Cogent (CCOI) Q2 2026 earnings review
Balance Sheet Fixed, But Top-Line Remains Broken
Cogent's Q2 2026 results reflect a company actively dismantling its past to build its future. Total service revenue declined 1.5% sequentially to $235.6M, underscoring that the aggressive pruning of legacy Sprint off-net contracts is still dragging down the topline. However, profitability and the balance sheet tell a much more optimistic story. Adjusted EBITDA margin expanded to 30.2%, and management successfully monetized 10 surplus data centers for $224.2M. This cash windfall triggered a $130.7M one-time gain, pushing EPS to $1.38, and allowed Cogent to aggressively repurchase debt. While the 'inflection point' back to revenue growth remains elusive, the significant drop in net leverage buys the company critical time.
🐂 Bull Case
After quarters of negotiation, Cogent successfully sold 10 data centers for $224.2M. This immediately funded $138.8M in discounted debt repurchases, dropping net leverage from 6.79x to 6.23x and materially de-risking the balance sheet.
High-margin Wavelength revenue grew 63.8% YoY to $14.8M. This segment remains the company's primary growth vehicle to capture AI and hyperscaler demand.
🐻 Bear Case
Total revenue is still decelerating, dropping 4.3% YoY. The anticipated 'inflection point' keeps getting pushed back as the churn in Off-Net and Enterprise services outpaces growth in On-Net and Wavelengths.
Total sales reps have declined steadily from 820 a year ago to 688 in Q2 2026. A shrinking quota-bearing sales force raises concerns about the company's capacity to re-accelerate the topline once the Sprint grooming ends.
⚖️ Verdict: ⚪
Neutral. The balance sheet repair is a massive structural win, saving the company from a looming leverage crisis. However, until the revenue base stabilizes and the Off-Net churn is fully flushed out, it's hard to underwrite a pure growth narrative.
Key Themes
Deleveraging Strategy Materializes
The long-awaited monetization of the acquired Sprint data centers finally occurred. Cogent sold 10 owned data centers for net proceeds of $224.2M. Management aggressively deployed this capital, repurchasing $138.8M par value of its 2032 secured notes at a discount. This reversing trend in leverage—dropping from 6.79x in 26Q1 to 6.23x in 26Q2—proves management is executing on its promise to prioritize bondholders and balance sheet health over dividends.
Wavelengths Growth Remains the Core Engine
Wavelength revenue hit $14.8M, representing a 63.8% YoY increase. While sequentially decelerating slightly (+9.2% in Q2 vs +12.3% in Q1), customer connections for this segment surged 66.4% YoY to 2,445. As AI workloads require more long-haul transport, this product is Cogent's most critical long-term growth driver.
The Sprint Drag: Off-Net Grooming Deflates Revenue
Cogent's intentional shedding of low-margin legacy Sprint business continues to punish the topline. Off-net revenue fell 5.1% QoQ and 17.3% YoY to $84.5M. This mix shift is intentional and improves margins, but it is taking longer than initially guided for the core On-Net growth to mathematically overtake the Off-Net shrinkage.
Margin Expansion Trajectory Resumes
After a seasonal dip in 26Q1, profitability is accelerating again. Non-GAAP gross margin hit a record 47.0%, while Adjusted EBITDA margin climbed to 30.2%. By churning unprofitable Enterprise (-8.9% QoQ) and Off-net connections, Cogent is effectively trading low-quality revenue for high-quality cash flow.
Sales Force Headcount Attrition
Total headcount and the sales force are shrinking. Quota-bearing sales reps dropped to 506, down from 628 a year ago. While productivity per rep improved slightly to 4.5 units per month, relying on fewer reps to sell complex Wavelengths into a competitive AI infrastructure market limits the company's overall capacity to scale.
Other KPIs
Reversing sharply from a net loss of $39.5M in Q1. However, this is entirely driven by the $130.7M gain on the sale of data centers. Without this one-time asset sale, operating operations would still be operating at a net loss.
Stable sequentially (+0.5% QoQ). The explosive growth seen in early 2025 has leveled off as the company's wholesale strategy matures and the available pool of unleased addresses stabilizes.
Capital expenditures remained elevated at $38.5M compared to operating cash flow of $3.2M. While CapEx is down 16.7% from the Q1 supply-chain induced spike, the core business is still consuming cash, making the T-Mobile payments and data center sales essential for liquidity.
Guidance
Stable. The board approved the $0.02 quarterly dividend, maintaining the strict capital preservation strategy enacted in late 2025 to prioritize debt reduction over equity holder returns.
Stable. As structured in the Sprint acquisition, T-Mobile payments have stepped down from the Year 1 peak and are locked in at $8.3M per month for the remainder of the 42-month term, providing predictable cash flow to bridge the operational gap.
Key Questions
Data Center Valuation and Remaining Assets
You successfully sold 10 data centers for $224.2M. What is the status of the remaining 14 legacy Sprint data centers, and do you expect similar per-megawatt valuations for the rest of the portfolio?
Wavelength Acceptance Timelines
Wavelength sequential growth decelerated slightly from 12.3% in Q1 to 9.2% in Q2. Are you still experiencing customer-side delays in accepting provisioned circuits due to their own power and GPU shortages?
The Revenue Inflection Point
Off-net revenues continue to drag down consolidated sales. With the Sprint acquisition now more than three years in the rearview mirror, in exactly which quarter do you mathematically project On-Net growth to finally outpace Off-Net churn?
Sales Force Contraction
Quota-bearing sales reps have declined by nearly 20% year-over-year. Is this the floor for the sales force size, or should we expect continued headcount reductions to manage SG&A?