Analysts say BT is quietly becoming a cash machine
Key Points
- BT guides to normalised free cash flow of £2 billion this year and £3 billion by the end of the decade
- Capital expenditure falls by more than £1 billion from FY26 levels as the fibre build completes
- Quilter Cheviot's Matt Dorset called the results in line to slightly positive, with revenue 0.6% ahead of consensus
- Business division revenue stabilised, with new contracts from Scottish Water and Royal Mail
- Dorset said BT's free cash flow yield makes it an intriguing stock as capex peaks
Analysts say BT’s slowing fibre build is about to unlock a surge in free cash flow, with the group guiding to £2 billion this year and £3 billion by the end of the decade.
BT published its results for the three months to 30 June 2026 on Thursday (23 July), holding revenue flat at £4.3 billion and reconfirming all of its financial guidance.
Matt Dorset, Equity Research Analyst at Quilter Cheviot, said BT produced a solid update that landed in line to slightly positive across the board. He noted revenue came in 0.6% ahead of consensus, while earnings fell 1% but beat market expectations and would have been flat excluding one-offs in last year’s comparator.
The investment case centres on capital expenditure. BT has spent years pouring money into its full fibre rollout, and that build is now approaching its finish line. The network passed 23.4 million premises in the quarter, with the 25 million target due by December 2026.
Dorset said the fibre rollout has started to slow as BT nears its target, and that this slowing build will support expanding free cash flow. He pointed to strong penetration, with 574,000 fibre net additions in the quarter and a take-up rate of 40%.
The capex cliff
Capital expenditure excluding spectrum sits at £4.2 billion to £4.3 billion this year, and the group expects it to fall by more than £1 billion from that level over the medium term as the fibre build completes.
Normalised free cash flow follows the opposite path, from around £2 billion this year to around £3 billion by the end of the decade.
BT has committed to low-to-mid single-digit dividend growth until its credit metrics reach levels consistent with a BBB+ rating, after which it says residual cash flow becomes available for enhanced distributions.
Dorset said the valuation continues to remain attractive, and that an increasingly attractive free cash flow yield as capex peaks makes BT an intriguing stock for investors to consider.
The quarter also showed progress in BT’s long troubled Business division. Dorset described the segment as a problem child that is starting to stabilise, with flat revenue and earnings down 7% but better than expected. BT signed new connectivity contracts with Scottish Water and Royal Mail in the period.
Elsewhere, BT’s proposed joint venture with Verizon moved its International division into discontinued operations, sharpening the group’s focus on the UK. Reported profit before tax for continuing operations fell 4% to £505 million on higher finance costs, while adjusted EBITDA slipped 1% to £2 billion.
