Deutsche Telekom's A- Grade and 5.8 Billion Profit Can't Shake the 27-Euro Ceiling

S&P upgrades Deutsche Telekom to A- on €20B free cash flow outlook, yet shares fall 15% yearly. Strong Q1 EBIT leads DAX but technicals and Verdi wage talks weigh.

For the first time in its history, Deutsche Telekom now carries an A- credit rating after S&P upgraded the Bonn-based group last week, citing an expected annual free cash flow of over €20 billion. The move provides the company with significant financial flexibility. But the market is proving stubborn: the stock closed at €27.63 on Friday, marking a 15% decline over the past twelve months and leaving it well below both its 50-day average of €30.16 and the 200-day line of €29.24.

The disconnect between operating strength and share price performance is stark. In the first quarter of 2026, Deutsche Telekom led all DAX-listed companies in earnings before interest and tax, posting €5.8 billion according to EY. That put it comfortably ahead of Allianz at €4.5 billion and Eon at €3.9 billion. The achievement came against a backdrop of shrinking revenues across the index — sales fell an average of 3.7% — while profits rose 4.4%. For Telekom, the international business remains the key earnings engine; more than 80% of revenues among Germany’s biggest corporations now come from abroad.

Despite that profit leadership, the chart tells a more cautious story. On May 13 the stock formed a hanging man candlestick pattern, a technical warning that can accelerate profit-taking after an uptrend. While not a definitive reversal signal, it adds to an already uncertain picture. Over the past month the share price has fallen 3.22%, and year-to-date it is marginally negative. A seven-day gain of 0.80% offers little comfort, especially with the 50-day and 200-day moving averages acting as overhead resistance.

One overhang is the unresolved dispute with labour union Verdi. The union rejected Telekom’s latest offer for roughly 60,000 employees and is using the company’s planned €2 billion share buyback as leverage in wage negotiations. The fourth round of talks is scheduled for May 26-27. Analysts at Goldman Sachs and Deutsche Bank remain bullish, with price targets around €40, but a resolution at the negotiating table could remove a key drag on sentiment.

Meanwhile, management is pushing ahead with growth initiatives. Together with Rheinmetall, Deutsche Telekom is developing a drone defence shield that uses its mobile network as a radar system, detecting anomalies in data traffic that suggest aircraft control signals. The project is being researched in collaboration with the University of the Bundeswehr in Hamburg.

In its core fixed-line business, the company added roughly 200,000 new active fibre-optic customers in the first quarter, bringing the total in Germany to around 2.2 million. The take-up rate edged up to 17.1%. While the rollout continues steadily, the real catalysts for the share price may come from external factors: inflation data from Germany and the US could shift rate expectations, affecting defensive large-cap stocks like Telekom.

For now, the €27 level serves as a practical floor. If it holds, the strong EBIT performance and the S&P upgrade could regain the market’s attention. If it breaks, the hanging man signal may gain the upper hand over solid fundamentals.