Deutsche Telekom's Q1 Earnings Top Forecasts as Wage Dispute Intensifies Across Germany

Deutsche Telekom has delivered a first-quarter earnings beat, lifting its full-year guidance even as a bitter tariff conflict threatens to inflate costs in its home market. The shares rose more than 3 percent on Wednesday to €28.54, partly recovering from Tuesday’s close at €27.61, but still sit roughly 17 percent below their 52-week high. The stock now trades below its 50-day moving average of €30.48, reflecting the market’s caution ahead of this week’s labour talks.

Revenue climbed to €29.9 billion, up just 0.4 percent on a reported basis owing to currency headwinds, but organic growth hit 4.7 percent. Service revenue, the most closely watched margin driver, advanced 4.6 percent organically to €25.0 billion. Adjusted EBITDA AL reached €11.5 billion, a 2.0 percent reported increase and 7.5 percent organic gain, comfortably above the consensus estimate of €11.3 billion. The group’s adjusted net profit rose 6.5 percent to €2.6 billion, though GAAP net income dropped 28.2 percent to around €2.0 billion after one-off effects in the prior-year period.

T-Mobile US remains the powerhouse. Its service revenues surged 11.5 percent to $18.9 billion, with postpaid customer accounts expanding to 34.4 million. In a move that underscores long-term efficiency gains, T-Mobile US and Ericsson have begun commercial testing of an AI-powered 5G-Advanced network. Early field trials showed a 10 percent improvement in spectral efficiency and download throughput gains of up to 15 percent — capabilities that could ease capital spending pressure without sacrificing capacity.

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Germany delivered organic revenue growth of 2.1 percent to €6.3 billion, propelled by a continuing fibre roll-out. Some 13 million households are now reachable via fibre-to-the-home, with 2.2 million customers actively using the technology. The mobile business added roughly 200,000 net new contract customers. But the domestic cost base is coming under scrutiny. Around 70,000 employees are covered by the wage negotiations, and the company serves 75 million mobile customers in Germany, so any pay increase will have a measurable impact on operational expenditure.

The dispute has already escalated. Over Monday and Tuesday, coordinated warning strikes hit 15 German states, disrupting customer service and parts of the network infrastructure. The Ver.di union is demanding a 6.6 percent salary increase over twelve months for about 60,000 tariff-bound workers, plus an annual membership bonus of €660 and a monthly training allowance increase of €120. Ver.di negotiator Frank Sauerland has said no employer offer is yet on the table, while management’s latest proposal was dismissed as “completely inadequate”. The next round of talks is scheduled in Potsdam.

Analysts remain broadly constructive, even with the labour overhang. JPMorgan and Barclays both maintain “overweight” ratings, with price targets of €40 and €39.50 respectively. The median target among 17 analysts stands at €38.12, implying a hefty upside from current levels. The stock offers a dividend yield of roughly 3.64 percent. However, the relative strength index of 77.5 suggests the shares are technically overbought after Wednesday’s rally, posing a short-term risk.

The European business outside Germany grew organically by 2.1 percent to €3.1 billion, while T-Systems booked order intake of €994 million, up 3.6 percent on an organic basis. Management now expects full-year adjusted EBITDA AL of around €47.5 billion, a slight upward revision from the prior target of €47.4 billion, with free cash flow AL set to exceed €19.8 billion. The adjusted earnings per share outlook remains unchanged at roughly €2.20. For investors, the tension is clear: a well-diversified model anchored by T-Mobile US and fibre expansion is delivering solid organic momentum, yet the domestic wage battle threatens to erode margins and keep the share price tethered below its intrinsic value.

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