TELUS Q2 Earnings Call Highlights

Key Points

• TELUS is resetting its strategy under CEO Victor Dodig, cutting its quarterly dividend by 55% to C$0.1875 and targeting approximately C$2.7 billion in cash savings through 2028 for debt reduction. The company aims to reduce net leverage from 3.5x to 3x or lower by the end of 2028 and has paused acquisitions.
• Second-quarter results were pressured by a C$2.1 billion non-cash impairment at TELUS Digital, reflecting faster declines in legacy services as customers automate functions with artificial intelligence. Service revenue fell 1% to C$4.4 billion and adjusted EBITDA declined 2% to C$1.8 billion, although operating cash flow rose 15%.
• TELUS lowered its 2026 outlook, now expecting service revenue to range from flat to down 2%, adjusted EBITDA to decline 2% to 4%, and free cash flow to be approximately C$1.8 billion. Capital expenditure expectations increased to about C$2.6 billion, partly due to AI data-center investments and higher restructuring costs.

TELUS NYSE: TU outlined a transformation plan alongside its second-quarter 2026 results, cutting its dividend, reducing its financial outlook and setting a target to lower leverage as new President and CEO Victor Dodig seeks to focus the company on its core telecommunications operations.

Dodig, who became TELUS president and CEO on July 1 after previously leading CIBC, said the company will prioritize strengthening its balance sheet, tightening operational discipline and deploying capital toward profitable growth. He said TELUS expects the plan to produce minimum compounded annual free-cash-flow growth of 10% over 2027 and 2028.

“Our focus is on executing with discipline and positioning TELUS to deliver sustainable, profitable growth and returns over the long term,” Dodig said.

Dividend Reset and Deleveraging Plan

TELUS said it will reduce its quarterly dividend by 55%, to C$0.1875 per share from Oct. 1, equivalent to C$0.75 annually. The company also will end the discount associated with its dividend reinvestment plan on that date.

The company expects the dividend reset to generate approximately C$2.7 billion in cumulative cash savings through the end of 2028, with the funds directed toward debt reduction. TELUS also changed its dividend payout target to 45% to 60% of trailing 12-month free cash flow, compared with its prior target range of 60% to 75% on a prospective basis.

TELUS reported net debt-to-adjusted EBITDA of 3.5 times as of June 30, down from 3.7 times a year earlier. Its updated target is to reduce leverage to 3 times or lower by the end of 2028. The company has also placed a moratorium on acquisitions while it works toward that target.

Dodig said TELUS is pursuing sales of non-core assets and is continuing work on real estate monetization. He cited the September 2025 sale of a 49.9% stake in wireless tower subsidiary Terrion to La Caisse as an example of the company’s approach. That transaction generated C$1.26 billion in proceeds and lowered leverage by 0.17 turns, according to TELUS.

The company said it remains active in discussions involving certain non-core assets within TELUS Health and is progressing efforts to monetize core non-real-estate assets. Dodig said the company is reviewing its portfolio, including TELUS Ventures, but did not provide a specific dollar target for potential divestitures.

Second-Quarter Results Include TELUS Digital Impairment

For the second quarter, TELUS reported service revenue of C$4.4 billion, down 1% from a year earlier, while adjusted EBITDA declined 2% to C$1.8 billion. The company said underlying telecom performance was resilient, but results were affected by weaker performance at TELUS Digital and lower real estate gains.

Cash from operations increased 15%, while free cash flow rose 2% to C$545 million. Adjusted earnings per share fell to C$0.16 from C$0.22 in the prior-year period, reflecting lower operating income and the elimination of TELUS Digital’s non-controlling interest.

TELUS recorded a C$2.1 billion pre-tax, non-cash carrying-value impairment at TELUS Digital. Chief Financial Officer Gopi Chande said the writedown reflected accelerated churn in legacy services provided to certain hyperscale customers, including content moderation, ad relevancy and search-related work, as customers automate those functions using artificial intelligence.

Chande said TELUS Digital is shifting toward higher-value, more complex AI datasets, though those activities have not yet offset the pace of decline in legacy services. He also said the company reassessed the growth trajectory for AI-enabling services because customer adoption has been slower than previously expected, sales cycles have lengthened and deal sizes have compressed.

TELUS Digital’s customer experience management business, which accounts for more than half of the segment’s revenue, continued to show incremental growth through CXAI engagements, Chande said.

Telecom Operations and Revised Outlook

TELUS Technology Solutions, or TTech, posted service revenue of C$3.3 billion and adjusted EBITDA of C$1.6 billion, both relatively flat year over year. Mobile network revenue increased 1% to C$1.7 billion, marking the third consecutive quarter of growth.

Mobile net phone additions totaled 17,000, while blended mobile phone churn increased slightly to 1.08%. Postpaid churn was stable. TELUS said lower immigration and population growth have reduced the addressable market for new customer growth across the industry.

Internet net additions totaled 20,000. Fixed data revenue remained stable at C$1.2 billion, supported by 2% residential growth, though the business segment faced pressure from public-sector contract changes and revenue variability.

TELUS Health service revenue rose 4% to C$533 million, and adjusted EBITDA increased 1% to C$99 million. TELUS Agriculture & Consumer Goods service revenue grew 6% to C$90 million, driven by animal agriculture revenue.

The company cut its full-year outlook. TELUS now expects consolidated service revenue to range from flat to down 2% in 2026, compared with its prior expectation for 2% to 4% growth. Consolidated adjusted EBITDA is expected to decline 2% to 4%, replacing the prior forecast for 2% to 4% growth.

Free cash flow is now expected to be approximately C$1.8 billion for 2026, down from the prior outlook of approximately C$2.45 billion. TELUS attributed the change to lower EBITDA, higher capital expenditures and an additional C$100 million in transformation-related restructuring costs compared with its first-quarter update.

Capital expenditures are now expected to total approximately C$2.6 billion in 2026, up from a prior estimate of about C$2.3 billion. Chande said the increase reflects inflation and supply-chain effects, investment in AI data center infrastructure and customer-base management initiatives. TELUS said it remains committed to reaching a multiyear capital-intensity target of 10%.

The company plans to provide more detail on its cost-savings program and transformation initiatives when it reports third-quarter results in November.

About TELUS (NYSE:TU)

TELUS Corporation NYSE: TU is a Canadian telecommunications and technology company headquartered in Vancouver, British Columbia. It delivers a broad portfolio of consumer and business communications services across Canada, including mobile wireless, fixed-line voice, broadband internet, and television. TELUS also provides a range of enterprise services such as cloud and IT solutions, managed network services, cybersecurity and Internet of Things (IoT) offerings for business customers.

Beyond core connectivity, TELUS has expanded into health and digital services.

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