Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 31, 2026 · Beat 4 of last 7 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
TELUS's revised guidance and dividend reset reflect a telecom operator navigating a softer demand environment while pivoting capital toward AI infrastructure, including sovereign data centers. The $2.1B impairment at TELUS Digital highlights the accelerating automation of legacy CX services by hyperscalers, a signal of AI's disruptive impact on traditional outsourcing. TELUS's continued investment in AI data centers and network upgrades supports the broader AI infrastructure buildout in Canada.
TELUS reported Q2 consolidated service revenue of $4.4B, down 1% YoY, and adjusted EBITDA of $1.8B, down 2%, with telecom stable but TELUS Digital weaker. The company recorded a $2.1B impairment on TELUS Digital due to faster-than-expected automation of legacy services by hyperscale clients. TELUS Health grew service revenue 4% and adjusted EBITDA 1%, while Agriculture & Consumer Goods grew 6%. Free cash flow was $545M, up 2% YoY. Management also announced a dividend reset and a moratorium on acquisitions.
Management introduced a transformation strategy centered on three priorities: strengthening the financial foundation, honing operational discipline, and deploying resources for profitable growth. They reset the dividend to $0.75 annually (down 55%) to accelerate deleveraging, targeting net debt to adjusted EBITDA of 3x or lower by end of 2028 (pushed from 2027). They committed to minimum 10% compounded annual free cash flow growth over 2027-2028. 2026 CapEx was raised to ~$2.6B (from ~$2.3B) due to inflation, AI data center investments, and customer base management. Management expects to provide a detailed cost savings program and further portfolio updates on the Q3 call in November.
“We expect this plan to deliver minimum compounded annual free cash flow growth of 10% over 2027 and 2028. This is the number I'm holding myself and our team accountable to.”
on Free cash flow growth commitment
“We are moving with clarity, and we're moving with urgency, and I'm confident, very confident in the ability of our team to deliver.”
on Transformation execution
“While demographic headwinds, including population growth and lower immigration levels, have meaningfully reduced the addressable market for new customer growth, we're encouraged by what we're seeing in the wireless competitive environment.”
on Wireless market conditions
Can you unpack the adjusted EBITDA guidance revision by segment? And what's new or different about the asset portfolio review?
Victor explained the portfolio review is about nurturing good businesses and monetizing those better off with other owners, with active processes underway. Gopi broke down the ~5 percentage point EBITDA revision: 2 points from TELUS Digital, 1 from Health, 1 from pausing real estate JVs, and 1 from telecom. Telecom is stable H2 vs H1, but TELUS Digital H2 is weaker than H1.
Is the 10% free cash flow growth commitment off the new $1.8B base? And how much capital are you willing to invest in AI?
Gopi confirmed the commitment is off the 2026 base, with EBITDA growth and CapEx reduction driving it. Victor discussed AI investments, emphasizing using capabilities within existing businesses and partnering on data center capital to avoid increasing CapEx, with more details in Q3.
There seems to be a conflict between simplifying the business and keeping ag and health as core. And how will you get the troops to focus on profitable growth differently?
Victor said there is no conflict, and the portfolio will look more simplified in 12 months. He emphasized a mindset shift toward profitable growth, protecting the premium brand while using flanker brands to compete at the low end, and incenting teams to build multiproduct relationships.