Mobile giant AT&T is preparing to pay millions of dollars to current and former customers to settle a class action lawsuit over a pair of massive data breaches.

A judge has granted preliminary approval for a settlement that will hand $177 million to people affected by the breaches.

The first breach is believed to have happened back in 2019, with hackers stealing sensitive data from 7.6 million current and 65.4 million former customers.

Although AT&T believes the data may have been taken from one of its vendors, the firm has acknowledged that data including customers’ social security numbers, names and dates of birth was exposed.

The second breach happened last year, when hackers breached the company’s Snowflake cloud workspace environment, stealing smartphone call and text metadata of nearly 110 million customers from May of 2022 to October of 2022.

People who can prove they suffered financial damages as a result of the data breaches will likely receive a larger share of the payout.

At time of publishing, affected customers are expected to receive notice of eligibility by mail or email, with the claims process coming in August.

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Nearly every company that’s even remotely related to the tech industry is betting that artificial intelligence (AI) will be a key driver of their business in the coming years. This is giving investors a lot of choices when it comes to picking an AI stock.

Two companies that have seen their share prices surge recently and are no doubt on some investors’ AI stock short lists are telecommunications giant AT&T (T 0.83%), which is critical to connecting AI devices to the internet, and AI data analytics company Palantir Technologies (PLTR 0.97%).

Here’s how the two companies stack up in the AI space.

Image source: Getty Images.

How both companies are taking advantage of the AI demand

AT&T may not be the first company you think of when you’re thinking about AI stocks, but the telecom’s massive wireless internet infrastructure is a key component to advancing AI services. For example, AT&T’s ultra-fast 5G networks are used for AI-powered tech like autonomous vehicles.

Internet-enabled devices are becoming more powerful and more useful with AI, making fast and reliable internet connections even more important to powering AI assistants and other services. AT&T also works with tech giants, including Alphabet‘s Google and Microsoft, to establish edge network computing services that ensure AI and other services work well in specific locations.

But while AT&T helps with the connectivity of AI devices, Palantir is an actual artificial intelligence company. Palantir sells AI-powered analytics services and has grown rapidly as the U.S. government and private companies have clamored for its services.

Using AI to power analytics can help with everything from defense and military operations to managing supply chains and monitoring the electric grid. This wide application of services means that Palantir has a total addressable market of $1.4 trillion, according to Morningstar data.

Which company is growing faster?

It should come as no surprise that Palantir is growing much faster than AT&T. As a large, established telecom, there’s only so much sales growth AT&T can experience.

AT&T’s sales rose 2% in the first quarter to $30.6 billion, and non-GAAP (adjusted) earnings increased 6% to $0.51 per share. The company’s management forecasts free cash flow of $16 billion for 2025 and adjusted earnings per share of $2.02, at the midpoint of guidance.

Meanwhile, Palantir’s revenue spiked 39% in the first quarter to $884 million, and adjusted earnings rose 62% to $0.13 per share. Palantir is profitable, which not many young AI start-ups can claim, and the company actually raised its outlook for this year, in contrast to the many companies that have pulled their outlooks for 2025. It now expects full-year sales to increase 36% for the year, up from its previous estimate of 31%.

Palantir is the clear winner

AT&T’s telecom services are important to many AI companies, but Palantir is the better AI pure play. Its AI analytics revenue is growing fast, the company is profitable, and it’s tapping into a massive market that’s just getting started.

But before you mash the buy button in your brokerage app, it’s important to mention that while Palantir is the better AI stock in this matchup, it’s also very expensive. Palantir’s trailing price-to-earnings ratio is an astronomical 546. Compare that to the S&P 500‘s P/E multiple of 24 and Nvidia (another major AI stock) at just 45.

This means that if you’re considering buying Palantir stock, you might want to wait for its share price to dip a bit or start with just a small position. The stock’s massive gains over the past couple of years have pushed its valuation so high that it’s hard to justify the premium.

That doesn’t mean Palantir’s stock won’t continue to gain ground, but investors need to know that they’re paying an extremely high price for the stock if they buy now.

AT&T (T 0.30%) shareholders have plenty to celebrate, with the stock up 24% thus far in 2025. The telecommunications giant has presented robust earnings, reinforcing an optimistic long-term outlook. The stock’s impressive performance is an outlier next to the 3% decline in the S&P 500 index year to date. As such, AT&T has emerged as a reliable source of stability amid the broader stock market volatility that’s causing concern about the strength of the U.S. economy.

Can AT&T’s record-setting rally continue, or is it time to hang up the phone? Let’s discuss where the stock could be headed one year from now.

Operating and financial momentum into 2025

It’s been nearly three years since AT&T completed one of the largest restructuring efforts in its history — spinning off the WarnerMedia group in 2022. The deal marked a pivot away from the media and entertainment business, allowing the company to refocus efforts on its core telecom strengths. This strategic pivot has proven successful. Today, AT&T carries far less debt and generates more durable cash flow, gaining the flexibility to invest in growth areas like 5G and fiber optics infrastructure.

For the full year ended Dec. 31, AT&T’s wireless service revenue grew 3.5% year over year, driven by the addition of 1.4 million net postpaid subscribers coupled with gradual price hike initiatives. Broadband services saw even stronger momentum, with annual revenue rising 7.2%, led by an 18% surge in fiber revenues compared to 2023.

AT&T notes that approximately 40% of its fiber customers also have a wireless plan, up from 35% in 2021. This trend highlights its ability to cross-sell services and deepen customer relationships within a highly valuable and loyal subscriber base.

Image source: Getty Images.

For 2025, AT&T expects further growth while setting a free-cash-flow target of at least $16 billion, an increase of $700 million compared to 2024. This figure excludes the company’s remaining stake in DIRECTV, which AT&T has agreed to sell, receiving an additional $7.6 billion in cash when the deal closes, expected to close in the second half of the year.

Perhaps even more significant is the growing confidence in the sustainability of AT&T’s quarterly dividend, which remains at $0.28 per share, offering a yield of 3.9%. The annualized dividend payout ratio represents approximately 55% of the company’s 2025 earnings per share (EPS) guidance of $1.97 to $2.07. Additionally, AT&T has announced plans to move forward with a $10 billion share repurchase, reaffirming its commitment to reward shareholders.

Some reasons for caution

AT&T and the telecom industry offer defensive positioning in today’s market. Given the utility-like importance of wireless services and internet connectivity, it’s expected that AT&T’s business should be relatively insulated from an economic slowdown. For investors, the stock could offer some relief next to other sectors facing disruptions due to trade tariffs being implemented by the Trump administration.

Ultimately, the bullish case for the stock is that AT&T continues to generate high-quality cash flows and stable earnings regardless of how the U.S. economy evolves. Investors seem to agree given the ongoing share price rally.

That said, investors now face the challenge of weighing its pricey valuation. AT&T shares are trading at 13.3 times its estimated 2025 EPS as a forward price-to-earnings (P/E) ratio, a significant jump from last year’s bargain-level multiple below 8. Compared to rival Verizon Communications, with a forward P/E of 9.6 and a higher 6% dividend yield, AT&T commands a premium that has become harder to justify, which could limit the stock’s upside.

T PE Ratio (Forward) data by YCharts

My prediction for AT&T stock

Weighing the pros and cons of an investment in AT&T, which appears expensive to me, I believe the stock is a hold right now. A repeat of the massive return from recent months is unlikely, but I predict shares will be trading at a modestly higher price by this time next year. Ultimately, investors sitting on the sidelines may find other stocks with better value and more upside elsewhere in the market.

While much of the investing world has been focused on artificial intelligence, one under-the-radar stock winner over the past year has been AT&T (T -0.08%). Shares of the telecom giant are up by more than a third in the past 12 months. The stock got another boost after the company posted solid fourth-quarter results and indicated it would implement a big buyback.

Let’s take a closer look at AT&T’s Q4 results to see if the stock is still a buy.

Solid subscriber growth and a big buyback ahead

AT&T continues to see solid subscriber growth in its wireless and broadband businesses, helped by its bundling strategy. In the fourth quarter, it added 839,000 retail postpaid subscribers, including 482,000 retail postpaid phone additions. However, it lost 119,000 prepaid subscribers, as this segment continues to feel the aftermath of the end of the Affordable Connectivity Program (ACP) last spring.

Overall mobility segment revenue increased 3.3% to $23.1 billion. Mobility service revenue and equipment sales each rose by 3.3% to $16.6 billion and $6.6 billion, respectively. Postpaid phone average revenue per subscriber (ARPS), meanwhile, rose 0.9% to $56.72.

Turning to broadband, AT&T added 307,000 fiber subscribers and 158,000 internet air subscribers. The company lost 184,000 non-fiber subscribers as they continued to switch to faster options. Broadband ARPS jumped by 6.2% to $69.69, while fiber ARPS climbed 4.7% to $71.71. Total consumer broadband revenue rose 3.4% to $3.5 billion, while fiber revenue climbed 7.8% in the quarter to $2.9 billion.

On the downside, AT&T’s business wireline segment saw a 10% decline in revenue to $4.6 billion. The segment flipped from an operating profit of $165 million in Q4 of last year to a loss of $211 million this year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the segment sank 22% to $1.2 billion.

Total revenue edged up 0.9% to $32.3 billion, while adjusted earnings per share (EPS) was unchanged at $0.54. The results topped analyst expectations for adjusted EPS of $0.50 on revenue of $32 billion, as complied by LSEG.

For the year, AT&T generated $18.5 billion in free cash flow in the quarter and paid out $8.2 billion in dividends. The stock currently has a forward dividend yield of about 4.7%. AT&T has held its quarterly dividend, about $0.28, steady since May 2022.

In its release, AT&T said it would spend some $40 billion on dividends and buybacks over the next three years. It has $20 billion pegged toward buybacks and $20 billion toward dividends. It earlier hinted it could possibly raise its dividend, noting it should have an additional $10 billion that could go toward additional dividends, buybacks, or investments. Buybacks are planned to begin in the second half on 2025.

For 2025, the company is looking for full-year revenue growth to be in the low single digits with mobility service revenue growing by 2% to 3% and broadband revenue growing by mid-teens. It expects adjusted EBITDA to grow by about 3% and adjusted EPS of between $1.97 to $2.07, which would be down from $2.26 in 2024. It forecast free cash flow to be more than $16 billion.

It plans to spend around $22 billion modernizing its wireless network and expanding its fiber offering. It plans to exit its copper network by 2029. It’s also looking to save $3 billion a year in costs by the end of 2027.

Image source: Getty Images.

Is AT&T stock still a buy?

While AT&T and Verizon Communications (VZ -0.47%) have been putting up similar results, AT&T stock has been nicely outperforming. It’s done a nice job of adding wireless and broadband subscribers, as its investments in 5G and fiber have been paying off. It continues to build out its fiber network to pass through more homes, which is driving growth.

Similar to Verizon, it is also seeing weakness in its business wireline segment, as well as with prepaid subscribers. Like Verizon, it also generates a lot of free cash flow. The company appears set to direct most of its excess cash toward buying back stock. Verizon, meanwhile, is in the midst of a large acquisition of Frontier Communications.

AT&T’s strong stock performance has vaulted it ahead of Verizon in terms of valuation, with it now having a forward price-to-earnings (P/E) multiple of about 11.4 based on 2025 earnings estimates. That compares to a forward P/E of 8.5 for Verizon. Historically, Verizon has had the higher multiple.

T PE Ratio (Forward) data by YCharts

AT&T has been doing a nice job, but because of the valuation gap I currently prefer Verizon. The two companies’ operational results have been quite similar recently, but investors seem to prefer AT&T’s capital allocation moves more than Verizon’s.

Both stocks, however, look to be solid long-term investments with steady business models that generate a lot of free cash flow.