By Telus Corporation (TSX: T) is set to release its third-quarter 2026 earnings between November 6 and 10. The stock momentum picks up around the earnings release. This time, investors seem optimistic as the stock price jumped almost 12% since October 9. There could be three things driving this rally:
- the PHP security crisis that triggered on October 21,
- the artificial intelligence (AI) stock sell-off as capital markets review the return on invested capital (ROIC), or
- a slight recovery in the stock price after a 29.5% dip since the previous quarterly earnings release.
I turned bearish on Telus in May when it announced plans to invest over $66 billion over the next five years in network infrastructure to support AI connectivity. No major AI investment surfaced after that. Such announcements are to be taken with a pinch of salt, as Telus has been going back and forth with its capital allocation strategy since 2025.
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Telus’s results are coming up
Telus had a management reshuffle in the normal course of business as the CEO and CFO retired and new management took the helm on July 1. The new CEO, Victor Dodig, isn’t a Telus veteran but a new member who joined in May 2022 as a board member. Meanwhile, the new CFO, Gopi Chande, has a 16-year stint at Telus and knows the ropes of the business. November earnings will be the first showdown of the Dodig -Chande partnership.
Three questions investors should be asking
Investors should look forward to the upcoming earnings as the new management will set the course, hopefully a stable one.
Q1. What will be the new management’s debt repayment strategy?
In the second-quarter earnings call, Dodig addressed the elephant in the room. He slashed Telus’s dividend by 55%, removed the 2% discount on the dividend reinvestment plan (DRIP), and paused dividend growth. These efforts are expected to bring $2.7 billion in cumulative cash savings in three years, which he wants to use to repay debt.
Until July 31, debt repayment was the priority. He even hinted that the company might consider selling Telus Health and Agriculture to someone who can grow these businesses efficiently and use the sales proceeds towards debt reduction.
Dodig had three months to go through his ideas and work out the math with Chande. Investors will surely be interested to know how Telus plans to reduce its debt, or if the priority has changed again. So far, the company has made no financial announcements.
Q2. The new financial targets for the medium term
Another question investors hope the upcoming earnings call will answer is its medium-term financial target – the dividend payout ratio, leverage ratio, and free cash flow (FCF) it targets to achieve by 2030. To brush up your memory, Dodig drastically slashed FCF guidance for 2026 from $2.45 billion to $1.8 billion. Telus expects to reduce its net debt to 3 times its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 2028. Earlier, this target was set for 2027. Can Telus achieve this revised target, or is more bad news in store?
Q3. What will happen to Telus’s AI commitments?
The final question that could trigger a stock price recovery is Telus’s stance on AI investments. Will the heavily leveraged telco burn more cash on AI infrastructure as the capital markets are nose-deep in AI debt?
Dodig talked about focusing on the wireless segment and AI as part of its business strategy. How the management puts these bits and pieces together in its capital strategy is what the market has been anticipating.
Telus is in desperate need of a turnaround. It was even absent from Prime Minister Mark Carney’s Investing Summit. This is probably a good sign, as peer BCE, which made AI commitments at the summit on September 15, saw its stock price fall 17.8% up to October 9.
Investor takeaway
You could consider buying Telus stock now for the short term to take advantage of the earnings momentum. However, the final decision whether to buy this stock for the long term in hopes of a turnaround is better left to post-earnings.
