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Wed, July 29, 2026 at 6:03 AM EDT 6 min read

Key Points

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• Telefonica raised its 2026 adjusted operating cash flow outlook to growth of more than 3%, citing stronger operating leverage and momentum in Spain and Brazil. Other targets were maintained, although revenue growth is expected at the low end of guidance due to weaker handset sales, especially in Germany.

• Second-quarter performance improved at the group level, with service revenue up 0.9%, adjusted EBITDA up 2.7%, and free cash flow reaching €611 million. Spain and Brazil led growth, with Brazil's adjusted EBITDA and operating cash flow after leases rising 11% and 18%, respectively.

• Germany and the U.K. remained areas of pressure: Telefónica Deutschland plans to cut about 1,100 jobs and close 60 stores, while Virgin Media O2 faced declining service revenue and EBITDA and continues to target deleveraging from roughly 5.8 times leverage.

Telefonica (NYSE:TEF) raised its 2026 outlook for adjusted operating cash flow after leases after reporting stronger second-quarter momentum in Spain and Brazil, while maintaining its other full-year targets amid handset weakness in Germany and pressure in the U.K.

Chairman and CEO Marc Murtra said the company now expects adjusted operating cash flow after leases to grow by more than 3% in 2026, up from its prior outlook of more than 2%. He said the upgrade reflected improved operating leverage and performance in Spain and Brazil.

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"We are on track to fulfill 2026 guidance in all other metrics," Murtra said. However, he said revenue growth is expected to land at the low end of the company's range because of weaker handset sales, particularly in Germany. Telefonica maintained its adjusted EBITDA outlook and expects to finish at the high end of that range.

Group Financial Performance and Cash Flow

At the group level, service revenue rose 0.9% year over year in the second quarter, supported by accelerating growth in Spain and, to a lesser extent, Brazil, according to CFO Juan Azcue. B2B revenue increased 6.7%, while B2C revenue rose 1.4%.

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Adjusted EBITDA increased 2.7% in the quarter, and adjusted operating cash flow after leases grew 2.9%. The operating cash flow after leases margin expanded by 0.4 percentage points year over year in both the second quarter and the first half, while capital expenditures represented 11.6% of revenue in the first six months, unchanged from a year earlier.