TELUS Q2 Earnings Fall Y/Y on Digital Weakness, Outlook Cut

TELUS has lost 33.6% in the past year compared with the  Zacks Diversified Communication Services industry’s decline of 3.2%.

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TU's Revenue Mix Shows Broad Pressure

Service revenues decreased 1% year over year to C$4,442 million. Equipment revenues fell 11% to C$478 million, reflecting lower contracted mobile volumes and weaker fixed premises equipment sales. Other income plunged 82% to C$9 million because prior-year lease and sublease revenues did not recur.

Consolidated adjusted EBITDA declined 2% to C$1,777 million. However, adjusted EBITDA margin improved 30 basis points (bps) to 36.0%, as cost-reduction efforts partly countered revenue pressure. Goods and services purchased rose 1% to C$1,869 million, while employee benefits expense fell 5% to C$1,472 million. Restructuring and other costs increased 42% to C$189 million.

TELUS Mobility Holds Up

TTech operating revenues and other income decreased 2% to C$3,746 million. Mobile network revenue rose 1% to C$1,743 million, supported by subscriber growth. Mobile equipment and other service revenues fell 13% to C$433 million, while fixed data revenue was flat at C$1,175 million and fixed voice revenue declined 8% to C$157 million.

TTech adjusted EBITDA was nearly unchanged at C$1,639 million. The adjusted margin expanded 110 bps to 43.8%, helped by workforce reductions, privatization synergies, lower bad-debt expense and growth in security, automation and TV. These gains offset pricing pressure, weaker equipment margins, lower business data revenue and higher cloud-related costs.

TU's Health Growth Meets Margin Pressure

TELUS Health operating revenues and other income increased 3% to C$536 million. Health service revenues rose 4% to C$533 million, driven by acquisitions, including Workplace Options, and growth in payor and provider solutions. Continued prior-year churn and pricing pressure in employer solutions limited the increase.

Adjusted EBITDA advanced 1% to C$99 million, supported by revenue growth and acquisition integration synergies. The adjusted margin declined 50 bps to 18.4% because of acquisition-related costs, digital and security investments and regional marketing spending. Healthcare lives covered increased by 1.8 million to 158.9 million.

TELUS Digital Weakness Deepens

TELUS Digital operating revenues and other income declined 6% to C$774 million. External revenues fell 10% to C$654 million, reflecting client ramp-downs in trust and safety and AI and data solutions, an unfavorable currency impact and a prior-year contractual receipt. Higher customer experience management volumes provided a partial offset.

Adjusted EBITDA fell 20% to C$72 million, and adjusted margin contracted 160 bps to 9.2%. TELUS recorded a C$2,135 million noncash impairment of intangible assets and goodwill tied to the segment, contributing to a reported net loss of C$1,830 million and a basic loss of C$1.17 per share.

TU Cash Flow Improves as Dividend Is Reset

Cash provided by operating activities increased 15% to C$1,342 million, aided by working-capital changes, lower income taxes paid and reduced restructuring disbursements. Free cash flow rose 2% to C$545 million despite higher interest payments and lower EBITDA. Capital expenditures were unchanged at C$678 million.

The board reset the quarterly dividend by 55% to C$0.1875 per share, or C$0.75 annualized. TELUS expects about C$2.7 billion of cumulative cash savings through 2028 for debt reduction. Net debt to adjusted EBITDA was 3.5 times, with a target of approximately 3.0 times or lower by year-end 2028.

TELUS Cuts 2026 Financial Targets

TELUS now expects full-year consolidated service revenue growth to range from flat to a 2% decline versus its prior 2-4% growth forecast. Adjusted EBITDA is projected to fall 2-4%, reversing the earlier expectation for 2-4% growth, as fixed data, TELUS Digital and TELUS Health trends remain softer than planned.

The company raised its 2026 capital expenditure forecast to approximately C$2.6 billion from C$2.3 billion. Free cash flow guidance was reduced to about C$1.8 billion from C$2.45 billion, reflecting lower adjusted EBITDA, higher capital spending and C$100 million of incremental cash restructuring charges.

TU’s Zacks Rank

TELUS currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Other Companies

Exelon Corporation EXC reported second-quarter 2026 adjusted operating earnings of 43 cents per share, in line with the Zacks Consensus Estimate. Earnings increased 10.3% from 39 cents in the year-ago quarter. Higher distribution and transmission rates across several utilities supported the improvement.

Revenues totaled $5.97 billion, beating the Zacks Consensus Estimate of $5.66 billion by 5.46%.  The top line increased 10% from the year-ago figure of $5.43 billion.

Edison International EIX reported second-quarter 2026 core earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.02 by 51%. The bottom line surged 58.8% from 97 cents in the year-ago quarter, primarily reflecting Southern California Edison’s adoption of the 2025 General Rate Case final decision.

Edison International's second-quarter operating revenues totaled $4.36 billion, which missed the Zacks Consensus Estimate of $4.72 billion by 7.7%. The top line also decreased 4.1% from the year-ago quarter’s figure of $4.54 billion.

DTE Energy Company DTE delivered second-quarter 2026 earnings per share of $1.32, beating the Zacks Consensus Estimate of $1.14 by 15.8%. The bottom line, however, decreased 2.9% from the year-ago reported figure of $1.36.

While the company’s operating earnings were $274 million in the quarter, down from $283 million a year ago, the path to that outcome was shaped by sizable swings across segments.

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This article originally published on Zacks Investment Research (zacks.com).

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