Deutsche Telekom Faces Twin Challenges: Record Cash Flow and Widening Strike Front

Despite Q1 profit jump and 2026 guidance upgrade from T-Mobile US, over 20,000 workers strike for 6.6% pay rise ahead of critical wage talks.

Strong earnings momentum and an upgraded outlook are doing little to calm tensions on the shop floor at Deutsche Telekom. The telecoms giant has lifted its medium-term profit forecast thanks to its US arm, yet more than 20,000 employees have now taken part in warning strikes since late April — a figure that includes staff at subsidiaries such as T-Systems for the first time.

Strike lines harden ahead of critical talks

The industrial action is escalating just as management and the ver.di union prepare for the fourth round of wage negotiations on 26–27 May. The union is demanding a 6.6% pay rise for roughly 70,000 tariff employees, alongside higher apprenticeship pay and special bonuses for union members. The employer's previous offer was rejected outright. In the most recent walkouts, 9,000 workers downed tools, and ver.di has warned that further spread to other parts of the group is possible if no acceptable proposal is tabled.

US division drives guidance upgrade

Operationally, the group is firing on most cylinders. Adjusted net profit rose 6.5% in the first quarter to €2.6 billion, while revenue edged up to just under €30 billion. The adjusted operating result hit €11.5 billion, up 2% year-on-year — a figure that would have been stronger without the weak US dollar. Management now expects adjusted EBITDA to reach around €47.5 billion in 2026, and free cash flow to exceed €19.8 billion, both helped by an improved outlook from T-Mobile US. Deutsche Telekom's stake in the American subsidiary has climbed to nearly 54%.

AI speeds up customer service as fiber rollout stays costly

Artificial intelligence remains a strategic priority for CEO Tim Höttges. A new chatbot handled one million calls in Germany in the first quarter, a volume the company expects to double over the full year. The technology is also being used to accelerate software development. Capacity for specialised Nvidia chips at the group's Munich data centre is already fully booked, and a dedicated investor event is planned for the autumn to detail further financial benefits.

The fibre-optic expansion, meanwhile, continues to absorb heavy investment. Deutsche Telekom now has 2.2 million active fibre customers in Germany and added 3.6 million European households last year. It has set a target of connecting a further 2.5 million homes in Germany this year alone. To maintain the pace, the company has increased its capital expenditure budget by €800 million.

Shares stuck in a narrow range

Despite the positive operational backdrop, the stock has struggled to gain traction. The shares closed at €27.79 on Thursday, after slipping 1.45% in an earlier session to €27.83. They now trade below their 50-day moving average and have delivered a double-digit percentage decline over the past twelve months. Year to date, the performance has recently turned negative after spending much of the period near breakeven. A planned €2 billion share buyback programme for 2026 is intended to provide support, but in the near term the labour dispute is weighing on sentiment.

All eyes will be on the negotiating table at the end of May. If the two sides fail to bridge the gap, the strike front could widen further — adding another layer of uncertainty to an otherwise improving earnings story.