# How T-Mobile US makes money

CXProWealth Business Lens · T-Mobile US (TMUS) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-28 with the SEC (accession 0001283699-26-000129): https://www.sec.gov/Archives/edgar/data/1283699/000128369926000129/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $23.6B (+7.4% on the year)
- Operating income: $5.7B (operating margin 24.0%)
- Net income: $3.5B (net margin 14.6%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $5.1B (21.5% of revenue)
- Cash conversion (operating cash flow / net income): 2.12x
- Capital expenditure: 9.6% of revenue

## Where the money goes (Q3 FY2026)

- Postpaid revenues → Total revenues: $16.3B
- Prepaid revenues → Total revenues: $2.4B
- Wholesale and other service revenues → Total revenues: $679.0M
- Equipment revenues → Total revenues: $3.9B
- Other revenues → Total revenues: $280.0M
- Total revenues → Total operating expenses: $17.9B
- Total operating expenses → Cost of goods and services sold: $8.5B
- Total operating expenses → Selling, general and administrative: $6.0B
- Total operating expenses → Depreciation and amortization: $3.5B
- Total revenues → Operating income: $5.7B
- Operating income → Total other expense, net: $1.1B
- Total other expense, net → Other expense, net: $90.0M
- Total other expense, net → Interest expense, net: $1.0B
- Operating income → Income before income taxes: $4.5B
- Income before income taxes → Income tax expense: $1.1B
- Income before income taxes → Net income: $3.5B

## Where the revenue comes from

### Products and services (Condensed Consolidated Statements of Comprehensive Income)

| Member | Value | Share |
|---|---:|---:|
| Postpaid revenues | $16.3B | 69.0% |
| Equipment revenues | $3.9B | 16.7% |
| Prepaid revenues | $2.4B | 10.3% |
| Wholesale and other service revenues | $679.0M | 2.9% |
| Other revenues | $280.0M | 1.2% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Total revenues | $23.6B | 100% |
|   Service | $19.4B | 82.2% |
|   Postpaid revenues | $16.3B | 69.0% |
|   Prepaid revenues | $2.4B | 10.3% |
|   Wholesale and other service revenues | $679.0M | 2.9% |
|   Equipment revenues | $3.9B | 16.7% |
|   Other revenues | $280.0M | 1.2% |
| Service | $3.0B | 12.8% |
| Equipment revenues | $5.4B | 23.1% |
| Selling, general and administrative | $6.0B | 25.5% |
| Impairment expense | $0 | 0.0% |
| Depreciation and amortization | $3.5B | 14.6% |
| **Total operating expenses** | $17.9B | 76.0% |
| **Operating income** | $5.7B | 24.0% |
| Interest expense, net | -$1.0B | 4.4% |
| Other expense, net | -$90.0M | 0.4% |
| **Total other expense, net** | -$1.1B | 4.8% |
| **Income before income taxes** | $4.5B | 19.3% |
| Income tax expense | ($1.1B) | 4.6% |
| **Net income** | $3.5B | 14.6% |
| Reclassification of loss from cash flow hedges, net of tax effect of $18, $16, $52 and $48 | (-$52.0M) | 0.2% |
| Gains (losses) on fair value hedges, net of tax effect of $9, $(7), $45 and $(55) | $27.0M | 0.1% |
| Unrealized gain (loss) on foreign currency translation adjustment, net of tax effect of $1, $0, $1 and $0 | $1.0M | 0.0% |
| Prior service cost, net of amortization, and amortization of actuarial gain, on pension and other postretirement benefits, net of tax effect of $(13), $0, $(14) and $(1) | -$40.0M | 0.2% |
| **Other comprehensive income (loss)** | $40.0M | 0.2% |
| **Total comprehensive income** | $3.5B | 14.8% |
| Basic (in USD per share) | $3 | 0.0% |
| Diluted (in USD per share) | $3 | 0.0% |
| Basic (in shares) | 1,070,648,134 |  |
| Diluted (in shares) | 1,071,630,434 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2008 | $2.8B | $467.8M | $149.4M | $447.5M | $954.6M | -$507.1M |
| FY2009 | $3.5B | $535.3M | $176.8M | $899.3M | $831.7M | $67.7M |
| FY2010 | $4.1B | $718.9M | $193.4M | $994.5M | $790.4M | $204.1M |
| FY2011 | $20.6B | -$4.3B | -$4.7B | $5.0B | $2.7B | $2.3B |
| FY2012 | $19.7B | -$6.4B | -$7.3B | $3.9B | $2.9B | $961.0M |
| FY2013 | $24.4B | $996.0M | $35.0M | $3.5B | $4.0B | -$480.0M |
| FY2014 | $29.6B | $1.4B | $247.0M | $4.1B | $4.3B | -$171.0M |
| FY2015 | $32.5B | $2.5B | $733.0M | $5.4B | $4.7B | $690.0M |
| FY2016 | $37.5B | $4.1B | $1.5B | $2.8B | $4.7B | -$1.9B |
| FY2017 | $40.6B | $4.9B | $4.5B | $3.8B | $5.2B | -$1.4B |
| FY2018 | $43.3B | $5.3B | $2.9B | $3.9B | $5.5B | -$1.6B |
| FY2019 | $45.0B | $5.7B | $3.5B | $6.8B | $6.4B | $433.0M |
| FY2020 | $68.4B | $6.6B | $3.1B | $8.6B | $11.0B | -$2.4B |
| FY2021 | $80.1B | $6.9B | $3.0B | $13.9B | $12.3B | $1.6B |
| FY2022 | $79.6B | $6.5B | $2.6B | $16.8B | $14.0B | $2.8B |
| FY2023 | $78.6B | $14.3B | $8.3B | $18.6B | $9.8B | $8.8B |
| FY2024 | $81.4B | $18.0B | $11.3B | $22.3B | $8.8B | $13.5B |
| FY2025 | $88.3B | $18.3B | $11.0B | $28.0B | $10.0B | $18.0B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +8.5% (year before +3.6%): accelerating
- Operating income: +1.5% (year before +26.2%): slowing
- Net income: -3.1% (year before +36.3%): slowing
- Free cash flow: +33.8% (year before +53.6%): slowing

## Operating figures stated in the filing

- Postpaid account churn: 1.1% (as of 2026-09-30). "Postpaid account churn 1.09 % 0.97 % 12 bps 1.04 % 0.94 % 10 bps" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Postpaid account churn: 1.0% (as of 2025-09-30). "Postpaid account churn 1.09 % 0.97 % 12 bps 1.04 % 0.94 % 10 bps" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Postpaid ARPA: $156 (as of 2026-09-30). "Postpaid ARPA $ 155.73 $ 149.44 $ 6.29 4 % $ 153.53 $ 148.54 $ 4.99 3 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Postpaid ARPA: $149 (as of 2025-09-30). "Postpaid ARPA $ 155.73 $ 149.44 $ 6.29 4 % $ 153.53 $ 148.54 $ 4.99 3 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Flat overhead turned 7.4% growth into 25% profit growth

Revenue rose 7.41% while operating expenses rose 2.85%, so operating income climbed 24.97% to $5.66B and the operating margin reached 24.0%.

Selling, general and administrative expense was $6,020M against $6,015M a year earlier, falling from 27.4% to 25.5% of revenue. Depreciation and amortization moved only to $3.45B from $3.41B. Total operating expenses of $17.92B were 76.0% of revenue, down 3.37 points, which is where the 3.37-point widening of the operating margin came from. _(from the filing)_
Part of the jump is a comparison effect. The prior-year quarter carried a $278M impairment of capitalized billing-system software, equal to 6.1% of that quarter's $4.53B operating income, and nothing comparable recurred. The filing also describes selling, general and administrative expense as essentially flat for the quarter only; over the nine months it rose. _(from the filing)_
Analysis: the quarter shows the fixed-cost character of a wireless network. When overhead holds still, most added revenue reaches operating income. Whether that holds depends on restructuring continuing to remove cost faster than the integration of UScellular and new fiber customers adds it. A quarter in which overhead grows in step with revenue again would show that part of this leverage was timing. _(analysis)_

### Devices cost 139% of what they bring in

Cost of equipment sales was $5.44B against equipment revenues of $3.93B: the phone is an acquisition cost repaid by monthly service bills.

Equipment revenues were $3.93B, 16.7% of revenue, up 13.39%. Cost of equipment sales rose to $5.44B from $4.85B. The filing attributes both increases to a richer high-end phone mix and higher manufacturer pricing, partly offset by fewer devices sold, mainly prepaid. _(from the filing)_
Service carries the device shortfall. Cost of equipment sales equals 33.5% of the $16.27B in postpaid revenue. Qualified customers can finance a device on an equipment installment plan, which keeps the account attached while the balance is paid down. _(from the filing)_
The filing lists higher procurement costs among its risk factors, naming tariffs and trade policy and "memory chip cost impacts on smartphones", along with dependence on key suppliers. _(from the filing)_
Analysis: because a pricier phone raises both the revenue and the cost of each device, the subsidy per customer tends to grow with the price of the phone unless promotions are trimmed. That makes the device line the first place component and tariff costs would surface in the results. _(analysis)_

### Revenue per account rose while more accounts left

Postpaid ARPA reached $155.73 from $149.44, but monthly account churn rose to 1.09% from 0.97%, so price and retention moved in opposite directions.

Postpaid revenues rose 9.32% to $16.27B, 69.0% of revenue, a share up 1.21 points. The filing attributes the gain to more average accounts, including from the UScellular and Metronet acquisitions, and to higher ARPA from fee revenue, plan changes and more customers per account. _(from the filing)_
Postpaid account churn was 1.09% a month against 0.97% a year earlier. The company attributes the rise to "higher average broadband-only accounts which have higher churn" and "the temporary impact of our rate plan modernization". _(from the filing)_
Outside postpaid, revenue shrank. Prepaid fell 7.54% to $2.43B on fewer customers and "dilution from promotional activity and rate plan mix", and wholesale and other service revenue fell 7.49% to $679M, primarily from "lower DISH and TracFone MVNO revenues". _(from the filing)_
Analysis: the company calls part of the churn rise temporary. If that is right, churn should ease as the plan changes settle. If churn stays higher while ARPA keeps climbing, the revenue gain leans on price more than on deeper relationships. _(analysis)_

### Free cash flow rose only because capital spending dipped

Operating cash flow slipped to $7.34B from $7.46B, yet free cash flow rose to $5.07B from $4.82B as capital spending fell on timing.

Capital spending was $2.27B against $2.64B a year earlier, which the filing puts down to the "planned timing of capital purchases". It took 30.9% of operating cash flow and equalled 9.6% of revenue. Free cash flow was 21.5% of revenue. _(from the filing)_
The first two quarters of the year ran at a higher pace, with capital spending of $2.62B and $2.70B. _(from the filing)_
The cash also funds shareholder returns. Diluted shares fell to 1.07B from 1.13B through repurchases, so diluted earnings per share rose to $3.22 from $2.41 while net income rose 27.3% to $3,455M. _(from the filing)_
Analysis: since the lower spending is timing rather than a cut, this quarter's free cash flow likely overstates the run rate if purchases return to the pace of the first half. _(analysis)_

### Competitive edge

- **A built network turns added revenue into profit** From FY2022 to FY2025 revenue rose from $79.57B to $88.31B while operating income nearly tripled, from $6.54B to $18.28B.
- **Postpaid accounts carry 69% of revenue** Postpaid revenue of $16.27B is 69.0% of the total, up 1.21 points, and the company now manages the business by the paying account.
- **Fiber partners build the lines, T-Mobile keeps customers** In its fiber joint ventures, partners own the network while T-Mobile owns the customer relationship and records the revenue as postpaid.

### What to watch

- **Competition already shows in rising churn** Competition heads the filing's risk list, and the filing already cites higher industry switching among the reasons more postpaid accounts left this year.
- **Interest takes 18% of operating profit** Net interest expense rose 11.58% to $1.03B, faster than revenue's 7.41%, and equals 18.2% of operating income.
- **Cybersecurity is the risk the company rewrote** The one risk factor updated this quarter covers state-sponsored attacks, legal exposure from past breaches and attackers using advanced AI tools.

## Investor view

**Overhead held flat, so a 7.4% revenue gain became a far larger jump in T-Mobile's operating profit**

### How it makes money

T-Mobile reports a single operating segment, Wireless, and earns mostly from monthly service bills. Postpaid revenue, from phone, home broadband and fiber accounts that pay after receiving service, was $16.27B in the quarter, 69.0% of total revenues of $23.58B. Prepaid customers, who pay in advance, brought $2.43B, and wholesale and other service revenue, mostly other operators' customers carried on the network, $679M. _(from the filing)_
Devices are the second line, and they are a cost of winning the bill rather than a profit source. Equipment revenues were $3.93B, 16.7% of revenue, while cost of equipment sales was $5.44B, or 138.6% of what the devices brought in. Qualified customers can finance a device on an equipment installment plan, which keeps the account attached while the balance is paid down. _(from the filing)_
Most of the cost base does not move with each added customer. Selling, general and administrative expense was $6,020M against $6,015M a year earlier, depreciation and amortization $3.45B against $3.41B, and cost of services $3.01B. What is left is operating income of $5.66B, a 24.0% operating margin, and free cash flow of $5.07B, 21.5% of revenue. _(from the filing)_
Management now runs the business by the paying account rather than by the line. This year the company "shifted away from reporting customer performance measures" to align with its "long-held priority on growing high-value accounts". The account, a household or business on one bill, is the unit it prices, bundles and measures retention against. _(from the filing)_

### What shifted

Revenue grew 7.41% while total operating expenses grew 2.85%, so operating income rose 24.97% to $5.66B and the operating margin widened by 3.37 points to 24.0%. Selling, general and administrative expense was essentially flat at $6,020M against $6,015M, falling from 27.4% to 25.5% of revenue. The prior-year quarter also carried a $278M impairment of capitalized billing-system software that did not recur. _(from the filing)_
Growth came from postpaid, up 9.32% to $16.27B, which the filing attributes to more average accounts, including from the UScellular and Metronet acquisitions, and higher postpaid ARPA of $155.73 against $149.44. Prepaid fell 7.54% to $2.43B on fewer customers and "dilution from promotional activity and rate plan mix". Wholesale fell 7.49%, primarily from "lower DISH and TracFone MVNO revenues". _(from the filing)_
Retention weakened. Postpaid account churn rose to 1.09% a month from 0.97%, which the company attributes to "higher average broadband-only accounts which have higher churn" and "the temporary impact of our rate plan modernization". Equipment revenues rose 13.39% on a richer high-end phone mix and higher manufacturer pricing, while cost of equipment sales rose to $5.44B from $4.85B for the same reasons. _(from the filing)_
Below operating income, interest expense rose 11.58% to $1,031M, equal to 18.2% of operating income, and income tax expense rose 33.29% to $1,085M. Net income rose 27.3% to $3,455M. Diluted shares fell to 1.07B from 1.13B through repurchases, so diluted earnings per share rose to $3.22 from $2.41. Operating cash flow was $7.34B against $7.46B, and capital spending fell to $2.27B from $2.64B, which the filing puts down to the "planned timing of capital purchases". _(from the filing)_

### Risks in the filing

Competition comes first in the company's list: competition, industry consolidation and changes in the market for wireless and other connectivity. The filing already cites "higher industry switching" as one reason postpaid account churn rose over the year to date, so the risk is not only prospective. _(from the filing)_
Cybersecurity is the one risk factor the company updated this quarter. It says it faces persistent attacks, including from state-sponsored groups, that two earlier attacks brought class actions, mass arbitration and an FCC investigation, and that attackers using advanced AI tools may find and exploit weaknesses faster than patches can be deployed. It adds that companies it has acquired brought their own security weaknesses. _(from the filing)_
The company names its "substantial level of indebtedness", changes in credit markets and possible rating downgrades, and the scarcity and cost of wireless spectrum, whose licenses are subject to renewal and may be revoked. Each touches the same need: the network depends on spectrum bought with borrowed money. _(from the filing)_
Costs and control round out the list. The filing names higher procurement costs from tariffs and trade policy, including "memory chip cost impacts on smartphones", and dependence on key suppliers. It also notes that Deutsche Telekom, its controlling stockholder, has interests that "may differ from the interests of other stockholders". _(from the filing)_
Three of these risks already show in the quarter's figures. Device cost pressure shows in cost of equipment sales running well above equipment revenue and growing faster than it. Competition shows in churn rising, with the company citing industry switching. Indebtedness shows in interest expense growing faster than revenue. The cyber risk shows only in continuing legal costs from past incidents, yet it is the factor the company chose to rewrite. _(analysis)_

## Founder view: mechanisms

### The device is sold at a loss to anchor the bill

T-Mobile sells phones for less than they cost and lets customers pay for them over many months. The loss on the device is an acquisition cost for a relationship that bills every month. The installment plan does a second job: while a customer still owes on a phone, leaving means settling that balance, so the device holds the account in place while service revenue repays the subsidy. _(analysis)_

### Revenue per account, not per line

T-Mobile manages to the account, the household or business that pays one bill. Each added phone line, tablet, watch or home internet connection on that account raises revenue per relationship, while the cost of acquiring, billing and serving the account grows far less. Bundling more products onto one bill is how the company raises revenue without needing a new customer for each sale. _(analysis)_

### A fixed-cost network turns growth into margin

A wireless network costs much the same to run whether it carries a little more traffic or a little less. Once it is built and integrated, each added account mostly adds revenue, so profit grows faster than sales as long as overhead is held still. This quarter shows the effect cleanly: selling and administrative cost stood still while revenue rose. _(analysis)_

### Buy a network, then remove the duplicate cost

T-Mobile grows by buying other carriers and their spectrum, moving their customers onto its own network, and closing duplicate sites, stores and systems. Revenue arrives at once; the profit arrives later, after the integration cost is spent. The Sprint merger set the pattern and the UScellular deal repeats it, with merger and restructuring costs that the company reports apart from its ongoing results. _(analysis)_

### Own the customer, rent the network

For home fiber, T-Mobile forms joint ventures with infrastructure investors who own and build the lines, while T-Mobile keeps the customer and the brand. The filing describes the strategy as "us owning customer relationships and selling fiber service under the T-Mobile brand". The capital-heavy part sits with partners; T-Mobile pays wholesale fees for network access and records the customer revenue as postpaid. _(analysis)_

## Member research

Signed-in members read, on the page: what T-Mobile US's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- T-Mobile US 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/1283699/000128369926000129/ (2026-10-28)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02