Owning shares in Australia’s telecommunications giant, Telstra Group Ltd (ASX: TLS), could prove to be a shrewd long-term investment. Analysts are anticipating a sustained period of profit growth for the company, a key driver for both a rising share price and a more substantial dividend payout. For investors focused on building passive income, understanding the trajectory of a company’s net profit is paramount, as it underpins the ability to sustainably increase dividend payments.
Let’s delve into the projected financial performance of Telstra over the coming years, as outlined by market analysts.
Recent Performance: A Strong Half-Year Result
Telstra recently unveiled its results for the first half of the 2026 financial year, showcasing notable improvements across several key metrics. The company’s mobile division, a significant contributor to its revenue, experienced a 4% uplift, reaching $5.8 billion. This translated into a 4% increase in mobile operating profit (EBITDA), hitting $2.7 billion.
Several factors contributed to this mobile segment strength:
- Mobile Service Revenue Growth: A healthy 5.6% increase in mobile service revenue was driven by strategic price adjustments for handheld devices and a rise in wholesale user numbers.
- Average Revenue Per User (ARPU) Expansion: Telstra saw impressive ARPU growth across its mobile offerings:
- Postpaid handheld ARPU climbed by 4.8%.
- Prepaid handheld ARPU surged by a remarkable 14.7%.
- Wholesale ARPU saw a solid 7% increase.
- User Base Expansion: The total number of mobile handheld users grew by 135,000. This growth was distributed across:
- A 16,000 increase in postpaid retail customers.
- A 21,000 increase in prepaid retail customers.
- A substantial 98,000 increase in wholesale users.
This robust performance in the mobile sector buoyed the company’s overall financial results. Total income grew by 0.2% to $11.8 billion, EBITDA saw a 4.7% increase to $4.4 billion, and net profit experienced a significant 9.4% jump to $1.1 billion. Furthermore, cash earnings per share (EPS) rose by 19.7% to 14 cents, and the dividend per share was boosted by 10.5% to 10.5 cents.
Brokerage firm UBS acknowledged Telstra’s strong performance, particularly highlighting the resilience of its mobile business and its effective cost management strategies, even as other business segments faced some headwinds.
Analyst Outlook: Growth Projections to 2030
UBS maintains a positive outlook on Telstra’s growth prospects, forecasting that cash operating profit (EBIT) could achieve a compound annual growth rate (CAGR) of 5% over the next four years. This anticipated growth is expected to be fuelled by CPI-linked price increases in its mobile offerings and ongoing cost efficiencies, partly driven by AI-powered productivity gains.
While segments like fixed enterprise, active wholesale, and international operations showed some weakness compared to UBS’s initial expectations, the company’s rigorous cost control measures are providing a crucial offset, supporting operating profit.
FY26 Projections and Margin Expansion
UBS anticipates continued margin expansion for Telstra. Near-term initiatives are expected to keep cost growth constrained to a CAGR of approximately 1.5% over the next four years. This cost management is being bolstered by several factors:
- Workforce Adjustments: Telstra has indicated up to 650 redundancies, representing around 1.5% of its workforce, aiming to streamline operations.
- Supplier Consolidation: Benefits are expected from consolidating software and IT providers.
- Joint Ventures: A collaboration with Accenture is designed to drive cost reduction and accelerate product development timelines.
The brokerage firm forecasts that Telstra’s group EBITDA margin could expand by an average of 60 basis points (0.60%) annually from FY26 to FY30. This expansion is largely attributed to increasing efficiencies as the company adopts and integrates artificial intelligence technologies.
Factoring in these projections, UBS predicts that Telstra could generate a net profit of approximately $2.3 billion in FY26. Historically, consistent growth has been a positive indicator for Telstra’s share price performance.
FY27: Continued Profitability Gains
Building on the positive momentum, Telstra is projected to see its EBIT margin continue to climb in the coming years. UBS anticipates the EBIT margin could reach 18% in FY27, an increase from the projected 17.4% in FY26. This suggests a steady improvement in the company’s profitability.
For the 2027 financial year, the net profit is forecast to reach $2.45 billion.
FY28: Further Profit Growth Expected
The 2028 financial year looks set to bring even greater profitability. The business is projected to report a net profit of $2.6 billion, accompanied by an expected EBIT margin of 18.7%. This continued upward trend indicates sustained operational improvements and revenue growth.
FY29: Margins and Profits on the Rise
Owners of Telstra shares could see further upside in FY29, with the EBIT margin projected to ascend to 19.5%. This enhanced margin is expected to contribute to a net profit rise to a projected $2.85 billion.
FY30: A Strong Finish to the Projections
The final year in this series of projections, FY30, could mark a significant increase in profitability, with the business anticipated to achieve a net profit of $3.2 billion. The EBIT margin is forecast to reach 20.8%, demonstrating Telstra’s expected ability to generate increasing returns from its asset base.
While UBS currently rates Telstra shares as ‘neutral’ with a price target of $5.20, the firm acknowledges Telstra as its preferred investment within the Australian telecommunications sector. This suggests that despite a lack of a ‘buy’ recommendation, the broker sees fundamental strengths that set Telstra apart from its peers.
