Telstra Shares Fall Back To Test Support

Telstra shares (ASX: TLS) closed 3.2% lower today at A$4.84, despite announcing a bigger-than-expected share buyback and lifting its dividend. Markets instead focused on modest growth guidance and rising infrastructure costs, pushing the share price to within four cents of it’s 52 week low of A$4.70 intraday.

Today’s move pushes holders into negative territory YTD, down 0.62% since the start of 2026, with a 12% pullback over the past three months highlighting a shift in sentiment.

What Did Telstra Report?

Telstra’s underlying earnings before interest, tax, depreciation, amortisation and leases (EBITDAaL) rose 4% to A$8.3 billion for the year, landing precisely at the midpoint of its A$8.2-8.4 billion guidance range and matching the forecast. Reported net profit after tax increased 2.7% to A$2.4 billion, while cash earnings per share jumped 14% to 25.5 cents.

The company lifted its total dividend 10.5% to 21 cents per share, marginally ahead of the 20.9 cent consensus estimate. Underlying return on invested capital improved 0.5 percentage points to 9%, edging closer to management’s medium-term target of 10% as the company’s Connected Future 30 strategy continues to take effect.

For the 2027 financial year, Telstra provided guidance for underlying EBITDAaL of A$8.5-8.8 billion, representing approximately 4% growth at the midpoint, alongside cash EBIT of A$4.75–4.95 billion. The outlook reflects steady but unspectacular expansion in what is a mature, regulated market.

The mobile division, which accounts for roughly 44% of group income, grew revenue 3.2% to A$11.37 billion in FY26, with average revenue per user rising across all categories, brands and segments. A series of tariff increases contributed to that outcome. The complication is that some customers appear to be responding to those price increases by trading down to cheaper plans. If that persists, it introduces a ceiling on how much further pricing power can drive ARPU growth, which is the mechanism that has underpinned the mobile story for the past two years.

Buyback Fails To Stem Selling

The new A$1 billion buyback announcement represents the centrepiece of Telstra’s capital management strategy and follows the completion of a A$1.25 billion program in June. Executing the buyback at current depressed price levels will prove mathematically accretive to earnings per share and supports the company’s stated confidence in its cash generation capacity. The program also reinforces Telstra’s positioning as a defensive, yield-oriented investment, with the 21 cent dividend now implying a headline yield of approximately 4.4% at the current share price, before franking credits.

Spending To Increase

Telstra disclosed that its Aura Network intercity fibre project is now more than halfway complete, with management reaffirming expectations for a mid-teens internal rate of return and an approximately nine-year cash payback period. The long-life infrastructure asset is designed to provide wholesale capacity and support future revenue growth, particularly from the 2028 financial year onwards.

Yet the company also revealed that total strategic spending linked to Aura and related projects will now reach approximately A$1.8 billion through to FY28, up from a prior estimate of around A$1.6 billion. The increase stems largely from inflation pressures and the extension of some route construction into FY28 rather than completion by FY27 as originally planned.

The Outlook

Price Targets

The disconnect between fundamentally solid results and negative share price action points to a broader sentiment challenge facing Telstra. The company continues to execute on its stated strategy, yet markets appear to demand either a material growth acceleration or a valuation reset lower.

The analyst community has not abandoned the stock. The consensus price target sits at A$5.19, roughly 9.1% above today’s close, although today’s miss gives the bear case more traction than it has had for some time.

At current levels, Telstra trades on modest multiples relative to its earnings and cash generation, but the stock’s defensive characteristics and regulatory exposure leave it vulnerable to sector rotation and risk-off sentiment. The lack of a significant positive surprise in either the result or guidance failed to provide the catalyst needed to reverse recent weakness. It’s also likely that some positioned for an earnings beat or more aggressive guidance upgrade ahead of the announcement, leading to a sell-the-news dynamic once the numbers proved merely in-line with expectations.

On the technical side, Telstra’s share price has broken below the lower Bollinger Band of A$4.89, with the support zone at A$4.90 severely tested to the downside. The band width of around 4% indicates the stock had been trading in a fairly compressed range in the lead-up to results, which makes the magnitude of today’s move more significant as a sentiment signal.