Charter (CHTR)

Cable, internet, and telephone services provider Charter (NASDAQ:CHTR) met Wall Streets revenue expectations in Q3 CY2025, but sales were flat year on year at $13.67 billion. Its GAAP profit of $8.34 per share was 11.2% below analysts’ consensus estimates.

Company Overview

Operating as Spectrum, Charter (NASDAQ:CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.

The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.

Competitors in the telecommunications and media services industry include Comcast (NASDAQ:CMCSA), DISH Network (NASDAQ:DISH), and AT&T (NYSE:T).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Charter’s 3.1% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Charter’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

Charter also discloses its number of internet subscribers and video subscribers, which clocked in at 29.79 million and 12.56 million in the latest quarter. Over the last two years, Charter’s internet subscribers were flat while its video subscribers averaged 7.3% year-on-year declines.

This quarter, Charter’s $13.67 billion of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.

Charter’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 23.7% over the last two years. This profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.

This quarter, Charter generated an operating margin profit margin of 22.9%, down 1.3 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Charter’s EPS grew at a spectacular 23.2% compounded annual growth rate over the last five years, higher than its 3.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, Charter reported EPS of $8.34, down from $8.82 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Charter’s full-year EPS of $36.03 to grow 18.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Charter has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.7%, subpar for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Charter to make large cash investments in working capital and capital expenditures.

Charter’s free cash flow clocked in at $1.62 billion in Q3, equivalent to a 11.9% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

Over the next year, analysts predict Charter’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 9.5% for the last 12 months will increase to 11.4%, it options for capital deployment (investments, share buybacks, etc.).

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Charter historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.1%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Charter’s ROIC averaged 1.4 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Charter reported $464 million of cash and $95.16 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $22.78 billion of EBITDA over the last 12 months, we view Charter’s 4.2× net-debt-to-EBITDA ratio as safe. We also see its $5.05 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its EPS missed Wall Street’s estimates and its internet subscriber count declined. Overall, this was a softer quarter. The stock traded down 4.3% to $221.03 immediately after reporting.

Updated: December 4, 2025 at 9:55 PM EST

When considering an investment in Charter, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We cheer for all companies serving everyday consumers, but in the case of Charter, we’ll be cheering from the sidelines. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Charter’s number of internet subscribers has disappointed, and its Forecasted free cash flow margin for next year suggests the company will fail to improve its cash conversion.

Charter’s P/E ratio based on the next 12 months is 4.8x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $314.94 on the company (compared to the current share price of $200.04).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.