Telstra rewards shareholders with $1bn buyback and bigger dividend despite revenue slip

Telstra (TLS) rewarded shareholders in its FY26 results despite a small dip in revenue, announcing a $1 billion share buyback, a full year dividend up 10.5% and underlying earnings near the top of guidance. 

“We increased investment in our network and delivered ongoing earnings growth, reflecting momentum across our business, and disciplined cost control and capital management,” said CEO Vicki Brady.

Despite the positive announcements, the company went through significant upheaval this year. A major network outage led the board to dock Brady’s pay, though her total remuneration still grew to $6.8 million.

But not all Telstra workers had it so good. 1,200 roles were shed across the business through an enterprise restructure, a divestment, and cuts to its consumer division, all of which supported the company’s earnings growth. 

The market response so far is not positive with shares down 4.8% to $4.76 in early trade. 

Telstra FY26 results in focus

• Underlying EBITDAaL (aL = after leases): $8.3bn, up 4% — near the top of the $8.2bn-$8.4bn guidance range and in line with Morgans' ~$8.3bn forecast

• Total dividend: 21 cps, up 10.5% vs 20.9 cps ests (in line)

• Reported net profit after tax (NPAT): $2.4bn, up 2.7%

• Group revenue: $22.9bn, down 0.8% year-on-year

• Underlying NPAT: $2.5bn, up 4.9% year-on-year

• New on-market buyback: up to $1bn, on top of the $1.25bn completed in June — running ahead of Bell Potter's ~$750m FY27 estimate

Those job cuts helped support the result with the company framing the reductions as “disciplined cost control”. Underlying operating expenses fell 3%, feeding through to positive operating leverage and the 4% lift in underlying earnings.

Telstra lifted mobile prices during the year to help fund network investment, pushing average revenue per user (ARPU) higher across postpaid, prepaid and mobile broadband. That drove mobile services revenue up 4.8%, the main engine behind the earnings growth, while cost-of-living support measures were expanded alongside the increases. 

The result was overshadowed by the July network outage, which downed mobile services, trains and payment systems across the country. Brady was conciliatory in her commentary on the failure, noting: "When our network fails, the impact is real, and we're deeply sorry for the disruption the incident caused."

FY27 and beyond

Here is the guidance for FY27 from management:

• Underlying EBITDAaL: $8.5bn to $8.8bn (up 1.9-5.5% on FY26)

• BAU capex: $3.35bn to $3.65bn (up from $3.36bn), with a lift in network investment

• Cash EBIT: $4.75bn to $4.95bn (up from $4.66bn)

• Strategic investment: $0.2bn to $0.3bn (down from $0.46bn)

Management framed FY27 around delivering on Connected Future 30, its five-year strategy to FY30, built on growing cash earnings, lifting return on invested capital and keeping costs growing slower than income. It will stay disciplined on costs and capital allocation and keep its focus on productivity, simplification and positive operating leverage, while continuing to invest in network resilience and growth, including lessons from the July outage.

On the numbers, management expects continued underlying EBITDAaL growth in FY27, within the $8.5 billion to $8.8 billion range, with higher business as usual (BAU) capex reflecting increased network investment to support its network leadership and ongoing growth.

Much of that is flowing into the Aura Network, Telstra's main growth project and a new high-capacity fibre network linking Australia's major cities, the backbone carrying data across the country. Telstra is renting capacity on it to the tech giants building Australia's AI and cloud infrastructure, with long-term deals signed with Google, Amazon Web Services, Microsoft and Firmus. It's over halfway built, and Telstra expects it to earn around 14-16% a year on a roughly nine-year payback.

The bottom line

Telstra heads into FY27 needing to keep pulling the same two levers that carried this result: price and cost. With most subscriber growth coming from lower-value wholesale and prepaid, sustaining ARPU gains without pushing customers out the door remains a challenge. 

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