Deutsche Telekom’s Q1 Cash Flow Surges 5.7B, But Net Profit Drops 28% — A Tale of Two Quarters

Deutsche Telekom's Q1 net profit plunged 28% to €2bn on restructuring costs, yet adjusted EBITDA rose 2% and free cash flow hit €5.7bn. Management raised full-year guidance despite slow fibre uptake at 17%.

Deutsche Telekom kicked off 2026 with a set of results that paint a decidedly mixed picture. While the group’s operational engine powered ahead on the back of its US arm, bottom-line earnings took a sharp hit. The Bonn-based telecoms giant booked a 28% fall in net profit to €2bn in the first quarter, dragged down by restructuring costs at T-Mobile US and one-off items that flattered the prior-year comparison.

Revenue edged up to €29.9bn, a modest 0.3% headline increase that belies organic growth of 4.7%. The adjusted EBITDA AL — the company’s preferred measure of operating profitability — rose 2% to €11.5bn, and organically gained 7.5%. Free cash flow AL came in at €5.7bn during the period, underlining the group’s ability to generate cash even as it pours money into network expansion.

That cash generation is financing an aggressive fibre build in Germany, where the company now reaches 13m households with a direct connection. Yet the uptake remains sluggish: only 2.2m households had an active fibre line by the end of March, representing a take-up rate of roughly 17%. The performance trails that of rival Deutsche Glasfaser, which has signed up 2.8m households and sees a utilisation rate of around 30%. The domestic telecom business generated €6.3bn in revenue, up 2.1% on an organic basis.

Despite the muted fibre adoption, management raised its full-year guidance after the strong quarter. The group now expects adjusted EBITDA AL of around €47.5bn for 2026, up from its earlier target. Free cash flow AL should exceed €19.8bn, also slightly increased from prior forecasts. On the customer front, Deutsche Telekom now anticipates adding between 950,000 and 1.05m new contract customer accounts in 2026 — 50,000 more at both ends of the previous range.

The stock, however, continues to trade well below its peak. Shares were hovering around €27.86 on Friday, down roughly 14% over the past twelve months and nearly 19% below their 52-week high of €34.25. Chart watchers note that the €29 mark presents formidable resistance; a sustained break above that level would be needed to shift the technical picture.

Analysts remain broadly bullish on valuation grounds. Deutsche Bank reiterated a buy rating with a €42 price target. Goldman Sachs trimmed its target from €42 to €40 but kept a buy recommendation. The DZ Bank also lowered its fair value estimate while maintaining a positive stance.

In early May, the company opened a flagship store in Dortmund spanning two floors and roughly 350 square metres. The outlet leans heavily on digital experiences, featuring an AI avatar dubbed “MIA”, and puts fibre products front and centre — a strategic priority management expects will help drive take-up in the quarters ahead.