Q2 FY2026
Filed Aug 6, 2026Cogent reported lower service revenue but improved adjusted EBITDA margin, while a data-center sale gain drove positive GAAP earnings per share.
Service revenue declined both sequentially and year over year, led by off-net revenue, while gross margins and adjusted EBITDA margin improved and the quarter included a $130.7 million gain on the sale of ten owned data centers.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Service revenueother | $235.6 million | decrease of 1.5% | decrease of 4.3% |
| Foreign exchange impact on service revenue growthother | $0.3 million | negatively impacted service revenue growth | positively impacted service revenue growth |
| Service revenue growth on a constant currency basisother | decreased by 1.4% | decreased by 1.4% | decreased by 4.6% |
| GAAP gross profitGAAP | $57.6 million | increased by 3.0% | increased by 72.1% |
| GAAP gross marginGAAP | 24.5% | – | – |
| Non-GAAP gross profitnon-GAAP | $110.7 million | increased by 0.3% | increased by 1.3% |
| Non-GAAP gross marginnon-GAAP | 47.0% | – | – |
| Net cash provided by (used in) operating activitiesother | $3.2 million | – | – |
| EBITDAother | $46.1 million | – | – |
| EBITDA marginother | 19.6% | – | – |
| EBITDA, as adjusted, for cash paid under the IP Transit Services Agreementnon-GAAP | $71.1 million | increased by 1.3% | – |
| EBITDA margin, as adjusted for cash paid under the IP Transit Services Agreementnon-GAAP | 30.2% | – | – |
| Basic net earnings (loss) per shareGAAP | $1.39 | – | – |
| Diluted net earnings (loss) per shareGAAP | $1.38 | – | – |
| Gain on sale of ten owned data centersGAAP | $130.7 million | – | – |
| Total customer connectionsother | 115,839 | decreased by 0.8% | decreased by 2.4% |
| IP Network trafficother | increased by 2% | increased by 2% | increased by 16% |
| On-net buildingsother | 3,627 | increased by 22 on-net buildings | increased by 98 on-net buildings |
| Optical wavelength service locationsother | 1,137 locations | – | – |
| Net leverage ratio, adjusted for amounts due from T-Mobileother | 6.23 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| On-net revenueOn-net service is provided to customers located in buildings that are physically connected to Cogent’s network by Cogent facilities. | $135.4 million | decrease of 0.1% | increase of 2.3% |
| Off-net revenueOff-net customers are located in buildings directly connected to Cogent’s network using other carriers’ facilities and services to provide the last mile portion of the link from the customers’ premises to Cogent’s network. | $84.5 million | decrease of 5.1% | decrease of 17.3% |
| Wavelength revenueAcquiring the Sprint network allowed Cogent to construct a wavelength network using predominantly owned fiber and expand its product offerings to include optical wavelength services. | $14.8 million | increase of 9.2% | increase of 63.8% |
| Non-core revenueNon-core services are legacy services, which Cogent acquired and continues to support but does not actively sell. | $0.9 million | – | – |
Capital returns
- Cogent approved a quarterly dividend of $0.02 per share for Q2 2026.
- On August 5, 2026, Cogent’s Board approved a regular quarterly dividend of $0.02 per share payable on September 4, 2026 to shareholders of record on August 21, 2026.
- Cogent purchased $20.4 million par value of its 2032 secured notes at an average price of $91.955, resulting in a gain of $1.6 million during the three months ended June 30, 2026.
- In July 2026, Cogent purchased an additional $118.4 million par value of its 2032 secured notes at an average price of $90.071 resulting in a gain of $11.8 million.
- Total purchases of Cogent’s 2032 secured notes through July 31, 2026, were $138.8 million at an average price of $90.348, for a total gain of $13.4 million.
What drove it
- On-net revenue, including wavelengths, increased by 0.7% sequentially from Q1 2026 to $150.2 million for Q2 2026 and increased by 6.2% from Q2 2025.
- Wavelength revenue increased by 9.2% from Q1 2026 and increased by 63.8% from Q2 2025.
- Wavelength customer connections increased by 66.4% from June 30, 2025 to 2,445 as of June 30, 2026 and increased by 8.0% from March 31, 2026.
- IP Network traffic increased by 2% from Q1 2026 and increased by 16% from Q2 2025.
- GAAP gross margin was 24.5% for Q2 2026, compared with 23.4% for Q1 2026 and 13.6% for Q2 2025.
- EBITDA margin, as adjusted for cash paid under the IP Transit Services Agreement, was 30.2% for Q2 2026, compared with 29.3% for Q1 2026 and 29.8% for Q2 2025.
Concerns
- Service revenue decreased by 1.5% from the three months ended March 31, 2026 and decreased by 4.3% from the three months ended June 30, 2025.
- Off-net revenue decreased by 5.1% sequentially and decreased by 17.3% from the three months ended June 30, 2025.
- Total customer connections decreased by 2.4% from June 30, 2025 and decreased by 0.8% from March 31, 2026.
- Off-net customer connections decreased by 12.2% from June 30, 2025 and decreased by 4.1% from March 31, 2026.
- Net cash provided by operating activities was $3.2 million, compared with $14.8 million for the three months ended March 31, 2026.
- The gain on the sale of ten owned data centers was $130.7 million and was included in earnings per share for the three months ended June 30, 2026.
What to watch
- Service revenue growth, including the stated foreign exchange impact and constant currency performance.
- The pace of off-net revenue and off-net customer connection declines.
- Growth in wavelength revenue, customer connections and optical wavelength service locations.
- Adjusted EBITDA margin and cash paid under the IP Transit Services Agreement.
- Execution of the commitment to use at least $175.0 million of data-center sale proceeds to repurchase debt obligations at a discount.
- Net leverage ratio, adjusted for amounts due from T-Mobile.
Balance sheet and cash flow
- Total cash and restricted cash at the end of Q2 2026 was $369.7 million.
- Net cash provided by (used in) operating activities was $3.2 million for the three months ended June 30, 2026.
- Amounts paid under the IP Transit Services Agreement were $33.3 million for the three months ended June 30, 2026.
- The $8.3 million monthly payment for July 2026 was paid to Cogent on June 30, 2026.
- Cogent’s net leverage ratio, adjusted for amounts due from T-Mobile, declined to 6.23 for Q2 2026 compared to 6.79 for Q1 2026 and 6.61 for Q2 2025.
- The First Supplemental Indenture increased the maximum secured debt leverage ratio from 4.00 to 4.75.
- The First Supplemental Indenture includes a commitment to use at least $175.0 million of the proceeds from the sale of data centers to repurchase its debt obligations at a discount.
Analysis
Cogent’s core service-revenue trend remained under pressure in Q2 2026. Service revenue was $235.6 million, down 1.5% from the three months ended March 31, 2026 and down 4.3% from the three months ended June 30, 2025. On a constant currency basis, service revenue decreased by 1.4% sequentially and decreased by 4.6% year over year. Off-net revenue was the principal reported weakness, decreasing 5.1% sequentially and 17.3% year over year.
The mix within service revenue showed a divergence between legacy connectivity trends and optical wavelength expansion. On-net revenue was $135.4 million, down 0.1% sequentially but up 2.3% year over year, while wavelength revenue was $14.8 million, up 9.2% sequentially and 63.8% year over year. Wavelength customer connections reached 2,445, with increases of 66.4% from June 30, 2025 and 8.0% from March 31, 2026. In contrast, total customer connections were 115,839, down 2.4% year over year and 0.8% sequentially, reflecting the reported off-net connection declines.
Margins improved despite the revenue decline. GAAP gross profit increased by 3.0% sequentially to $57.6 million, and GAAP gross margin rose to 24.5% from 23.4% in Q1 2026 and 13.6% in Q2 2025. Non-GAAP gross margin was 47.0%, compared with 46.1% sequentially and 44.4% a year earlier. EBITDA, as adjusted for cash paid under the IP Transit Services Agreement, increased by 1.3% sequentially to $71.1 million, and its margin was 30.2%, compared with 29.3% in Q1 2026.
Reported GAAP per-share earnings were heavily affected by asset-sale activity. Basic and diluted net earnings per share were $1.39 and $1.38, respectively, versus net losses per share in the prior quarter and prior-year period. Cogent stated that the $130.7 million gain on the sale of ten owned data centers was included in earnings per share. Operating cash flow was $3.2 million, compared with $14.8 million for the three months ended March 31, 2026, while total cash and restricted cash was $369.7 million at quarter-end.
Capital allocation centered on debt reduction and a reduced quarterly dividend. Cogent bought $20.4 million par value of its 2032 secured notes during Q2 and an additional $118.4 million par value in July, with total purchases through July 31, 2026 of $138.8 million and a total gain of $13.4 million. The amended indenture increased the maximum secured debt leverage ratio from 4.00 to 4.75 and includes a commitment to use at least $175.0 million of data-center sale proceeds for discounted debt repurchases. Net leverage ratio, adjusted for amounts due from T-Mobile, declined to 6.23 from 6.79 in Q1 2026. The filing did not provide forward financial guidance.
Not in the filing
stated, not guessed- GAAP net income or net loss
- GAAP operating income or loss
- Non-GAAP operating income or loss
- Free cash flow
- Capital expenditures
- Total debt
- Cash excluding restricted cash
- Revenue guidance
- Gross margin guidance
- Operating expense guidance
- Tax rate guidance
- Forward EBITDA guidance
- Named executive quotes
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.