T-Mobile US Inc. (NASDAQ: TMUS) shares dropped 5.21% to $181.00 in premarket trading Thursday after the wireless carrier reported second-quarter earnings that beat analyst expectations while missing on revenue and subscriber growth metrics. The company reported diluted earnings per share (EPS) of $2.99, surpassing the consensus estimate of $2.58 by 15.89%, representing a 5.3% increase year-over-year. However, total sales reached $22.79 billion, falling short of the $22.94 billion estimate, driven by slower postpaid net account additions which declined 13% to 277,000.

Operational Performance

Despite the overall decline in net additions, T-Mobile’s postpaid net account additions of 277,000 exceeded Bloomberg’s consensus estimate of 264,341. Postpaid Average Revenue Per Account (ARPA) grew 2% year-over-year to $152.91, reflecting a shift toward higher-tier plans. Chief Operating Officer Jon Freier noted that approximately 60% of new customers are selecting the highest-tier Experience plans, which include unlimited premium data and device upgrade benefits.

Postpaid account churn increased to 0.99% from 0.92% in the prior year period. Total postpaid accounts stood at 34,700 thousand at the end of the quarter. Service revenues increased 9% year-over-year to $19.0 billion, with postpaid service revenues growing 13% to $15.9 billion. The company achieved a record wireless Net Promoter Score (NPS) of 46, the highest for a major carrier according to HarrisX survey data.

Financial Results

Net income rose 1% to $3.2 billion, inclusive of $146 million in UScellular merger-related costs, specifically accelerated depreciation, net of tax. Core Adjusted EBITDA, a non-GAAP measure, increased 12% to $9.5 billion. Operating cash flow improved 7% to $7.5 billion, while Adjusted Free Cash Flow grew 4% to $4.8 billion. Stockholder returns for the quarter totaled $3.3 billion, comprising $2.2 billion in common stock repurchases and $1.1 billion in cash dividends.

Guidance Update

T-Mobile raised its full-year 2026 guidance for Adjusted Free Cash Flow to a range of $18.4 billion to $18.8 billion, up from the previous range of $18.1 billion to $18.7 billion. The company also raised its forecast for net cash provided by operating activities, including net payments related to the UScellular merger, to $28.4 billion to $28.8 billion, from $28.1 billion to $28.7 billion. Capital expenditures are expected to remain approximately $10.0 billion. T-Mobile reiterated its guidance for postpaid net account additions of 950,000 to 1.05 million and Core Adjusted EBITDA of $37.1 billion to $37.5 billion.

What the Numbers Show

The divergence between strong EPS growth and declining subscriber additions highlights T-Mobile’s strategy of prioritizing average revenue per user over pure volume growth. With 60% of new customers opting for premium plans, the company is successfully monetizing its existing base despite intensifying competition from rivals like AT&T Inc. (NYSE: T). However, the rise in churn to 0.99% suggests that retaining legacy customers remains a challenge as the company retires older plans and pushes higher-priced bundles.

T-Mobile US has generated an average annual return of 15.55% over the past 10 years, outperforming the market by 2.38% on an annualized basis. The company currently holds a market capitalization of $207.01 billion.

Investment Growth Analysis

If an investor had purchased $100 worth of T-Mobile US stock 10 years ago, that investment would be valued at $423.93 today. This calculation is based on a current share price of $191.29.

Performance Metrics

The performance highlights the impact of compounded returns on capital growth over extended periods.