Deutsche Telekom's Q1 Beat Masks FTTH Adoption Gap as AI and T-Mobile US Propel Growth

Deutsche Telekom posts solid Q1 with US arm driving growth, but stock falls as German fiber take-up lags. AI initiatives and raised guidance offer hope.

The disconnect between Deutsche Telekom’s operational muscle and its share price has rarely been starker. On Thursday, the stock edged down to €27.80 — a far cry from the double-digit gains the company’s US arm is delivering — as investors focused on a stubborn domestic bottleneck. At the closing bell, the shares sat at €27.79, nursing a monthly decline of 2.66% despite a modest weekly uptick of 1.39%.

The German telecoms giant’s first-quarter numbers were broadly solid. Adjusted net profit climbed 6.5% to €2.6 billion on revenue that held virtually flat at just under €30 billion. Adjusted for currency swings, the top-line advance was considerably stronger, with organic revenue growth of 4.7% to €29.9 billion. The unadjusted net profit, however, fell 28.2% to €2.0 billion, weighed by the absence of positive valuation effects that had flattered the year-earlier period.

T-Mobile US continues to be the locomotive. Deutsche Telekom increased its stake in the American subsidiary to almost 54% by the end of April, and the unit is posting double-digit earnings growth. The integration of acquired rival UScellular is generating hefty restructuring charges, and group net financial debt remains elevated at nearly €134 billion, but the cash-generation machine is humming. Free cash flow for the full year is expected to exceed €19.8 billion.

On the home front, the story is more nuanced. Deutsche Telekom is adding fibre-optic households at a brisk pace — 370,000 new connections in the first quarter, or 5,873 per working day — but adoption is lagging behind build-out. At the end of March, the company had roughly 2.2 million active FTTH customers, having added 0.2 million in the quarter. The take-up rate stood at 17.1%, up 1.6 percentage points from a year earlier, but chief executive Tim Höttges has made no secret of his dissatisfaction. Finance chief Christian Illek expects 750,000 new FTTH customers this year, rising to one million in 2027, as the company presses ahead with its plan to make fibre available to another 2.5 million premises in 2026.

Artificial intelligence is being deployed to narrow the gap between investment and return. Deutsche Telekom is using software to plan routes and automate quality control, trimming per-connection build costs by up to 15%. A chatbot already handling one million calls per quarter in the German business is set to double its throughput this year. Group-wide, more than 500 AI and digitalisation projects are under way, spanning customer service and network operations. The company is also touting fully booked Nvidia B200 capacity at its Munich data centre and plans an investor event in October focused on AI applications and their financial impact.

Management raised its full-year guidance modestly on the back of the quarter’s performance. Adjusted earnings per share are expected to come in around €2.20 for the 2026 financial year. Shareholders can look forward to a proposed dividend of €1 per share and a new buyback programme that will retire up to €2 billion of stock by year-end.

Goldman Sachs, meanwhile, trimmed its price target on the stock from €42 to €40, albeit maintaining a "Buy" rating. Analyst Andrew Lee cited more moderate growth outside the US and strict European regulation as constraints on valuation multiples. The company also faces near-term labour uncertainty: the next round of wage talks for roughly 60,000 employees is scheduled for 26-27 May.

Deutsche Telekom’s network reach is already impressive — 5G coverage in Germany now stands at 99% — and the €30 billion fibre capex plan through 2030 underlines its commitment to infrastructure leadership. The challenge is converting that physical reach into recurring revenue. Until the take-up rate accelerates meaningfully, the market is likely to keep the shares tethered below the levels that the US-driven earnings momentum would otherwise justify.