T-Mobile Q2 2025: Growing Profits by Selling Phones at a Loss

In the competitive U.S. wireless market, T-Mobile has long branded itself as the disruptive "Un-carrier." To see if its financial performance lives up to the bold claims, we're digging into its latest 10-Q filing for the second quarter of 2025. The report reveals a company successfully growing revenue and profits through a focused, disciplined strategy.

From Revenue to Profit

For the quarter ending June 30, 2025, T-Mobile posted Total Revenue of $21.13 billion, a solid 7% increase from the same period last year. This top-line growth translated to the bottom line, with Net Income rising 10% to $3.22 billion. This performance resulted in a healthy net margin of 15.2%, a strong indicator of the company's profitability.

The following chart illustrates how T-Mobile converted its revenue into profit during the quarter.

After generating a Gross Profit of $13.76 billion, T-Mobile accounted for $8.55 billion in operating expenses—which include everything from marketing and administrative costs to network depreciation. This left the company with an Operating Income of $5.21 billion, up 13% year-over-year.

The Service and Equipment Dynamic

T-Mobile's income statement reveals two very different business stories when you examine its primary revenue streams: Service and Equipment.

• Service Revenue: This is the company's core profit engine, comprising the monthly bills customers pay for phone plans, data, and high-speed internet. This segment brought in $17.44 billion and, after its direct costs, generated an impressive $14.72 billion in gross profit.

• Equipment Revenue: This segment, which covers the sale of smartphones and other devices, generated $3.44 billion in revenue. However, the cost of acquiring those devices was $4.66 billion, resulting in a $1.22 billion loss on hardware sales.

This isn't an accounting error; it's a deliberate strategy. Like many carriers, T-Mobile is willing to sell a phone at a loss to attract new customers and lock them into profitable, long-term service contracts. It’s the modern-day "razor and blades" business model, and the numbers show it's working.

Growing a Valuable Customer Base

The strategy is clearly paying off in customer growth. During the quarter, T-Mobile added over 1.7 million net new postpaid customers, who are considered the industry's most valuable subscriber type. An even more telling metric is the Postpaid Phone Average Revenue Per User (ARPU), which tracks how much the company earns from each subscriber per month. ARPU increased by 3% to $50.62, showing that T-Mobile is successfully encouraging customers to adopt higher-value plans.

In conclusion, T-Mobile's Q2 2025 report demonstrates a company in a strong financial position. By strategically leveraging equipment sales to fuel its high-margin service business, it is successfully growing both its customer base and its profitability. In the relentless U.S. telecom market, this focused execution is enabling T-Mobile to thrive.