Telstra (ASX:TLS) Shares Drift As Buyback And Dividend Challenge Doubts

Telstra Group walked into this result with the stock under pressure, down about 10% over three months and closing today at A$4.84. The market has been treating the stock like a plodder. The earnings print told a different story with cash earnings per share up to A$0.255 and underlying earnings before interest, tax, depreciation, amortisation and leases at A$8.3b.

For a mature telecom operator that is a powerful earnings trend. The board backed it with a higher A$0.21 full year dividend and a fresh A$1b buyback. The gap between that earnings momentum and the recent share price drift is the tension investors now need to judge over the coming years.

Is Telstra Group trading like a misread income stock or a genuine value setup at a P/E of 23.9x and a share price well below the cited DCF estimate? Compare the current market price against the detailed valuation analysis for Telstra Group

FY 2026 Earnings Summary

• Revenue (FY 2026 vs FY 2025 TTM): A$23,405m vs A$23,125m (steady to slightly higher year on year)
• Net Income from Continuing Operations (FY 2026 vs FY 2025 TTM): A$2,406m vs A$2,343m (modest improvement year on year)
• Basic EPS (FY 2026 vs FY 2025 TTM): A$0.199 per share vs A$0.189 per share (around 5.5% higher year on year)
• Net Profit Margin (FY 2026 vs prior year): 9.6% vs 9.4% (slight margin expansion on a trailing basis)

Prefer clean charts over another wall of Telstra Group figures and footnotes? Get a full visual take on the stock with an at a glance view of its valuation setup in the company report for Telstra Group.

Telstra bull case: income engine backed by real cash

Bulls argue Telstra is a cash compounder that can keep lifting dividends while funding heavy networks and digital growth. The FY26 print gives that view some real backing. Cash EPS sits at A$0.255 against a A$0.21 dividend. That is a comfortable cash cover for an income stock. Underlying EBITDAaL of A$8.3b and UROIC of 9% align with the Connected Future 30 ambition for solid earnings compounding. The board has backed this with a new A$1b buyback after completing A$1.25b in FY26 at an average price of about A$5.08. Mobile service revenue growth of 4.8%, higher handheld ARPU and a 3% lift in mobile EBITDA all point to pricing power and customer resilience, supported by early Aura and digital infrastructure contracts with major hyperscalers.

Telstra bear case: outage, capex and slowing share price

Sceptics see Telstra as an ex‑growth utility with rising risk and a stretched income story. Recent trading gives that argument some footing. The share price is down about 10% over 90 days even as reported profit attributable rises 3.2% to A$2.24b and net income from continuing operations reaches A$2,406m. That gap suggests growing concern over execution and risk. The July nationwide outage and ACMA investigation create real regulatory and reputational overhang. Heavier BAU CapEx guidance of A$3.35 to A$3.65b and a higher Aura budget of about A$1.8b to FY28 both point to more cash tied up before returns are visible. Fixed consumer and small business still lose services in operation despite a 13.5% EBITDA lift, which supports worries about structural fixed‑line erosion and the need for ongoing cost cuts just to hold margins.

Access where the surface looks calm but the models start to disagree by checking what the street is really building in for Telstra Group over the next few years with the analyst estimates for Telstra Group.

Stay Ahead With Simply Wall St

If the gap between Telstra Group's recent share price drift and its cash earnings strength has your attention, register for free with Simply Wall St and add it to a Watchlist to keep an eye on price versus fair value and watch for your preferred entry point. Once you are invested, use the Portfolio Command Center to cut through noise and focus on the key updates that matter to your holdings. For a longer term view, lean on the Community to see how other investors are thinking about Telstra Group and similar stocks. By spotting potential catalysts and risks early, you give yourself a better chance of staying ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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