Telefonica SA (TELFY) Q2 2026 Earnings Call Highlights: Strong Growth in Spain and Brazil Amid …

Brazil

On Jul 29, 2026

This article first appeared on GuruFocus.

Free Cash Flow: EUR611 million in the quarter, EUR278 million more than the previous quarter.
Net Financial Debt: Reduced to EUR25.3 billion.
Adjusted Operating Cash Flow After Leases: Upgraded guidance from over 2% to over 3% for 2026.
Service Revenue Growth: 1.0% in the first half of the year.
Adjusted EBITDA Growth: Accelerated year-on-year growth in Spain and Brazil.
Revenue Growth in Spain: 2.9% year-on-year.
Adjusted EBITDA Growth in Spain: 2.3% year-on-year.
Adjusted Operating Cash Flow Growth in Spain: 3.7% year-on-year.
Revenue Growth in Brazil: Ahead of inflation with strong commercial execution.
Adjusted EBITDA Growth in Brazil: 11% year-on-year.
Adjusted Operating Cash Flow Growth in Brazil: 18% year-on-year.
Revenue Decline in Germany: Over 11% year-on-year, mainly due to lower handset sales.
Adjusted EBITDA Trend in Germany: Improved to minus 7.2%.
Net Debt-to-EBITDA Ratio: 2.78 as of June 2026.
Interest Cost Payments: Decreased from 3.23% to 2.95% over the last 12 months.

Release Date: July 29, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Telefonica SA (TELFY) reported strong execution in the second quarter, delivering consistent and resilient growth across its strategic roadmap.
The company achieved year-on-year growth in adjusted EBITDA and adjusted operating cash flow after leases at the group level, particularly in Spain and Brazil.
Free cash flow reached EUR611 million in the quarter, showing a significant increase of EUR278 million from the previous quarter.
Telefonica SA (TELFY) has further deleveraged, reducing net financial debt to EUR25.3 billion, and improved its operating leverage.
The company upgraded its 2026 guidance for adjusted operating cash flow after leases from over 2% to over 3%, reflecting confidence in its financial performance.

Negative Points

Telefonica SA (TELFY) expects to be at the low end of its revenue growth range due to weakness in handset sales, particularly in Germany.
The company faces challenges in the German market with a decline in revenue over 11% year-on-year, mainly due to lower handset sales.
Despite maintaining adjusted EBITDA guidance, Telefonica SA (TELFY) is cautious about the timing and execution of its transformation plan in Germany.
The competitive environment in Spain remains intense, particularly in the lower value segment, which could impact future growth.
Telefonica SA (TELFY) is dealing with high leverage in its UK operations, with a focus on deleveraging to reach a more sustainable range.

Q & A Highlights

Q: Can you discuss the competitive intensity in the Spanish market and your expectations for service revenue growth in the second half of 2026? A: Emilio Gayo Rodriguez, CEO, explained that Telefonica expects similar competitive trends in the Spanish market for the next quarter. The company has strong assets that allow it to compete well across all segments, particularly in high-value areas. They are confident in sustaining growth in B2C and see better trends in B2B, with new revenue streams from cybersecurity and cloud services. Overall, they expect improved results in H2 compared to H1.

Q: Why is there no increase in EBITDA guidance despite strong performance in H1? A: Emilio Gayo Rodriguez, CEO, stated that while they expect improved trends in Germany and strong performance in Spain and Brazil, they are being prudent and maintaining flexibility due to the ongoing transformation plan in Germany. They aim to finish the year at the high end of the guidance range but want to ensure they can adapt to any unforeseen challenges.

Q: How does Telefonica view potential asset sales or third-party financing to address leverage in the UK market? A: Juan Azcue Vich, Chief Strategy & Development Officer, emphasized that VMO2 is a strategically important asset, and both Telefonica and Liberty are committed to deleveraging. They are exploring both organic and inorganic options to increase free cash flow and reduce leverage, with no immediate need to access the market due to no significant maturities until 2029.

Q: What are Telefonica’s plans regarding data centers and data sovereignty? A: Marc Murtra, CEO, explained that Telefonica exited the data center business some years ago and is not currently focusing on it within their Transform and Grow plan. However, they are involved in the Spanish consortium for a European Commission project related to data centers and are working on edge nodes and AI capabilities to support industrial ecosystems.

Q: Can you provide insights into the competitive environment in Brazil and expectations for the second half of the year? A: Emilio Gayo Rodriguez, CEO, noted that the competitive environment in Brazil remains stable, with no significant changes expected. Telefonica Brazil, Vivo, has demonstrated strong performance in mobile and fixed revenue, and they are confident in maintaining this despite potential market changes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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