Do BT’s Q3 results justify share surge?

BT Group branding at the firm’s offices in Aldgate, London. Photo: Mike Kemp/In Pictures via Getty Images.

Upwardly moving BT Group (LSE:BT.A) shares today failed to extend their strong start to the year after a disappointing revenue performance offset relief over the pace of Openreach line losses.

BT Group has shown signs of building a position above its five-year trading range of 100-200p, aided by cash flow and dividend prospects as it nears the end of its fibre network build.

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A sector rotation due to uncertainties over the impact of artificial intelligence (AI) has also benefited BT, which last night closed at 205p following a 12% rise so far in 2026 and 35% since last April.

The shares topped 210p in today’s early dealings after third-quarter results indicated that competition from alternative network providers and the impact of a weaker overall broadband and new homes market has not been as severe as first thought.

Its regulated arm Openreach still expects wholesale full-year line losses of 850,000, but this is better than a previous 900,000 forecast after the pace of decline eased to 210,000 in the third quarter. Openreach lost 244,000 in the previous three months and 169,000 in the first quarter.

The number of premises passed with full fibre grew by just under 1.1 million to more than 21.4 million in the quarter, taking the total footprint to 21.4 million homes and businesses.

BT said this continued the fastest build any company has achieved in Europe as it remains on track for five million premises in the current financial year and 25 million by December.

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The progress is significant in terms of the delivery of chief executive Allison Kirkby’s guidance for a cash flow inflection to £2 billion in the next financial year and £3 billion by the end of the decade. This compares with the £1.5 billion expected in 2025-26 results in May.

Berenberg, which has a price target of 250p, expressed relief at the pace of Openreach line losses as it turned its attention to the outlook for rising cash flow.

The bank said: “At the next results in May, we expect to finally gain greater visibility on the full-year 2027 cash flow guidance of £2 billion, which includes the first of BT’s large capex cuts.”

BT’s next dividend is due for payment on Wednesday 11 February after the interim award rose by 2% to 2.45p a share, in line with a policy of paying 30% of the prior year’s full-year award.

The shares faded to 204p by lunchtime as the City digested a 2% miss on quarterly revenues.

The overall 4% decline to £5 billion was driven by business and international weakness, offset by broadly flat performances in consumer and Openreach. Underlying earnings fell 1% to £2.1 billion, which was slightly below the City consensus.

BT reiterated 2026 guidance for revenues of about £20 billion, UK service revenues in the region of £15.3 billion and £15.6 billion and underlying earnings of £8.2 billion-£8.3 billion.

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With earnings struggling to grow amid top-line pressures, UBS believes it will be challenging for BT to achieve its guidance of £2 billion in free cash flow in 2027.

UBS, which has a Sell recommendation and 140p price target, adds that the UK market is among the most challenged in Europe after altnets established a 60% footprint with pricing 20-30% below major peers.

Potential risks include the need for price cuts at Openreach to stem line losses and the possibility of a VirginMediaO2 takeover move for TalkTalk. It also highlights pressure on BT to densify its mobile network to catch-up with VodafoneThree.