is calculated as EBITDA divided by service revenues. When discussing our segment results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations (AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International segment, EBITDA excludes depreciation and amortization from operating income. These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations.

21 We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well. There are material limitations to using these non-gaap financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, Net Income $ 4,014 $ 3,515 $ 7,588 $ 7,400 Additions: Income Tax Expense 2,056 1,906 3,860 4,028 Interest Expense 1,395 1,258 2,688 2,465 Equity in Net (Income) Loss of Affiliates (14) (28) 159 (41) Other (Income) Expense - Net (128) (91) (108) (161) Depreciation and amortization 6,147 6,576 12,274 13,139 EBITDA 13,470 13,136 26,461 26,830 Total Operating Revenues 39,837 40,520 79,202 81,055 Service Revenues 36,538 37,142 72,994 74,243 EBITDA Margin 33.8% 32.4% 33.4% 33.1% EBITDA Service Margin 36.9% 35.4% 36.3% 36.1%

22 Segment EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, Business Solutions Segment Segment Contribution $ 4,459 $ 4,201 $ 8,819 $ 8,500 Additions: Depreciation and amortization 2,335 2,521 4,647 5,029 EBITDA 6,794 6,722 13,466 13,529 Total Segment Operating Revenues 17,107 17,579 33,955 35,188 Segment Operating Income Margin 26.1% 23.9% 26.0% 24.2% EBITDA Margin 39.7% 38.2% 39.7% 38.4% Entertainment Group Segment Segment Contribution $ 1,655 $ 1,651 $ 3,252 $ 3,246 Additions: Equity in Net (Income) Loss of Affiliates (1) Depreciation and amortization 1,458 1,489 2,877 2,977 EBITDA 3,124 3,142 6,146 6,222 Total Segment Operating Revenues 12,682 12,711 25,305 25,369 Segment Operating Income Margin 13.1% 13.0% 12.9% 12.8% EBITDA Margin 24.6% 24.7% 24.3% 24.5% Consumer Mobility Segment Segment Contribution $ 2,400 $ 2,574 $ 4,739 $ 5,068 Additions: Depreciation and amortization ,744 1,854 EBITDA 3,271 3,506 6,483 6,922 Total Segment Operating Revenues 7,791 8,186 15,531 16,514 Service Revenues 6,528 6,948 13,137 13,891 Segment Operating Income Margin 30.8% 31.4% 30.5% 30.7% EBITDA Margin 42.0% 42.8% 41.7% 41.9% EBITDA Service Margin 50.1% 50.5% 49.3% 49.8% International Segment Segment Contribution $ (32) $ (184) $ (132) $ (368) Additions: Equity in Net (Income) of Affiliates (25) (9) (45) (23) Depreciation and amortization EBITDA Total Segment Operating Revenues 2,026 1,828 3,955 3,495 Segment Operating Income Margin -2.8% -10.6% -4.5% -11.2% EBITDA Margin 12.5% 5.7% 10.7% 5.3%

23 Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, AT&T Mobility Operating Income $ 5,329 $ 5,342 $ 10,501 $ 10,616 Add: Depreciation and amortization 1,992 2,081 3,989 4,137 EBITDA 7,321 7,423 14,490 14,753 Total Operating Revenues 17,518 17,924 34,685 35,878 Service Revenues 14,534 14,911 29,072 29,709 Operating Income Margin 30.4% 29.8% 30.3% 29.6% EBITDA Margin 41.8% 41.4% 41.8% 41.1% EBITDA Service Margin 50.4% 49.8% 49.8% 49.7% Supplemental Latin America EBITDA and EBITDA Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, International - Latin America Operating Income $ 141 $ 32 $ 218 $ 85 Add: Depreciation and amortization EBITDA Total Operating Revenues 1,361 1,222 2,702 2,352 Operating Income Margin 10.4% 2.6% 8.1% 3.6% EBITDA Margin 26.7% 20.0% 24.2% 21.0% Supplemental Mexico EBITDA and EBITDA Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, International - Mexico Operating Income $ (198) $ (225) $ (395) $ (476) Add: Depreciation and amortization EBITDA (109) (139) (230) (309) Total Operating Revenues ,253 1,143 Operating Income Margin -29.8% -37.1% -31.5% -41.6% EBITDA Margin -16.4% -22.9% -18.4% -27.0% Adjusting Items Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often significant impact on our fourth-quarter results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income. The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%. Certain foreign operations with losses, where such losses are not realizable for tax purposes, are not tax effected, resulting in no tax impact for Venezuela devaluation. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico.

24 Adjusting Items Dollars in millions Three Months Ended Six Months Ended June 30, June 30, Operating Expenses DIRECTV and other video merger integration costs $ 123 $ 133 $ 250 $ 306 Mexico merger integration costs Time Warner merger costs Wireless merger integration costs Actuarial (gain) loss (259) - (259) - Employee separation costs (Gain) loss on transfer of wireless spectrum (63) - (181) (736) Venezuela devaluation Adjustments to Operations and Support Expenses (154) Amortization of intangible assets 1,170 1,316 2,372 2,667 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Other Merger related interest expense and exchange fees (Gain) loss on sale of assets, impairments and other adjustments (36) Adjustments to Income Before Income Taxes 1,409 1,577 3,066 2,533 Tax impact of adjustments , Adjustments to Net Income $ 964 $ 1,027 $ 2,065 $ 1,652 1 Includes interest expense incurred on the debt issued prior to the close of merger transactions. Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-gaap financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies. Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, Operating Income $ 7,323 $ 6,560 $ 14,187 $ 13,691 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Adjusted Operating Income 1 8,610 8,137 16,765 16,204 EBITDA 13,470 13,136 26,461 26,830 Adjustments to Operations and Support Expenses (154) Adjusted EBITDA 1 13,587 13,397 26,667 26,676 Total Operating Revenues 39,837 40,520 79,202 81,055 Service Revenues 36,538 37,142 72,994 74,243 Operating Income Margin 18.4% 16.2% 17.9% 16.9% Adjusted Operating Income Margin % 20.1% 21.2% 20.0% Adjusted EBITDA Margin % 33.1% 33.7% 32.9% Adjusted EBITDA Service Margin % 36.1% 36.5% 35.9% 1 Adjusted Operating Income, Adjusted EBITDA and associated margins exclude all actuarial gains or losses ($259 million gain in the second quarter of 2017) associated with our postemployment benefit plan, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. As a result, Adjusted Operating Income and Margin reflect an expected return on plan assets of $106 million (based on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the actual return on plan assets of $234 million (actual annualized VEBA return of 12.2%), as included in the GAAP measure of income.

25 Adjusted Diluted EPS Three Months Ended Six Months Ended June 30, June 30, Diluted Earnings Per Share (EPS) $ 0.63 $ 0.55 $ 1.19 $ 1.17 Amortization of intangible assets Merger integration and other items Asset abandonments, impairments and other adjustments Actuarial (gain) loss (0.03) - (0.03) - (Gain) loss on transfer of wireless spectrum (0.01) - (0.02) (0.08) Venezuela devaluation Adjusted EPS $ 0.79 $ 0.72 $ 1.53 $ 1.43 Year-over-year growth - Adjusted 9.7% 7.0% Weighted Average Common Shares Outstanding with Dilution (000,000) 6,184 6,195 6,185 6,193 1 Includes combined merger integration items, merger-related interest expense. Net Debt to Adjusted EBITDA Net Debt to EBITDA ratios are non-gaap financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by Annualized Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt. Annualized Adjusted EBITDA is calculated by annualizing the year-todate Adjusted EBITDA. Net Debt to Adjusted EBITDA Dollars in millions Three Months Ended Mar. 31, Jun YTD 2017 Adjusted EBITDA $ 13,080 $ 13,587 $ 26,667 Add back severance - (60) (60) Net Debt Adjusted EBITDA 13,080 13,527 26,607 Annualized Adjusted EBITDA 53,214 End-of-period current debt 10,831 End-of-period long-term debt 132,824 Total End-of-Period Debt 143,655 Less: Cash and Cash Equivalents 25,617 Net Debt Balance 118,038 Annualized Net Debt to Adjusted EBITDA Ratio 2.22

26 Supplemental Operational Measures We provide a supplemental discussion of our domestic wireless operations that is calculated by combining our Consumer Mobility and Business Solutions segments, and then adjusting to remove non-wireless operations. The following table presents a reconciliation of our supplemental AT&T Mobility results. Consumer Mobility Supplemental Operational Measure Three Months Ended June 30, 2017 June 30, 2016 Business Solutions Adjustments 1 AT&T Mobility Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility Operating Revenues Wireless service $ 6,528 $ 8,006 $ - $ 14,534 $ 6,948 $ 7,963 $ - $ 14,911 Fixed strategic services - 3,028 (3,028) - - 2,805 (2,805) - Legacy voice and data services - 3,508 (3,508) - - 4,162 (4,162) - Other services and equipment (844) (874) - Wireless equipment 1,263 1,721-2,984 1,238 1,775-3,013 Total Operating Revenues 7,791 17,107 (7,380) 17,518 8,186 17,579 (7,841) 17,924 Operating Expenses Operations and support 4,520 10,313 (4,636) 10,197 4,680 10,857 (5,036) 10,501 EBITDA 3,271 6,794 (2,744) 7,321 3,506 6,722 (2,805) 7,423 Depreciation and amortization 871 2,335 (1,214) 1, ,521 (1,372) 2,081 Total Operating Expense 5,391 12,648 (5,850) 12,189 5,612 13,378 (6,408) 12,582 Operating Income $ 2,400 $ 4,459 $ (1,530) $ 5,329 $ 2,574 $ 4,201 $ (1,433) $ 5,342 1 Non-wireless (fixed) operations reported in Business Solutions segment. Consumer Mobility Supplemental Operational Measure Six Months Ended June 30, 2017 June 30, 2016 Business Solutions Adjustments 1 AT&T Mobility Consumer Mobility Business Solutions Adjustments 1 AT&T Mobility Operating Revenues Wireless service $ 13,137 $ 15,935 $ - $ 29,072 $ 13,891 $ 15,818 $ - $ 29,709 Fixed strategic services - 6,002 (6,002) - - 5,556 (5,556) - Legacy voice and data services - 7,138 (7,138) - - 8,535 (8,535) - Other services and equipment - 1,661 (1,661) - - 1,733 (1,733) - Wireless equipment 2,394 3,219-5,613 2,623 3,546-6,169 Total Operating Revenues 15,531 33,955 (14,801) 34,685 16,514 35,188 (15,824) 35,878 Operating Expenses Operations and support 9,048 20,489 (9,342) 20,195 9,592 21,659 (10,126) 21,125 EBITDA 6,483 13,466 (5,459) 14,490 6,922 13,529 (5,698) 14,753 Depreciation and amortization 1,744 4,647 (2,402) 3,989 1,854 5,029 (2,746) 4,137 Total Operating Expense 10,792 25,136 (11,744) 24,184 11,446 26,688 (12,872) 25,262 Operating Income $ 4,739 $ 8,819 $ (3,057) $ 10,501 $ 5,068 $ 8,500 $ (2,952) $ 10,616 1 Non-wireless (fixed) operations reported in Business Solutions segment.

27 Supplemental International We provide a supplemental presentation of the Latin America and Mexico Wireless operations within our International segment. The following table presents a reconciliation of our International segment. Supplemental International Three Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 1,361 $ - $ 1,361 $ 1,222 $ - $ 1,222 Wireless service Wireless equipment Total Operating Revenues 1, ,026 1, ,828 Operating Expenses Operations and support , ,723 Depreciation and amortization Total Operating Expense 1, ,083 1, ,021 Operating Income 141 (198) (57) 32 (225) (193) Equity in Net Income of Affiliates Segment Contribution $ 166 $ (198) $ (32) $ 41 $ (225) $ (184) Supplemental International Six Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 2,702 $ - $ 2,702 $ 2,352 $ - $ 2,352 Wireless service - 1,010 1, Wireless equipment Total Operating Revenues 2,702 1,253 3,955 2,352 1,143 3,495 Operating Expenses Operations and support 2,048 1,483 3,531 1,859 1,452 3,311 Depreciation and amortization Total Operating Expense 2,484 1,648 4,132 2,267 1,619 3,886 Operating Income 218 (395) (177) 85 (476) (391) Equity in Net Income of Affiliates Segment Contribution $ 263 $ (395) $ (132) $ 108 $ (476) $ (368)