Jim Cramer warns T-Mobile shares drop 26% amid subscriber growth fears

T-Mobile US Inc. shares have fallen 26% over the past year, reflecting investor concerns about the company's future amid increasing competition. The stock has dropped by 8% year-to-date. This decline is part of a broader narrative for telecom companies, as their growth largely hinges on subscriber increases, which have become more challenging in the face of competition from companies like SpaceX. The rocket firm is now also positioning itself as an AI company and has launched the world's largest satellite internet constellation, further threatening traditional carriers.

Jim Cramer, a prominent financial commentator, highlighted these challenges during a discussion on T-Mobile's recent earnings. He noted that the company's performance has not met expectations. After T-Mobile reported its second quarter results on July 23, shares plummeted by 11% on the same day, despite the company beating profit forecasts. A critical area of concern was the decline in new postpaid subscribers, which fell short of analyst predictions. T-Mobile expects to add only 250,000 postpaid accounts in the third quarter, significantly below the anticipated 275,000.

Management indicated that over 60% of new customers opted for premium plans, which could lead to higher profitability in the long run. However, these plans are associated with increased customer churn, raising alarms among investors. The company reported a churn rate of 0.85% in the second quarter, but the lowered guidance for subscriber growth is tied to the costs related to these premium offerings.

Despite these issues, T-Mobile's shares carry a forward P/E ratio of 16.45, surpassing Verizon's 9.38. Among hedge funds, 85 out of 1,022 held T-Mobile shares as of Q1 2026. While there are risks involved, some analysts believe that investments in AI-related stocks may offer higher returns and lower risks than T-Mobile. As the company navigates these competitive pressures, its ability to attract and retain subscribers will be crucial for its future success.