Telefónica opened 2026 with steady growth, stronger profitability, and lower debt, driven largely by Brazil while management kept a tight grip on European capex exposure tied to the EU’s AI gigafactory push.
In the first quarter, group revenue rose 0.8% year over year to €8.1 billion and adjusted EBITDA increased 1.8% to €2.8 billion, with Brazil providing most of the momentum as Germany and wider Europe faced ongoing pressure from commercial shifts.
Brazil and Spain lift group numbers as Germany remains affected by MVNO churn
Telefónica said the growth was largely driven by a surge in Brazil and discipline in Germany and Spain. Brazil outperformed other regions, with revenue up 7.4% and EBITDA up 8.7% in the quarter, alongside a record-high ARPU.
Spain was steadier: revenue and EBITDA were both up 2%, and Telefónica reported a best-ever churn of 0.7% alongside churn that was 1.1% lower overall. Management said its activity focused on profitable growth and network quality.
Germany, by contrast, saw declines, with revenue and adjusted EBITDA down 8.6% and 8.4% respectively. Telefónica linked the Germany weakness to 1&1 shifting MVNO traffic elsewhere and migrating phases: moving MVNO roaming to Vodafone and deploying onto its own network infrastructure as deployed. international business roaming SIMs are often sensitive to these kinds of partner and platform changes, so churn can show up quickly in the numbers.
Germany cost discipline, fixed comms push, and a 2027 growth call
Telefónica said adjusted EBITDA growth in Germany was in the high single digits in the absence of 1&1-related effects. It pointed to network simplification, digital operations, and portfolio op-ex control under its “transform and grow” strategy, and said German cost-cutting included multiple efficiency programs aimed at channel economics, energy profile, and the operating model.
Emilio Gayo and Juan Azcúaé rejected the idea that Germany needs a reset in scale or capital allocation, arguing Telefónica’s footprint is sufficient to compete and meet guidance, while acknowledging that scale improves margins. Telefónica also said it is pushing harder into fixed comms and bundled offers in Germany and that its network ranks second for quality there.
The operator expects to return to growth in Germany in 2027.
EU AI gigafactory: consortium-led bid with limited Telefónica equity and debt-heavy financing
Telefónica said it will not be over-extended or over-exposed by its leadership of a Spanish consortium bid for an EU AI gigafactory project. It also tied the scheme to the EU’s €200 billion InvestAI plan to boost AI competitiveness, and said it is involved in the EU’s €20 billion AI gigafactory scheme.
Telefónica is spearheading a Spanish state-backed bid with construction group ACS for one of five gigawatt-factory projects, with award timing in June or July. Management said the process is at the beginning: its investment is limited to parameters it considers value-accretive, and the project is expected to be completed by summer and decided by winter.
Asked about investment scale and returns, Telefónica responded that “nothing is decided” and that “not very much” would be invested, because the bid is a consortium effort and depends mostly on debt funding with a relatively small equity portion for Telefónica. Juan Azcúaé said Telefónica is talking about a minority investment between 10% and 15% and that around two-thirds of the financing, if not more, is via debt, with the remainder equity. He also said returns would be consistent with “infra-digital”—predictable infrastructure returns on long-term deals rather than quick venture-style AI upside—and that the risk is capped.
Financing and targets: op-co disposals reduce net debt; free cash flow target reiterated
Telefónica said portfolio management with op-co disposals in Colombia and Chile reduced group net debt by about €1.5 billion. It also reported a net gain in mobile contracts of 48,000 and said churn was 1.1% lower.
On overall guidance, Telefónica reaffirmed its full-year 2026 target of around €3 billion in free cash flow and said its UK joint venture with Virgin Media, VMO2, is on track to meet its 2026 financial targets, while citing fiber pricing constraints as limiting fixed ARPU growth despite network and customer improvements.