Mega-cap, blue chip telecom stocks are not known for making big moves. In fact, telecom has historically been considered a defensive sector.

So when AT&T (T) shares plunged 7.6% on Thursday — as the S&P 500 climbed 1% — it caught many investors by surprise.

AT&T is one of the largest telecoms in the world. More than 100 million consumers in the U.S. use its mobile and broadband services. At the same time, the company also serves nearly all of the Fortune 1000 companies with connectivity and smart solutions.

So why did this telecom giant take a nosedive on a green day for the broad market? Poor cash flow. And the main culprit for that? A struggle American consumer.

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Late bill payments

AT&T is considered a defensive name because wireless and Internet services are necessities for the modern economy. Whether boom or bust, people have to pay their phone bills and Internet bills every month, providing the company with a recurring business.

But in today’s economic climate, bills aren’t getting paid on time — and that impacts the telecom operator’s financials.

In the earnings conference call, CFO Pascal Desroches said that customers were paying their bills on average two days slower compared to a year ago, which hurt the company’s cash flow.

“The impact of this is almost $1 billion for the quarter,” Desroches says.

The reality is, while the U.S. economy has made a strong recovery from the COVID-19 pandemic and the unemployment rate held at a decades low, consumers are on a tight budget.

“There’s clearly some dynamics in the economy. We have customers that are stretching out their payments a little bit,” AT&T CEO John Stankey tells CNBC.

“We expect that they’re going to continue to pay their bills, but they’re taking longer to do it. That’s not atypical in an economic cycle.”

Beating expectations

AT&T’s post-earnings drop certainly looks painful, but you wouldn’t know that just by looking at the headline numbers.

In Q2, the company’s revenue from continuing operations totaled $29.64 billion, which was up 2.2% year over year excluding the impact of divestitures. Adjusted earnings from continuing operations came in at 65 cents per share, down from 73 cents per share earned in the year-ago period.