Telus Corp (TU) | The Buildout — AI Infrastructure
The Verdict
Telus Corp is a Canadian communications technology company that operates a national wireless and fibre network, digital health services, and a digital customer experience and AI business. For the AI buildout, it is converting legacy data centres in Rimouski and Kamloops into sovereign AI factories aimed at governments, hospitals, academic institutions and enterprises, with a disclosed NVIDIA partnership. At the same time, AI adoption by its hyperscale clients is removing demand for parts of its legacy TELUS Digital work, so TELUS is both an AI infrastructure participant and a business being reshaped by AI.
| Market Cap | — |
| Revenue (TTM) | $14.6B |
| Revenue Growth | +0.0% |
| EBITDA Margin (TTM) | 34.1% |
| Net Debt | $4.5B |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- FY2025 free cash flow was a record $2.2 billion, up 11% and above the annual target.
- Postpaid mobile phone churn was 0.97% for FY2025, the 12th consecutive year below 1%.
- LifeWorks synergies reached $431 million, above the $427 million target and nearly 3x the original $150 million target.
- Mobile network revenue grew 1% in Q2 2026, a third straight quarter of growth, while ARPU decline improved for a fifth straight quarter.
- The PureFibre build is expected to be roughly half self-funded through real estate monetization and copper recycling.
What We’re Watching
- TELUS Digital's second half of 2026 is expected to be weaker than the first half, after the $2.1 billion impairment.
- TELUS Health organic growth is slowing: revenue up 4% and adjusted EBITDA up 1% in Q2 2026, supported by the final Workplace Options month.
- The prior ~$2 billion 2028 AI-enabling revenue target was not restated on the July 31 call.
- Asset monetization is active but unproven: no named transaction was announced on the Q2 call.
The February 2026 thesis of broad growth, dividend continuity, and a $2 billion 2028 AI revenue target has weakened; the July 2026 reset under new CEO Victor Dodig focuses on deleveraging, core telecom, and portfolio simplification. The new management's transparency is a positive signal, but execution on cost savings, asset sales, and Digital stabilization is not yet proven. The open question is whether TELUS Digital's CXAI and complex AI data work can offset the legacy hyperscaler decline quickly enough to support the promised 10% free cash flow growth off the lower 2026 base.
Earnings Beat
In the fiscal second quarter ended June 30, 2026, TELUS reported revenue of $3.47 billion and gross margin of 14.9%. EBITDA was $517.3 million, and net income was negative $1.30 billion, reflecting the $2.1 billion pretax noncash impairment at TELUS Digital. Free cash flow was $486.3 million.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.5B | $3.6B | $3.7B | −6.3% |
| Gross margin | 14.9% | 62.8% | 63.1% | -4820bps |
| EBITDA | $517M | $1.1B | $867M | −40.3% |
| EPS | $-0.82 | $0.06 | $0.00 | −24590.5% |
| TELUS Digital pretax impairment | $2.1 billion | n/a | n/a | — |
I recognize the large reset that kind of was presented to you all this morning. I see it as a bit of an abbreviated detour.— Victor Dodig, President and CEO, July 31, 2026
Management tone: Management tone moved from the February 2026 call's continuity and confidence to a direct, reset-oriented stance on the July 31, 2026 call. The new CEO and CFO admitted the guidance miss, supplied a quantitative EBITDA bridge, and used language such as 'abbreviated detour,' 'moratorium on acquisitions,' and 'everything is really on the table.'
Management Guidance
Management revised 2026 guidance to consolidated service revenue flat to -2% and consolidated adjusted EBITDA -2% to -4%, with free cash flow of about $1.8 billion and capital expenditures of about $2.6 billion. The CFO attributed the five-percentage-point EBITDA bridge roughly two points to TELUS Digital, one to Health, one to pausing real estate joint ventures, and one to telecom, plus about 200 basis points of headwind from nonrecurring 2025 items. The leverage target moved to 3x or lower by end-2028.
Trajectory
Reported revenue fell from $3.93 billion in Q4 FY2025 to $3.59 billion in Q1 FY2026 and $3.47 billion in Q2 FY2026; Q2 FY2026 was down 6.3% year over year. Gross margin compressed to 14.9% in Q2 FY2026, and EBITDA margin was also 14.9%, as the $2.1 billion TELUS Digital impairment and weaker Digital trajectory hit the P&L. The core telecom reads more stable: management's Q2 2026 service revenue was down 1% year over year, with mobile network revenue up 1% for a third straight quarter, while Digital's H2 2026 is expected weaker than H1.
The Model
No projection published for this company. No model projection is available for this company.
The model publishes revenue and EBITDA projections only where the evidence supports them. Where it does not, nothing is shown rather than an estimate.
Looking Ahead
The next twelve months rest on the November 2026 AI data center update and continued asset monetization. Management committed to minimum 10% compounded annual free cash flow growth over 2027 and 2028, measured off the revised 2026 base of about $1.8 billion, with a new 45%–60% payout ratio starting in 2027. The October 1, 2026 dividend reset and DRIP discount removal also take effect, aimed at about $2.7 billion of cumulative cash savings through 2028.
- September 1, 2026Zainul Mawji departs TELUS — Leadership transition continues under the new CEO and simplified structure.
- October 1, 2026Dividend reset and DRIP removal — Quarterly dividend becomes $0.1875; DRIP discount eliminated.
- November 2026Q3 2026 earnings call — AI data center roadmap, economics, and potential capital partners.
- During 2026Asset monetization updates — TELUS Health, Agriculture, real estate and Ventures review processes.
- 2027New payout policy begins — 45%–60% of trailing FCF; minimum 10% FCF growth expected.
- By end-2028Leverage target — Net debt to adjusted EBITDA targeted at 3x or lower.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $14.6B | $14.8B | $14.6B | +0.9% |
| Gross Margin | 62.1% | 54.2% | 42.0% | 795bps |
| EBITDA | $5.0B | $5.5B | $38.9B | +10.2% |
| EBITDA Margin | 34.0% | 37.1% | 34.1% | +313bps |
| Net Income | $717M | $795M | −$632M | +11.0% |
| Free Cash Flow | $1.1B | $1.7B | $6.5B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)42.0%
- EBITDA Margin (TTM)34.1%
- Net Margin (TTM)-4.3%
- ROIC10.9%
- FCF Conversion29.1%
- SBC / Revenue0.5%
The Company
Telus Corp is a Canadian communications technology company operating in more than 45 countries, with more than 21 million customer connections and over $20 billion in annual revenue. It provides mobile and fixed telecom services, digital health, and digital customer experience and AI solutions. For the AI buildout, the company is converting legacy data centers in Rimouski and Kamloops into sovereign AI factories, supported by a strategic NVIDIA partnership.
After the July 2026 leadership change, TELUS now operates as a simplified structure: TELUS Communications under Dave Fuller and Global Platform businesses under Navin Arora. The company owns and operates a national wireless and PureFibre network, retains legacy data centers for AI repurposing, and continues to use its tower infrastructure after selling a 49.9% stake in Terrion to La Caisse for $1.26 billion.
Business Segments
Competitive Landscape
Management described Canadian wireless competition in February 2026 as involving 'irrational tactics.' TELUS points to FY2025 postpaid churn of 0.97%. In TELUS Digital, hyperscale clients are re-internalizing legacy content moderation and related work, making that part of the business replaceable.
Supply Chain
TELUS sits between telecom equipment and chip suppliers and Canadian consumers, businesses, health systems and government buyers.
More on TU: Earnings recap