Telefonica Beats on Q3 Earnings, Sales Miss Estimates on FX Headwinds

Telefonica, S.A. (TEF) reported a third-quarter 2025 net income of €271 million stemming from continuing operations, which plummeted 45.1% year over year. It generated €5 million from discontinued ones (Argentina, Peru, Uruguay and Ecuador). Furthermore, basic earnings per share (EPS) were €0.09 (11 cents) compared with €0.12 in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 22.2%.Telefonica’s revenues for the third quarter were €8.96 billion ($10.47 billion). On an organic basis, revenues grew 0.4%, underscoring steady operational performance across markets. However, reported revenues fell 1.6%, primarily due to adverse foreign exchange effects. This highlights the company’s ongoing challenge of currency volatility, particularly from its exposure to Latin American markets. The figure missed the consensus mark by 0.35%.In its Latin American operations outside Brazil, collectively referred to as HispAm, TEF has continued executing its portfolio simplification and divestment plan. The company closed the sale of its units in Uruguay and Ecuador during October, following the earlier disposals of Argentina and Peru. The sale of Telefónica Colombia is still pending, which, once completed, will further align the company’s footprint with its long-term strategy to focus on scalable, high-margin markets.Results by Business UnitsTelefonica Espana: Revenues in Spain increased 1.6% year over year to €3.2 billion, driven by continued service revenue upside and a surge of 15.6% in handset sales. The unit posted fixed broadband net additions of 2.4%, marking its best quarterly performance in nine years. This surge was underpinned by the high quality of services and the expansion of next-generation infrastructure. The quarterly adjusted EBITDA increased 1.1% to €1.17 billion, driven by higher revenues, improved IT service margins and efficiency gains from network transformation and hyper-automation initiatives.Telefonica Deutschland: Revenues decreased 6.6% to €1.96 billion, amid stronger performance in the core business. However, short-term mobile service revenue (MSR) trends continue to be adversely impacted by challenges related to the ongoing transformation of the partner business. The quarterly adjusted EBITDA margin was 32.1%. Capital expenditure (CapEx) plunged 22.5% to €257 million in the quarter.VirginMedia-O2 U.K.: Quarterly revenues went down 8% to €2.9 billion. The quarterly adjusted EBITDA margin was 39%. CapEx fell 8.4% to €609 million in the quarter.Telefonica SA Price, Consensus and EPS Surprise Telefonica SA price-consensus-eps-surprise-chart | Telefonica SA QuoteTelefonica Brasil: Quarterly revenues in Brazil increased 6.5% to €2.4 billion, fueled by strong increases in contract and FTTH revenues, which rose 7.7% and 11%, respectively. The quarterly adjusted EBITDA jumped 8.8% to €1.07 billion, led by efficiency improvements that kept operating expenses rising only in line with inflation, despite strong commercial activity and the increasing contribution of new digital businesses. CapEx increased 4.3% to €410 million in the quarter.Telefonica Infra (Telxius): Telxius, Telefonica’s submarine cable unit, renewed its long-term contracts with Telefónica’s businesses, ensuring mid- to long-term revenue visibility, though this temporarily affected short-term revenue trends. Nevertheless, proactive cost management and robust traffic growth (11% year over year in nine months) supported sustained profitability, with an EBITDA margin of 48.8% during the period.Telefonica Tech: Revenues of €567 million rose 21.6% year over year, showing sequential improvement mainly driven by accelerated growth in Spain. Revenues are well-balanced across services, with a strong focus on Managed & Professional services and own platforms. More than 85% comes from hard-currency markets. Cloud, Cybersecurity, IoT and AI & Data showed strong performance. Telefonica Hispam: Revenues fell 3.6% year over year to €1.02 billion, mainly due to weaker B2B performance in Colombia and reduced handset sales in Mexico. EBITDA rebounded to year-over-year growth of 1.2% at €206 million, driven primarily by strong performance in Mexico. The EBITDA margin reached 20.3%.Other DetailsEBITDA was €3.07 billion, declining 1.5% year over year due to currency headwinds. Operating income was €952 million in the quarter under review, which decreased 18%.Cash Flow & LiquidityFor the nine months ended Sept. 30, 2025, Telefonica generated €6.5 billion of net cash from operating activities compared with €7.2 billion in the prior-year period. Total free cash flow was €312 million.As of Sept. 30, 2025, the company had €4.4 billion in cash and cash equivalents, with €30.7 billion of non-current financial liabilities.TEF Reaffirms 2025 OutlookFor 2025, Telefonica continues to expect year-on-year organic growth in revenues, EBITDA and EBITDAaL - CapEx. It aims to keep CapEx as a share of sales below 12.5%, maintain free cash flow at 2024 levels and reduce debtThe company also reaffirmed its commitment to shareholder returns by confirming a €0.30 per share dividend for 2025, split into two tranches (€0.15 each in December 2025 and June 2026).TEF’s Zacks RankTelefonica currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks hereRecent Performance of Other CompaniesLumen Technologies, Inc. (LUMN) reported a third-quarter 2025 adjusted loss (excluding special items) of 20 cents per share, which was significantly narrower than the Zacks Consensus Estimate of a loss of 31 cents. The company reported adjusted loss per share of 13 cents in the prior-year quarter. Quarterly total revenues were $3.087 billion, down 4.2% year over year but beat the Zacks Consensus Estimate by 1.4%. Driven by significant AI-fueled connectivity demand, Lumen secured a total of $10 billion in PCF deals.Rogers Communications Inc (RCI) reported third-quarter 2025 adjusted earnings of 99 cents per share, which beat the Zacks Consensus Estimate by 7.61% but decreased 3.5% year over year. Revenues of $3.88 billion beat the consensus mark by 1.16% and increased 4.3% year over year. In domestic currency (Canadian dollar), adjusted earnings declined 3.5% year over year to C$1.37 per share. Total revenues increased 4.3% year over year to C$5.35 billion, primarily driven by growth in the Media businesses.T-Mobile US, Inc. (TMUS) , a leading wireless service provider, reported impressive third-quarter 2025 results, with both top and bottom lines beating the respective Zacks Consensus Estimate. Net sales were $21.95 billion, up from $20.16 billion in the year-ago quarter, driven by solid growth in service revenues. The top line beat the consensus estimate of $21.78 billion. Adjusted EPS was $2.59 per share, which beat the Zacks Consensus Estimate of $2.42. Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Rogers Communication, Inc. (RCI): Free Stock Analysis Report Telefonica SA (TEF): Free Stock Analysis Report T-Mobile US, Inc. (TMUS): Free Stock Analysis Report Lumen Technologies, Inc. (LUMN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks