The company added 419,000 monthly bill-paying wireless phone subscribers, compared with expectations of 284,800 additions, according to five analysts polled by FactSet.
"Our significant investment in 5G and fiber and consistent execution is driving durable growth across the large majority of our business," CEO John Stankey said in a post-earnings call.
AT&T's unlimited plans that are usually priced lower than those of rivals have helped the company add budget-conscious customers amid tough competition from T-Mobile (TMUS.O) and Verizon (VZ.N).
That has also helped AT&T retain customers better than rivals, with its postpaid phone churn- the number of people disconnecting from a company's service - coming at 0.70%, the second lowest reported for a second quarter.
Free cash flow, a metric that helps determine dividend payouts, rose more than 9% to $4.6 billion, beating LSEG estimates of $4.22 billion.
Finance chief Pascal Desroches said AT&T expects to see more benefits from its move to raise prices for its older unlimited plans in the fourth quarter. It increased prices by up to $20, which will come into effect in the August billing cycle.
However, slower phone upgrades in the U.S. weighed on AT&T's revenue, mirroring comments from Verizon (VZ.N).
Mobility equipment revenue was down 8% in April-June period. Total revenue of $29.8 billion missed estimates of $29.92 billion, according to LSEG data.
AT&T, one of the largest telecom operators in U.S., was troubled by data breaches and hours long outages this year.
The U.S. Federal Communications Commission said in a report on Monday the nationwide outage in February that lasted over 12 hours blocked more than 92 million voice calls and prevented more than 25,000 attempts to reach 911. This could potentially result in a fine.
