Telecom bellwether AT&T (T) may not have the most imposing track record when it comes to outperforming quarterly expectations, but today the company came through with one of its strongest reports in recent history. Buoyed by a sharp increase in wireless phone subscriptions and increasing momentum for its HBO Max streaming service, AT&T comfortably exceeded Q1 EPS and revenue expectations and registered positive top-line growth for the first time since 2Q19.

Skeptics may argue that the company’s strong performance is mainly attributable to aggressive promotional actions recently taken by AT&T, inflating subscription numbers at the cost of margins and profits. Indeed, AT&T’s offer to include free HBO streaming with select wireless plans unquestionably had an impact on the Q1 numbers. For instance, adjusted EBITDA declined by 4.7% yr/yr to $13.6 bln.

However, in our view, the overall results paint a mostly favorable and improving fundamental picture.

AT&T’s Mobility segment, which is by far its biggest segment at 43% of total revenue, experienced revenue growth of 9.4% compared to 7.6% growth last quarter. Beyond EPS and revenue, the major headline number from AT&T’s report is that the company generated 595,000 postpaid phone net adds, crushing analysts’ forecast of 216,000 adds. More importantly, AT&T vastly outperformed rival Verizon (VZ), which disclosed 326,000 wireless retail postpaid net losses in yesterday’s earnings report.

Similar to VZ, AT&T’s equipment sales surged, up 45% to $5.0 bln, as the company lapped easy yr/yr comparisons. In the year-ago period, the pandemic caused AT&T to close many of its retail stores late in the quarter, severely impacting phone and device sales.