Deutsche Telekom: Record DAX Profit and a $200bn Merger Gamble

Deutsche Telekom posts DAX-leading Q1 earnings but shares lag 19% below highs. A potential T-Mobile US merger and AI push add uncertainty.

Deutsche Telekom sits at an unusual crossroads. The company just posted the highest quarterly earnings of any DAX member — yet its shares trade nearly 19% below their 52-week high and below all major moving averages. That disconnect is the market's way of saying: the numbers are good, but the big unknowns are bigger.

A Profit Dominance That Demands Attention

In the first quarter of 2026, Deutsche Telekom booked EBIT of €5.8bn, comfortably outpacing Allianz at €4.5bn and Eon at €3.9bn. That made it the DAX’s undisputed profit leader, according to EY. The achievement is all the more striking given that DAX-wide revenues shrank 3.7% on average while earnings rose 4.4%. Telekom’s operational strength stands out in a landscape where many peers are squeezing more profit from thinner revenue.

The engine behind that performance? International exposure. More than 80% of revenue at Germany’s largest listed firms now comes from abroad, and Telekom is no exception. T-Mobile US continues to drive the bus: service revenue there climbed 11.5% to $18.9bn, while adjusted EBITDA AL jumped 12.9% to $9.1bn. On a group level, organic service revenue rose 4.6% and organic EBITDA improved 7.5%.

Those numbers gave management the confidence to raise full-year guidance. Adjusted EBITDA after leases is now expected at around €47.5bn — €100m higher than the previous target. The company also reaffirmed its forecast of 10% adjusted earnings-per-share growth for the year, with Q1 already showing an 8% gain.

The Merger Elephant — and Its Political Tail

Behind the earnings momentum looms a potential transaction that would remake the global telecom map. Deutsche Telekom already owns just over 53% of T-Mobile US, and sources have confirmed it is exploring the creation of a new holding company that would offer shares for both entities. The result would be the world’s largest phone company — and easily the biggest public M&A deal on record.

But the path is anything but straightforward. The German government and KfW together hold roughly 28% of Deutsche Telekom. A full merger would dilute that stake to an estimated 17-18%, potentially falling below the 25% threshold that Berlin has historically viewed as a floor for strategic companies. The state, in other words, holds a decisive card — and has not yet played it.

During the Q1 earnings call, management studiously avoided the topic. And in the subsequent press briefing, there was no comment either. For now, the market is left to guess whether the political math adds up.

AI Infrastructure — The Third Pillar

While the merger narrative captures headlines, the company is quietly building a new growth engine closer to home. Deutsche Telekom is investing in its own AI infrastructure. The AI cloud data centre in Munich, run in partnership with Nvidia, is already fully booked for B200 capacity. On the operational side, an AI chatbot diverted one million customer calls in the first quarter — and the company plans to double that number by year-end.

That digital push complements the core telecom business and offers a hedge against the dollar-dependence that would intensify if a full T-Mobile US merger goes through. Currency headwinds already weighed on reported results in Q1.

Technicals Tell a Cautious Tale

Despite the fundamental strength, the stock chart paints a more reserved picture. At €27.63, the share price sits well below the 50-day moving average of €30.16 and the 200-day line of €29.24. Over the past twelve months, the stock has dropped 15.17%. On a month-to-date basis, it is down 3.22%.

A technical formation adds to the wariness. On 13 May 2026, a hanging man candlestick pattern appeared — often read by chartists as a warning after an uptrend. While not a definitive reversal signal, it can accelerate profit-taking if buyers lose conviction.

The key near-term level is the €27 zone. If it holds, the strong Q1 earnings and raised outlook may reassert themselves. A break below would give more weight to the technical caution.

What’s Next

The next major milestone is 6 August 2026, when second-quarter results are due. Until then, the stock’s direction will likely be dictated less by earnings momentum and more by signals from Berlin — or Washington — on the merger front. Macro data, especially inflation prints from Germany and the US, could also shift sentiment for defensive large caps like Telekom.

For now, Deutsche Telekom is a company with record profits, a rising guidance, and a game-changing deal in the works. The market is waiting for clarity — and until it arrives, the shares are stuck between an earnings Everest and a technical valley.