AMERICAN TOWER CORP /MA/ Q3 FY2026 earnings call

• Strategic Priorities: Management reaffirmed three priorities: driving durable revenue growth, enhancing operational efficiency, and disciplined capital allocation.
• Tower Business Catalysts: Identified four key drivers for future demand: the capacity phase of 5G, new spectrum deployment cycles (800 MHz expected), transition to 6G, and AI-driven traffic growth (projected to grow 3x faster than traditional traffic).
• Satellite Integration: Viewed satellite providers (e.g., Starlink) as complementary to terrestrial networks, positioning American Tower as the premier vendor for any entity building scale in the US wireless market.
• Operational Efficiency: Focused on simplifying processes and using technology/AI to improve productivity, with a goal to expand tower cash EBITDA margins by 200-300 basis points by 2030.
• Portfolio Optimization: Entered an agreement to sell the Canada business for approximately $202 million to recycle capital toward higher-growth opportunities, debt reduction, and share repurchases.
• Data Center Strength: CoreSite continues to outperform with broad-based demand across cloud, network, enterprise, and AI customers, driving increased interconnection activity.

Consolidated property revenue grew approximately 5% year-over-year (excluding non-cash straight-line and FX impacts), or approximately 7% on a cash, FX-neutral basis normalized for one-time DISH churn. Tower organic tenant buildings growth was approximately 1% overall (approximately 4% excluding DISH churn). Data center (CoreSite) cash revenue growth exceeded 16%. Adjusted EBITDA grew over 2% (excluding net straight-line and FX), or over 5% normalized for DISH churn. Cash adjusted EBITDA margins declined approximately 50 basis points year-over-year, primarily due to DISH-related churn and lower services contributions; excluding DISH churn, margins grew 10 basis points. Attributable AFFO per share grew over 1% (excluding FX), or approximately 6% normalized for DISH churn and refinancing costs.

• Property Revenue: Raised full-year outlook by $55 million at the midpoint (approx. 1% increase). Revised outlook implies over 4% YoY growth excluding non-cash/FX, or nearly 7% on a cash, FX-neutral basis normalized for DISH churn.
• Organic Tenant Buildings Growth: Reiterated expectation of approximately 1% organic growth (approx. 4% excluding DISH churn). Confirmed 2026 is expected to be a trough year for US/Canada organic growth, with acceleration expected in 2027.
• Data Center Growth: Raised outlook for CoreSite data center growth to approximately 16% YoY.
• Adjusted EBITDA: Maintained flat outlook compared to prior guidance. Expects over 2% YoY growth excluding non-cash/FX, or over 5% normalized for DISH churn.
• AFFO Per Share: Raised attributable AFFO outlook by $0.02 per share. Revised outlook implies over 3% YoY growth (approx. 6% normalized for DISH churn/refinancing costs). Confirmed 2026 is a trough year for AFFO growth, expecting a return to mid-to-high single-digit growth in 2027.
• Capital Allocation: Reduced discretionary capital spending by approx. $40 million due to timing shifts in international tower development. Board authorized additional $2 billion for share repurchases, bringing remaining capacity to approx. $3.1 billion.

• DISH Churn Impact: One-time DISH-related churn created significant headwinds, including approx. 400 basis points of pressure on organic tenant buildings growth and approx. $15 million in lower network services EBITDA contribution.
• Services Timing Shifts: Certain customer projects previously expected in H2 were delayed, reducing services revenue to approx. $220 million and impacting EBITDA.
• AT&T Mexico Reserve: Established revenue reserves of approx. $8-$10 million per quarter in 2026, totaling approx. $40 million for the year, bringing the total reserve to approx. $70 million.
• US Leasing Pace: New leasing activity is front-loaded, leading to a step-down in H2 2026, though full-year contribution remains consistent with expectations.
• Macro/Legal Uncertainties: Ongoing arbitration and mediation with DISH regarding equipment ownership and financial terms, with a ruling not expected until early 2027.

Q: Analyst asked about the step-down in US new leasing volume and engagement levels with Starlink for potential terrestrial build. / A: Rod Smith noted the step-down is consistent with front-loaded activity and expects full-year new business to contribute ~250 bps to OTBG. Steve Vondran emphasized that satellite and terrestrial are complementary, stating American Tower is the premier vendor for any large-scale US wireless entrant like Starlink, leveraging unmatched site quality and speed to market.

Q: Analyst asked about the ownership status of abandoned DISH equipment and interest from other satellite companies beyond Starlink. / A: Steve Vondran confirmed American Tower owns the equipment via bankruptcy abandonment order and can provide access to interested parties. He stated they are talking to all entities with wireless ambitions, assuming any player needing scale will explore renting/building with AT.

Q: Analyst asked about the return on capital for the ~$700M data center capex plan and drivers behind increased CrossConnects. / A: Steve Vondran explained CoreSite’s interconnection model allows curated customer mixes and pricing power. Rod Smith added that stabilized returns are expected to be mid-teens, with upside if utilization/pricing improves. Regarding CrossConnects, management attributed the increase to AI and broader ecosystem connectivity (enterprise-cloud-AI), noting it is a structural demand shift rather than lumpiness.

Q: Analyst asked about the timing delays in services revenue and whether specific customer delays (e.g., low-band spectrum approvals) impact 2027 conviction. / A: Rod Smith clarified the services pullback is due to timing shifts of specific customer projects, decoupled from organic new business trends. Steve Vondran confirmed these delays are timing-only, not expectation changes, asserting full confidence in securing both services and rental revenue once the customer builds.

Q: Analyst asked about the durability of AFFO per share growth, specifically addressing the 'trough' in 2026 and the algorithm for 2027 recovery. / A: Rod Smith detailed that 2026 reported growth is near 0% FX-neutral due to DISH (-400 bps), refinancing (-100 bps), and services (-100 bps) headwinds. Normalizing for these non-recurring items yields ~7% growth. He projected a return to mid-to-upper mid-single-digit AFFO growth driven by developed market revenue growth, emerging market outperformance, and double-digit CoreSite growth.