Key Points

• T-Mobile shares dropped 10.75% on July 23 after the company's second-quarter report, then rose 5.67% the next day.

• Service revenue grew 9% year over year, and management raised its free cash flow guidance for 2026.

• The company expects a slower third quarter for account additions as it moves customers onto its newer rate plans.

• 10 stocks we like better than T-Mobile US ›

T-Mobile (NASDAQ: TMUS) investors saw some serious volatility last week. On Thursday, July 23, the wireless carrier reported second-quarter results in which profit came in ahead of Wall Street's expectations while revenue landed just shy of them. The stock fell 10.75% to $170.42. Then on Friday, July 24, shares turned around and rose 5.67% to close at $180.09.

Two wild sessions, one report, and a nearly $10-per-share gap between their closing verdicts. Clearly, investors are having a hard time making up their mind about the stock. With the stock now sitting about 31% below its 52-week high of $261.56, at about 14 times forward earnings, it's worth sorting out what is going on with the underlying business.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

What the selling was about

The second quarter itself held up fine. Total revenue rose about 8% year over year to $22.8 billion. Service revenue (the recurring monthly billings that matter most for a carrier) grew 9% to $19.0 billion. The company added 277,000 postpaid accounts in the period, with average revenue per account up 2% from a year ago.

The discomfort came from the outlook. Management told investors to expect only about 250,000 postpaid account additions in the third quarter, a step down from the second quarter's pace. The cause is a deliberate one. T-Mobile is migrating customers onto its newer rate plans, and it expected that shift to cost it some smaller accounts along the way as the migration plays out.

"As part of our full-year plan and guidance, we anticipated our Q3 rate plan modernization would result in a temporary elevated account churn profile," said chief financial officer Peter Osvaldik in the company's second-quarter earnings call. He noted the impact is concentrated in accounts with fewer lines, so the effect on phone customers leaving is smaller.

There is also a mild slowdown built into the revenue guide. After 9% service revenue growth in the second quarter, management expects about 6% growth in the third quarter and 8% for the full year, at approximately $77 billion.

A slightly soft revenue quarter plus a slower quarter ahead was enough for a market that had priced the stock for clean execution. That was the logic behind Thursday's selling.

The case the rebound made

But look at what management actually did with its guidance. Not only did T-Mobile hold its full-year target of 950,000 to 1,050,000 postpaid account additions (it has already delivered almost 500,000 in the first half), but it also raised its cash outlook. The company now expects adjusted free cash flow of $18.4 billion to $18.8 billion this year, an increase of $200 million at the midpoint, helped by lower cash taxes. Core adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is still expected to grow about 10% at the midpoint of its range.

The quality signals underneath held up, too. Management said more than 60% of customers on new accounts are choosing its premium plans, and that customers switching to T-Mobile carry monthly bills about 20% higher than those of customers leaving.

In other words, the quarter that spooked the market came with its profit engine intact, its full-year targets unchanged or better, and its cash forecast moving higher.

Now set that against the price. At a market capitalization of about $193 billion, the midpoint of that free cash flow guidance works out to a yield of nearly 10% on the whole company.

The stock's forward price-to-earnings ratio of about 14 also sits well below its trailing multiple of about 19, which is another way of saying earnings are expected to grow into the price quickly. For a business growing service revenue 9% and paying a 2.3% dividend yield on top, that is arguably a modest ask.

I think the rebound did. What disappointed on Thursday was slower account growth and a revenue line that still grew 8%. What didn't change was everything the investment case rests on: service revenue growth, EBITDA growth of about 10%, and a raised cash forecast. With that said, if the churn from the plan migration worsens, I'd revisit. Until then, T-Mobile looks like a growth business trading at a value multiple.

Should you buy stock in T-Mobile US right now?

Before you buy stock in T-Mobile US, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and T-Mobile US wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $390,394!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,209,184!*

Now, it’s worth noting Stock Advisor’s total average return is 899% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

*Stock Advisor returns as of July 29, 2026.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.