Telefonica (1K) | Hold | No change in trends, FCF soft

Research evidence excerpt

Telefonica (1K) | Hold | No change in trends, FCF soft

#EarningsPreview #Negative #EstimatesRevision

Release date: 15 July 2026

Company research

ESG profile HoldTelefonica

Spain | Telecom services Beta Profile: MCap: EUR20.5bn

Target Price: EUR4.00 Change in TP: 0.0 % Bloomberg: TEF SM Reuters: TEF.MC

Current Price: EUR3.62 Change in Sales: 0.4% 26E/1.1% 27E Free float 64%

Up/downside: 10.7% Change in Adj EBIT: 3.8% 26E/6.5% 27E Avg. daily volume (EURm) 81.5

YTD abs performance 3.5% Market data: 14 July 2026 Change in Adj. EPS: 1.6% 26E/8.9% 27E

52-week high/low (EUR) 4.88/3.24

No change in trends, FCF soft Price performance

We do not expect any significant change in underlying trends in Q2. Spain

may continue to show some EBITDA growth driven by large headcount

reduction, Germany and the UK remain pretty soft, while Brazil is

underpinned by a stronger currency, but with limited positive impact on FCF

this year due to hedging. In fact, Q2 FCF may be soft and would require a very

strong H2 to reach the guidance. Mid-term we are at 2.5% FCF CAGR 2025-28,

below the guidance of 3% to 5%, with the sector offering mid to high-single

digit growth and lower leverage. The stake acquired by Xavier Niel in

Vodafone may bring German consolidation forward, but either TEF pays more

to get 1&1 or they give up the expected synergies.

Key findings

Q2 headline numbers should be underpinned by the c. 9% gain in Brazilian FY to 31/12 (EUR) 12/26E 12/27E 12/28E

currency. We expect revenue/EBITDAaL growth of 2.7%/4.8% (adjusted for asset Sales 33,239 33,610 33,985

sale). However, we expect no change in underlying trends vs Q1. EBITDA adj. 11,908 12,200 12,429

EBIT adj. 4,943 5,201 5,427 In Spain, the commercial momentum remains solid but at the expense of ARPU. Net profit adj.