Array (AD)

Wireless telecommunications provider Array (NYSE:AD) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 83.1% year on year to $47.12 million. Its GAAP loss of $0.44 per share was significantly below analysts’ consensus estimates.

Company Overview

Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, Array (NYSE:Array) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.

Terrestrial telecommunication companies face an uphill battle, as they mostly sell into a deflationary market, where the price of moving a bit tends to decrease over time with better technology. Without dependable volume growth, revenue growth could be challenged. Unfortunately, broadband penetration in their core US market is quite high already. On the other hand, data consumption from streaming entertainment and 5G expansion could provide a floor on growth for the next number of years. As if that wasn't enough to worry about, competition is intense, with larger telecom providers and hyperscalers expanding their own networks.

Array competes with national wireless carriers including Verizon (NYSE: VZ), AT&T (NYSE: T), T-Mobile (NASDAQ: TMUS), and Dish Network (NASDAQ: DISH), as well as cable companies offering wireless services such as Comcast (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $2.82 billion in revenue over the past 12 months, Array is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Array’s revenue declined by 6.8% per year over the last five years, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Array’s recent performance shows its demand remained suppressed as its revenue has declined by 15.5% annually over the last two years.

This quarter, Array reported magnificent year-on-year revenue growth of 83.1%, and its $47.12 million of revenue beat Wall Street’s estimates by 15.7%.

Looking ahead, sell-side analysts expect revenue to decline by 91.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

Array was profitable over the last five years but held back by its large cost base. Its average adjusted operating margin of 1.8% was weak for a business services business.

Looking at the trend in its profitability, Array’s adjusted operating margin decreased by 3.6 percentage points over the last five years. Array’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Array generated an adjusted operating margin profit margin of negative 113%, up 509.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

Sadly for Array, its EPS declined by 42.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into Array’s earnings to better understand the drivers of its performance. As we mentioned earlier, Array’s adjusted operating margin expanded this quarter but declined by 3.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Array, its two-year annual EPS growth of 7.6% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, Array reported EPS of negative $0.44, up from negative $0.92 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Array’s full-year EPS of $0.17 to grow 556%.

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.

Array has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.9% over the last five years, slightly better than the broader business services sector.

Taking a step back, we can see that Array’s margin expanded by 9.3 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Array historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.7%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.

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. Unfortunately, Array’s ROIC averaged 1.3 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Array reported $325.6 million of cash and $1.19 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 $801.1 million of EBITDA over the last 12 months, we view Array’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $38.95 million 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 were impressed by how significantly Array blew past analysts’ revenue expectations this quarter. On the other hand, its EPS missed. Overall, this was a softer quarter. The stock remained flat at $44.51 immediately following the results.

Updated: December 3, 2025 at 11:21 PM EST

Before deciding whether to buy Array or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Array doesn’t pass our quality test. To kick things off, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Array’s EV-to-EBITDA ratio based on the next 12 months is 20.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $54.50 on the company (compared to the current share price of $49.61).