American Tower Q1 2025: Rallying on Earnings

• Q1 2025 Beat Expectations: American Tower (AMT) reported AFFO per share of $2.75, up 6.6% year-over-year and significantly above consensus estimates of $2.61–$2.62.
• Guidance Slightly Raised: Full-year AFFO per share guidance was modestly increased by 0.4% to a new range of $10.35–$10.54, primarily due to favorable currency exchange rates.
• Leasing Environment Strong: Management expressed optimism about leasing activity and highlighted disciplined expense control.
• Services Revenue: Despite an increase in services revenue, management warned not to overinterpret it due to lag effects and the nature of comprehensive agreements.
• Modeling from Services: My prior modeling supports the idea that using service revenue to forecast rental revenue simply doesn’t work.

American Tower (AMT) posted Q1 2025 results. Shares popped immediately. 

Results

• AFFO per share came in at $2.75. Up 6.6% year-over-year adjusted for the India transaction.
• Consensus estimates were $2.61 to $2.62, depending on the source. So this was a pretty large beat.
• However, it would have a much larger impact if guidance was raised by a similar amount (rather than a smaller amount).

Guidance for AFFO Per Share

• Old Guidance: $10.31 to $10.50 (midpoint $10.405)
• New Guidance: $10.35 to $10.54 (midpoint $10.445)
• Guidance raised 0.4%.
• The increase is driven by changes to foreign currency exchange rates.
• The new guidance reflects about 4.8% growth in full-year AFFO per share.

Other Notes

Management was very positive on the leasing environment for their assets. There was also a large emphasis on controlling their expenses. Despite not raising guidance for the year, it felt like they were expecting to be above the midpoint of guidance based on the activity thus far.

There was a healthy increase in services revenue. Many investors may try to read into that, but management denies that idea. In the earnings call, Steve Vondran (the CEO) said:

“And in terms of how that translates into revenue, there's a little bit of a disconnection from the activity levels and services to our property revenue because of our comprehensive agreements. So, in those agreements, there is a steady cadence of what we're going to get paid on there. It's a little bit independent of the activity levels. However, we do have one customer that's not on a comprehensive agreement. And we also have new colocations that are outside of some of the other comprehensive agreements. And so, those are much more affected by activity timing.

And when you think about the cadence of services versus the property revenue, if they're not part of a comprehensive agreement, there is a little bit of a lag time from when you see the services revenue to when you see those commence. And that varies a lot by customer. So, I would think about that as being somewhere in the neighborhood of 60 days to 180 days, depending on the customer and the type of transaction, and the geography on that.”

This is an area I researched previously. In my research, I compared services revenue by period with growth in tower leasing revenue in subsequent periods. The correlation was thoroughly underwhelming and I scrapped the model. To be fair, I've scrapped countless models. If there's one thing every analyst needs to know when they start doing analysis, it is that you'll scrap vastly more models than you keep. Just because something makes sense intuitively does not mean it will work.

Conclusion

Solid quarter. The Q1 2025 beat looks good, but management remains cautious with guidance as the revenue for “services” (not rent) should slow down in the second half. Leasing environment remains solid. They sold a small batch of towers, but it wasn’t a large enough transaction to have a material impact. I don’t foresee this having a material impact on targets. We expect AMT to deliver solid results, and they met our expectations. As a shareholder, I’m pleased but not surprised.

Disclosure: Long AMT, SBAC, and CCI.