Saudi Arabia's three listed telecom operators posted combined revenues of more than $22.2 billion (83.42 billion riyals) in the first nine months of 2026, up 3.67% from a year earlier, as growing demand for consumer and business services, an improved revenue mix and expanding subsidiary operations fueled growth. Revenues rose from about $21.46 billion (80.47 billion riyals) a year earlier, supported by growth in carrier and operator services alongside consumer and enterprise businesses. stc dominated the sector, generating $16 billion (60.1 billion riyals), or roughly 72% of the three operators' combined revenues, up 3.75% year-on-year. Mobily recorded a 5.07% revenue increase to $4.05 billion (15.19 billion riyals), while Zain Saudi Arabia posted a modest 0.57% rise to $2.17 billion (8.14 billion riyals). Four telecom companies are listed on the Saudi stock market. stc, Mobily and Zain Saudi Arabia close their financial years in December, while Etihad Atheeb Telecommunication Co. (GO) ends its fiscal year in March. Profits fall despite revenue growth Despite rising revenues, the three operators' combined net profit slipped 2.07% to about $3.78 billion (14.17 billion riyals) in the first nine months of 2026, down roughly 300 million riyals from 14.47 billion riyals a year earlier. The decline was driven by stc, whose net profit fell 5.71% to 10.92 billion riyals from 11.58 billion riyals in the same period of 2025. Its rivals fared better. Mobily's net profit climbed 7.68% to 2.71 billion riyals from about 2.51 billion riyals, while Zain Saudi Arabia recorded a 45% surge to 541 million riyals from 373 million riyals. stc's earnings were weighed down by nonrecurring items, lower finance income and higher financing costs, even as revenues and operating profit grew. Excluding nonrecurring items in both periods, the company said net profit rose 2.6%. Mobily benefited from stronger revenues and improved gross profit. Zain Saudi Arabia's earnings were lifted by a better revenue mix, lower financing costs and a one-off gain from the Universal Service Fund. Strong demand, uneven profits The results underscore a widening gap between revenue growth and profitability across Saudi Arabia's telecom sector, where financing costs, operating expenses and nonrecurring items continue to shape earnings. Suleiman Al-Humaid Al-Khaldi, a financial and economic expert, financial markets analyst and member of the Saudi Economic Association, told Asharq Al-Awsat that the results reflected resilient demand and expanding telecom operations as Saudi Arabia accelerates its digital transformation. He said the rise in combined revenues to 83.42 billion riyals confirmed continued business growth, even as profitability diverged among the three operators. But higher revenues do not necessarily deliver proportionate gains in net profit, he said, pointing to financing costs, operating expenses and nonrecurring items. With stc generating about 72% of the operators' combined revenues, its performance has an outsized impact on their overall financial results, even when rivals report stronger profits, Al-Khaldi said. He cautioned against interpreting stc's reported earnings decline as a sign of operating weakness. The company's operating profit rose 4.1%, while adjusted net profit grew 2.6% after excluding nonrecurring items in both periods, indicating that its core operations continued to expand and deliver positive results. Mobily's stronger earnings reflected revenue growth and improved gross profit, while Zain Saudi Arabia benefited from a better revenue mix, lower financing costs and one-off income from the Universal Service Fund, he said. Al-Khaldi stressed the need to distinguish recurring operating earnings from exceptional gains when assessing the sustainability of profit growth, particularly after Zain Saudi Arabia reported a third-quarter profit decline. He said stc's underlying operations remained solid despite pressure from lower finance income, rising financing costs and differences in the impact of nonrecurring items. Stc's share price fell from 42 riyals to 39 riyals, a decline of about 7.1% over the period under review, which Al-Khaldi said suggested relative price resilience. He cautioned, however, that the time frame mattered when comparing the stock with other Saudi blue chips. A company's investment strength should not be judged on reported net profit alone, he said. The sustainability of operations, earnings quality and capacity to pay cash dividends were equally important, reinforcing stc's standing as a leading Saudi stock. Looking ahead, Al-Khaldi forecast continued growth and improving profitability across the telecom sector, driven by expanding digital services and stronger demand for telecommunications and information technology solutions. He also expected stc to deliver positive fourth-quarter and full-year 2026 results, surpassing the corresponding periods of 2025 as its core businesses continued to grow. Rising revenues, squeezed margins Mohamed Hamdy Omar, chief executive of G.World for Studies, said Saudi telecom operators' nine-month results exposed a clear disconnect between revenue growth and earnings. Combined revenues rose 3.67% to 83.42 billion riyals, while net profit fell 2.16% to about 14.17 billion riyals, pointing to pressure on profit margins despite continued business expansion, he told Asharq Al-Awsat. Omar identified three factors behind the divergence: financing costs, higher operating expenses and nonrecurring items. First, telecoms remain a capital-intensive business. Network upgrades, wider fifth-generation (5G) coverage and investments in data centers and digital infrastructure require substantial spending, with some projects taking years to generate their targeted returns. Second, the shift from traditional telecom services to technology-driven offerings is pushing up operating costs. Expanding into cloud computing, cybersecurity, artificial intelligence and the Internet of Things requires investment in development, specialized talent and operations, adding near-term costs even as it strengthens long-term competitiveness. Third, one-off items can distort reported earnings. Omar pointed to stc's 2.6% adjusted net profit growth after excluding nonrecurring items in both periods, saying the figure highlighted the importance of separating underlying operating performance from headline profits. The earnings at Mobily and Zain Saudi Arabia also revealed differences in how effectively operators improve their revenue mix, control costs and capitalize on business opportunities, he said. The industry's next challenge will not simply be to generate more revenue, but to improve efficiency and turn heavy investment into cash flow and sustainable returns without eroding margins, Omar added. Omar expects Saudi Arabia's telecom sector to maintain its growth momentum through the final quarter of 2026 and into 2027, supported by the expanding digital economy and the kingdom's accelerating technological transformation. But the engines of growth are changing. Rather than competing primarily through traditional connectivity services and subscriber growth, operators are increasingly turning to higher-value digital and technology offerings, he said. Data centers, cloud computing and infrastructure supporting artificial intelligence applications stand out as major opportunities as demand rises for data processing, storage and transmission capacity. Operators with advanced networks, extensive customer bases and established operational expertise are well positioned to capitalize on that shift, Omar said. The enterprise and institutional market is also poised to become a major revenue driver as companies and government agencies seek more cybersecurity, cloud, Internet of Things and digital infrastructure management solutions. Telecom operators that successfully evolve into integrated technology solutions providers will be better placed to diversify revenues and strengthen profitability, he added. Saudi Arabia's megaprojects, expanding smart cities and growth in tourism, manufacturing, logistics and e-commerce should provide further opportunities for advanced connectivity and digital infrastructure in the coming years. The transition will not be without risks. Omar warned that high capital expenditure, rising financing costs, price competition in traditional services and lengthy investment payback periods could continue to weigh on profitability, particularly in data centers and artificial intelligence. He expects telecom revenues to keep rising in the fourth quarter of 2026, but said stronger earnings would hinge on operators' ability to rein in expenses, manage financing costs and improve investment returns. Competition in advanced digital services is likely to intensify in 2027, favoring companies that can diversify their income and make better use of existing infrastructure, he said. Ultimately, Omar said, Saudi Arabia's telecom industry is undergoing a gradual shift from traditional connectivity toward a broader role in the data economy. Its future competitive strength will depend less on subscriber numbers alone and more on how successfully operators turn their networks, assets and technological capabilities into higher-value digital services with sustainable profit margins.
